Dollar Tumbles on Stronger PMI Number

The U.S. Dollar opened the overnight trade better but turned lower following a strong PMI number out of China.

The U.S. Dollar opened the overnight trade better but turned lower following a strong PMI number out of China. The New York opening was weak but the Dollar accelerated to the downside after the release of a better than expected U.S. PMI Report. This report showed that the U.S. economy was expanding.

Although the Dollar weakened on the news, the selling action was not enough to change the trend to down, but merely indicates a technical retracement of last week’s sharp rally.
While the Dollar is retracing its rally, the currencies are posting gains with the exception of the Japanese Yen and British Pound.

The stronger than expected U.S. PMI report helped turn the USD JPY positive. The report showed expansion in the U.S. economy which helped boost yields on U.S. Treasuries. Traders sold Yen to buy Dollars to capture the higher yield.

The GBP USD has been trading lower all morning, but rallied off its bottom when the U.S. released the PMI Report. Traders are pressuring the British Pound in anticipation of the Bank of England meeting on November 5. Speculators are betting the BoE expands its asset-purchasing plan.

The EUR USD is trading better after finding support for three days at a retracement zone at 1.4776 to 1.4707. Traders are anticipating the European Central Bank to leave interest rates unchanged at its next meeting on November 5. The next upside target is 1.4873 to 1.4918.

The weaker Dollar and stronger gold market is helping to drive down the USD CHF. This currency pair failed to take out the swing top at 1.0285 as sellers overtook the buyers to keep the main trend down. The chart pattern suggests a break to 1.0158 is likely over the near-term, followed by 1.0129.

Strong gains in China’s PMI number suggest the economy is still expanding which is bullish news for the AUD USD. The Aussie rallied on the news after testing major support at .8948. Based on the short-term range of .9329 to .8905, the current upside momentum is likely to drive this market to .9117 to .9167. Gann angle resistance is at .9169 which makes .9167 to .9169 a possible upside target today.

The bullish news from China is also helping to boost the NZD USD. Expectations are for the expanding Chinese economy to boost New Zealand exports. Today’s rally has put this market in a position to post a daily closing price reversal up. The major upside target is .7358 to .7423, but this market has to clear downtrending Gann angle resistance at .7315 first.

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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