Stock Market Rally Drops U.S. Dollar to 14-Month Low

Investor appetite for higher risk assets helped drive the U.S. Dollar to a 14-month low this morning.

Investor appetite for higher risk assets helped drive the U.S. Dollar to a 14-month low this morning. The Dollar was expected to open mixed based on overnight trading data, but better than expected earnings from Wells Fargo Bank and Morgan Stanley helped turn the equity markets from lower to higher, thereby reversing the Dollar to down as traded began to demand risky assets.

The EUR USD finally broke through 1.5000 after toying with the idea for a couple of days. Trader demand for higher yielding assets helped power this market through this psychological barrier. Since the initial breakout, the Euro has traded on both sides of this price in an effort to try to establish new higher support. Traders as expected are just “sticking their toe in the water” as this currency pair rallies as some traders expect the European Central Bank to turn up the heat on the Euro if volatility gets out of control.

The GBP USD opened strong and has moved higher throughout the New York trading session. This morning’s Bank of England minutes helped boost the British Pound overnight as the minutes showed that the monetary policy committee voted 9-0 to keep its stimulus plan. This sign of unity was read as a bullish indicator for the Pound. Favorable comments from BoE Governor King also gave this currency pair a boost.

Strong equity markets and a turnaround in the energy complex have helped boost the Canadian Dollar. Early this morning the USD CAD was pressing toward a key 50% price at 1.0598 when the market turned around to the downside. Yesterday, the trend turned up for the USD CAD after the Bank of Canada alluded to the possibility of an intervention if the value of the Canadian Dollar gets too high.

The USD JPY is up this morning. The trade in the Japanese Yen has been very choppy lately as traders are having a hard time assessing the meaning of comments from Finance Minister Fujii.

Stronger demand for higher yields helped turn the AUD USD positive. Downside pressure was on the Aussie since yesterday following the release of the Reserve Bank of Australia minutes which showed that at 50 basis point rate hike in November was not likely.

Positive comments from the Reserve Bank of New Zealand triggered a rally in the NZD USD overnight. Gains have been extended during the day session because of an increase in appetite for risk. The RBNZ said that the price level of the New Zealand Dollar will not influence whether the central bank decides to hike interest rates. This gave traders confidence to go long because it indicated the RBNZ was considering moving up its target date for the first rate hike in over a year.

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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