Dollar to Open Mixed This Morning

Yesterday, the FOMC minutes indicated that the U.S. was far from hiking interest rates. They also showed that the Fed was a long way from implementing a tight monetary policy or reducing its asset buyback program.

Yesterday, the FOMC minutes indicated that the U.S. was far from hiking interest rates. They also showed that the Fed was a long way from implementing a tight monetary policy or reducing its asset buyback program. Several Fed members even tried to increase its asset purchasing power. This is definitely a sign that raising rates at this time is not a priority. Traders interpreted the FOMC minutes as bearish for the Dollar, erasing all of the gains captured following last week’s hawkish comments from Fed Chairman Bernanke.

This morning, traders will be watching for key earnings reports from Goldman Sachs and Citigroup to set the tone in the Forex markets. Firmer equity markets and lower risk aversion have been the catalysts behind the recent weakness in the Dollar.

Weekly initial claims, consumer inflation news and the Philadelphia Fed numbers will also be watched carefully for any signs of economic recovery.

GBP USD is trading sharply higher overnight, fueled by bullish comments from a Bank of England official. The BoE’s Paul Fisher said that the central bank’s quantitative easing program was working.

Overnight the NZD USD surged to a new 15-month high following a report that showed a better-than-expected inflation number. Speculators are now increasing bets that the Reserve Bank of New Zealand will raise its benchmark interest rate sooner than expected.

The USD JPY is posting a strong gain this morning, triggered by a combination of news and technical factors. The Japanese Yen started to feel pressure after Japanese Finance Minister Fujii denied saying a strong Yen was good for the economy. He clarified his position by stating that “countries must not compete in devaluing their currencies.”

The overnight rally in the EUR USD is fading. News that Euro Zone inflation fell in September is leading traders to reduce bets that the ECB will hike interest rates at its next meeting on November 5th. Watch for possible market moving comments from Trichet as he addresses a group of Euro Zone finance ministers. Trichet may express concern about the rapid rise in the Euro.

Hawkish comments from Reserve Bank of Australia’s Glen Stevens gave the AUD USD a boost overnight. Stevens is hinting that the RBA may have to raise rates again in November.

After trading down to a 15-month low overnight, the USD CAD is mounting a strong comeback this morning. The chart pattern suggests a possible daily closing price reversal may be forming. Concerns from Prime Minister Harper about the rapid rise in the currency, and its possible negative effects on the economy have made traders nervous about shorting at current levels.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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