Australian Dollar Drags Higher Yielding Currencies Lower

Weakness in the AUD USD is dragging higher yielding currencies lower overnight. This is leading to the call for a stronger U.S. Dollar on the opening.

Weakness in the AUD USD is dragging higher yielding currencies lower overnight. This is leading to the call for a stronger U.S. Dollar on the opening. Investors are becoming more risk averse ahead of three major central bank meetings this week. On November 4th the U.S. Federal Reserve holds its FOMC meeting. This will be followed by the European Central Bank and the Bank of England on November 5th.

The Reserve Bank of Australia raised its benchmark interest rate 25 basis points as expected. The initial move in the currency was to the upside but the market quickly turned seller when buyers could not take out key resistance levels. Traders were also looking for guidance as to future rate hikes. In its statement, however, the RBA did not signal that there were more increases to come in the future. This led to liquidation and position evening. The statement by the RBA also said it was “prudent to lessen gradually”. This quote refers to the stimulus to the economy that was provided by low interest rates.

Technically, the inability to break out to the upside after the rate hike drew the interest of sellers. At this time the AUD USD is trading inside of yesterday’s .8905 to .9121 range. Resistance is at a 50% price at .9117. This level stopped the rally yesterday. Support is at a 50% price on the downside at .8948. A failure to hold this level could trigger an acceleration to the .618 retracement level at .8859.

The EUR USD is trading sharply lower. Momentum is to the downside after the market broke the bottom of the four-day range. Further weakness is indicated now that this currency pair is trading under a 50% price at 1.4776 and a .618 retracement level at 1.4707. Downtrending Gann angle resistance is 1.4823. The chart indicates that the next major support is way down at 1.4480.

The GBP USD is trading weaker. It is also in a position to change the trend to down on the daily chart on a move through 1.6250. Losses could be limited by a 50% price at 1.6198 and a .618 price at 1.6082. At this time the market is hugging an uptrending Gann angle at 1.6306. Look for an acceleration down if this angle can’t hold. Downtrending Gann resistance is at 1.6411. The swing chart also indicates that a secondary lower top has been formed at 1.6603.

The USD JPY is trading flat to lower. This pair is hugging a 50% price at 90.15. The current chart pattern suggests this pair could move either way with 90.75 to 91.12 the next upside target. On the downside, 89.64 is a strong possibility.

The USD CHF changed the main trend to up when it broke through the last main top at 1.0285. A new secondary higher bottom was formed at 1.0155 in the process. The next upside target is an old top at 1.0352.

The USD CAD is trading higher but inside of yesterday’s 1.0870 to 1.0712 range. In addition, a pair of Gann angles is holding this market in a tight range. Downtrending resistance is at 1.0861. Up trending support is at 1.0725.

The NZD USD is trading weaker but inside of yesterday’s range. This could be indicating impending volatility. Yesterday’s range was .7267 to .7081. A downtrending Gann angle at .7275 is providing resistance. Last night the market broke under a 50% price at .7159, indicating weakness. The next downside target is the .618 retracement price at .7047. Old bottoms at .7105, .7077 and .7016 could slow down the rate of decline.

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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