U.S. Dollar Climbs Sharply Higher on Dubai World Debt Concerns

The U.S. Dollar is climbing sharply higher as global investors dump stocks and commodities on concerns about Dubai World’s debt problems.

The U.S. Dollar is climbing sharply higher as global investors dump stocks and commodities on concerns about Dubai World’s debt problems. Fear is racing through the global investment community, making lower-yielding assets such as the Dollar and the Yen more attractive. The situation in Dubai began to break late Wednesday night and spilled over into Thursday while U.S. markets were closed for the Thanksgiving holiday.

Investors began to take money out of higher risk assets when the largest corporate entity in Dubai asked creditors for a six-month break on debt repayments of almost $60 billion. This action by the Dubai corporation is raising concerns that other emerging market entities may be overextended in debt which could lead to even more liquidation.

Financial markets are taking a hit all around the world as traders fear that banks are facing major exposure to Dubai World’s mounting debt issues.

After reaching a high of 1.5144 earlier this week, the EUR USD is now in a position to turn the main trend down on the daily chart on a move through 1.4801. Technically, the main range is 1.4625 to 1.5144. This makes 1.4885 to 1.4823 a key retracement area.
Investors should also watch for a potential weekly closing price reversal top.

The main trend is down in the GBP USD. The main range is 1.5706 to 1.6878. The first down side target zone was 1.6292 to 1.6154. Last night’s break stopped after the market tested the 50% price at 1.6292. The low overnight is 1.6271.

Falling equity and commodity prices are doing damage to the Canadian Dollar. The main trend in the USD CAD is up as the market crossed the last main top at 1.0730. This pair could rise substantially if crude oil continues to plunge.

The final crisis in Dubai is helping to drive the Japanese Yen higher. This is beginning to raise concerns among Japanese officials that the rise in the Yen will hurt Japanese export sales. There may be intervention if the rise in the Yen begins to get volatile.

The USD CHF is not only mounting strong gains because of flight to safety reasons, but because the Swiss National Bank sold Swiss Francs in an effort to knock down its value after the recent rapid rise.

The AUD USD and NZD USD are down sharply. These two countries do substantial business with emerging market countries and have also benefitted from the excessive liquidity which has been pumped into the global economy. The main trend turned down in the Aussie Dollar on the overnight break through .9060. A new secondary lower top has also been formed at .9322. If the downside move continues, then look for a test of .8905.

The main trend turned down in the NZD USD on the overnight trade through .7081. The next downside target is .7016.

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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