GBP USD Weakens on Credit Concerns

The GBP USD is trading weaker this morning. Investors are concerned about bearish comments from a Fitch Ratings service official in Reuters regarding the U.K.’s credit status.

The GBP USD is trading weaker this morning. Investors are concerned about bearish comments from a Fitch Ratings service official in Reuters regarding the U.K.’s credit status. In an interview, Fitch executive David Riley said that the U.K. has the highest risk of major economies of losing its AAA status. This could lead to increased credit risk and higher borrowing costs.

The U.S. Dollar is trading slightly better this morning versus most major currencies after the bashing yesterday sent the trade weighted Dollar index to a 15 month low. Short-term indicators are oversold which could lead to a short-covering rally today.

Yesterday the Dollar was under pressure because over the weekend the Group of 20 decided not to issue a supportive statement and instead agreed to support continued economic stimulus. This led to a move by investors into riskier assets and away from the U.S. Dollar. This trend is expected to remain in the market for the foreseeable future as long as U.S. interest rates remain the lowest in the world. Investors are once again treating the Dollar as the world’s carry currency.

The EUR USD stopped short of a new high for the year yesterday. Despite conditions that warrant a weaker Dollar and stronger Euro, traders may be concerned about possible action to weaken the currency by the European Central Bank if the Euro gets to hot.

The Dollar is up this morning versus the Japanese Yen despite a better than expected rise in Japan’s current-account surplus. The report showed an increase of 0.2% which beat economists’ guesses for a smaller increase.

Weaker crude oil and equity prices are pressuring the Canadian Dollar after yesterday’s rally produced the largest one day gain in 5 months.

Reduced demand for higher yielding currencies and overbought conditions are putting pressure on the NZD USD and AUD USD 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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