Dollar Rallies as Demand for Risk Falls

The U.S. Dollar is trading higher against most major currencies this morning with the exception of the Japanese.

The U.S. Dollar is trading higher against most major currencies this morning with the exception of the Japanese. Easing in equity, gold and crude oil prices is sending a signal to traders to lighten up positions and book profits after the recent decline in the Dollar. The inability to accelerate the Dollar to the downside is also contributing to the rally. Shorts seem to have pulled offers after the down side momentum stated to flatten out.

The EUR USD failed to take out $1.5000 which came as a surprise to traders. Yesterday’s rally in the Euro following comments from Luxembourg’s Juncker should have given the Euro the green light to challenge the high for the year at $1.5063, but when traders failed to print $1.5000 last night, the market turned seller.

The GBP USD is trading weaker. Overbought conditions are contributing to the weakness, but the major concern for traders today is the U.K. economy and the country’s debt situation. Investors are concerned about bank credit issues. The recent Bank of England minutes indicate that members are split as to how to handle the quantitative easing program. Some wanted to expand it, others did not. This means that all members are not on the same page in reading the economy.

The Dollar is losing ground to the Japanese Yen. Repatriation of funds is helping to boost the Yen. Some traders are buying the Yen in speculation that a softening in the Chinese Yuan may be beneficial for the Japanese economy.

A sell-off in equity, gold and oil prices is helping to drive the USD CAD higher. Appetite for risk seems to have been taken off the table. This is putting pressure on commodity-based currencies like the Canadian Dollar.

The same situation is pressuring higher yielding currencies like the AUD USD and NZD USD. Traders are selling stocks in Asia, Europe and the United States while dumping higher yielding, higher risk assets.

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