Earnings Reports to Dictate U.S. Dollar’s Direction

Positive earnings reports are expected to continue to put pressure on the U.S. Dollar as traders continue to leave the safe haven currency for higher risk assets.

Positive earnings reports are expected to continue to put pressure on the U.S. Dollar as traders continue to leave the safe haven currency for higher risk assets.

The EUR USD is trading higher this morning despite efforts from the European Central Bank and other Euro Zone members to weaken it with comments addressing their concerns about the possible negative effects on Euro Zone exports. European Central Bank President Trichet said “excessive volatility” in currency rates is “bad for economic development.” His comment was seconded by Jean-Claude Juncker who said “It’s a problem that worries us”.

Concerns are being expressed by the ECB and other members of the Euro Zone because the recent appreciation of the Euro is hurting exports with the U.S. and China. In addition, the end result is a stronger Euro will threaten the Euro Zone’s recovery. So far traders seem to be ignoring these comments as the Euro rises to the 1.50 level.

Traders are also driving the GBP USD higher this morning because of demand for risky assets. Yesterday the Pound traded lower for much of the day because of comments over the weekend calling for a possible extension of the Bank of England’s asset buyback program. Traders are acting today as if this was just a rumor. Later in the week, the BoE will release the minutes from its last meeting. This report will allow traders to see how serious the BoE is about extending this program.

Lower yields in the U.S. continue to make the Japanese Yen a more attractive investment. In addition, the Yen received a boost overnight when Japanese Prime Minister Fujii reiterated his reluctance to intervene against a rising Yen. He basically stated that the Yen is rising because of the Fed’s “easy” money policy, and he saw no reason to curtail the rise in the Yen unless the rally was dictated by excessive volatility.

The Dollar is up against the Canadian Dollar. The Bank of Canada is expected to leave interest rates unchanged at today’s meeting, but traders are speculating it may issue a statement regarding its concerns about the rapid rise in the Canadian Dollar and the negative effect this rally could have on the Canadian economy.

The AUD USD and NZD USD are under pressure today despite a firm stock market. Overnight the Reserve Bank of Australia released the minutes from its last meeting. In this report it justified its recent interest rate hike of 25 basis points, but gave no reason to expect a 50 basis point cut in November. The market no feels that Aussie and Kiwi misread the RBA and that prices are overbought. This is leading to selling pressure this morning.

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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