Dollar Gains as Investors Shy Away from Risky Assets

The U.S. Dollar posted a strong gain versus major currencies on Thursday as investors pulled money out of higher risk assets and sought refuge in the safer Greenback.

The U.S. Dollar posted a strong gain versus major currencies on Thursday as investors pulled money out of higher risk assets and sought refuge in the safer Greenback. Recent weak U.S. economic data is making traders think twice about buying riskier stocks and commodities at the current lofty levels.

The EUR USD traded sharply lower early in the trading session but managed to erase more than half of the loss by the close. Traders have been sensitive to recent comments from European Central Bank President Trichet who tried to talk up the Dollar.
From a technical perspective, the Euro is range bound between 1.4625 – 1.5049. The mid-point of this range at 1.4865 is becoming short-term support. A close below this figure will be a sign of weakness. Regaining 1.5000 on a closing basis will be a bullish sign.

GBP USD traders largely ignored friendly October retail data and pressured the British Pound most of the day. Investors are still trying to sort out the meaning of the split vote between Bank of England members regarding its quantitative easing plan. Some say there is mixed interpretation of the economy while others feel that this is a sign the BoE may begin easing up on its asset-buyback program. Either scenario is making British Pound traders uncomfortable holding long positions. Technically, the recent strong rise was a little too much for the market to handle. The current overbought condition could trigger a retracement all the back to 1.6292 before serious buyers re-emerge. Credit issues are beginning to crop up again which could make long traders nervous.

The USD JPY lost ground today as Japanese investors repatriated funds while equity markets weakened. There is some light support at 88.96 but downside momentum triggered by another weak day for equities could drive this pair to the main bottom at 87.99.

The Dollar advanced versus the Swiss Franc, but gains were once again limited by major 50% resistance at 1.0186. This price stopped the market twice this week. Minor uptrending support is at 1.0127. Major Gann angle support moves up to 1.0080. On the upside, obviously this market has to clear out the 50% price at 1.0186 before advancing further. If this scenario develops, then look for a further rally to 1.0217 to 1.0222.

The USD CAD rallied sharply higher, supported by weaker equities and crude oil. Gains were reduced late in the session when gold advanced after being down most of the day. The main range is 1.0870 to 1.0416. Today the market tested the retracement zone of this range at 1.0643 to 1.0697. Additional resistance comes in at 1.0650.

News that labor was no longer backing the Reserve Bank of New Zealand helped to drive the NZD USD sharply lower. Labor representatives feel that the monetary policy of the RBNZ is curtailing economic growth. The strong rise in the currency is said to be the cause of a poor export market which is keeping New Zealand from recovering from the recession. The main range is .7081 to .7523. The major retracement zone of this range is .7302 to .7250. Today’s low stopped inside this range at .7271.

The AUD USD fell in sympathy with the New Zealand Dollar. Long traders also blew out of positions as global demand for higher yielding assets fell. Like New Zealand Dollar traders, Aussie traders may be beginning to feel that the high priced currency is going to have detrimental effects on the Australian economy.

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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