U.S. Dollar Rallies as Equity Markets Tumble

The U.S. Dollar is trading higher at the midsession, boosted by a sharp drop in equity markets.

The U.S. Dollar is trading higher at the midsession, boosted by a sharp drop in equity markets. Earlier this morning, Bank of America reported a huge loss and General Electric weaker earnings. This triggered a sell-off in the currency markets as demand dropped for higher yielding assets.

The Bank of America news overshadowed a Fed report which showed U.S. industrial output expanded last month. In addition, it was reported this morning by the University of Michigan that consumer confidence dropped to 69.4 this month from 73.5 in September.

The Dollar received another boost on the news that international demand for long-term U.S. financial assets was up in August following an increase in holdings by Japanese investors. This news was contrary to reports that foreign investors were beginning to shun U.S. investments because of the weaker Dollar.

The EUR USD is trading weaker as demand for higher yielding assets is falling. Traders are also finally reacting to the weaker economic reports from earlier in the week. The daily chart indicates the possibility of a reversal top following a close under 1.4967.

Traders are still pressing the GBP USD higher on speculation the Bank of England will end its asset buyback program sooner than expected. Based on the short-term range of 1.7042 to 1.5706, traders should watch for a test of 1.6374 to 1.6532.

The USD CHF is rallying this morning following a report which showed weak Swiss retail sales. Traders are paring long positions in the Swiss Franc as they adjust to the possibility of a weaker economy.

Weaker Canadian CPI data is helping to boost the USD CAD. Yesterday’s technical closing price reversal bottom is also helping to drive prices higher.

News that Japanese investors placed more funds in U.S. Treasury investments in August is helping the USD JPY move higher. The longer-term charts indicate a move to 92.88 to 94.04 is likely.

The outside move reversals in the AUD USD and NZD USD are strong indications of short-term tops. Both currency pairs are in positions to reverse the daily charts to down. Profit-taking is leading the break to the downside. Over speculation about interest rate hikes in New Zealand and Australia next month may have sent prices too high, too early.

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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