Dollar Faltering at the Mid-Session

The U.S. Dollar is trading lower at the mid-session. This market took out Friday’s high but failed to attract the buying strength it needed to drive it higher.

The U.S. Dollar is trading lower at the mid-session. This market took out Friday’s high but failed to attract the buying strength it needed to drive it higher. The chart pattern suggests a break to 75.26 to 75.03 may be needed to relieve the overbought condition.

The USD JPY is trading inside of a 92.32 to 84.83 range. Last Friday’s rally exceeded the retracement zone of this range at 88.57 to 89.46 before finding resistance at a downtrending Gann angle at 90.51. The morning action suggests that a pullback to 87.80 – 87.10 is possible.

Overnight, the EUR USD main trend turned down on the daily chart on the break under 1.4801 but selling pressure dried up, triggering a late morning recovery rally. The short-term chart pattern suggests that rally to 1.4950 is likely before new sellers arrive.

The GBP USD is recovering after a hard sell-off last night. The break stopped slightly above a major 50% retracement level at 1.6292 and three main bottoms at 1.6271, 1.6261 and 1.6250. A trade through 1.6271 turns the main trend down. Look for a retracement to 1.6516 to 1.6564 before new selling hits the market. On December 10th, the Bank of England meets to discuss monetary policy. Look for interest rates to remain unchanged while the BoE leaves its asset buyback program intact.

The USD CHF broke out over 1.0222 overnight to turn the main trend up. The follow-through to the upside was weak which means a correction back to 1.0081 to 1.0042 is possible. The recovery in the gold market is helping to provide some of the buying power. While the Fed is thinking about raising rates to stem inflation, the Swiss National Bank is still worried about deflation. This means that an intervention by the SNB is not out of the question. The situation will be clarified when the central bank meets on December 10th.

The USD CAD is trading lower, but this market is not going anywhere. At this time, it is stuck inside of a pair of .618 retracement levels at 1.0691 and 1.0459. The Bank of Canada meets this week on the 8th. Look for it to keep interest rates unchanged at 0.25%. It may address last week’s surprise hike in the number of jobs added. This may trigger a short-term rally, but gains are likely to be limited if the BoC expresses concerns about the impact of a higher currency on exports.

Reduced demand for higher yielding assets helped weaken the AUD USD this morning but the inability to break this market further has helped this pair regain a retracement zone at .9089 to .9133. The short-term chart indicates a rally to .9186 to .9218 is possible without changing the trend.

The NZD USD traded weaker early in the session but turned to the plus side at the mid-session. Based on the short-term chart, look for a retracement to .7189 to .7215 before new selling surfaces. The Reserve Bank of New Zealand is expected to hold interest rates at 2.50 percent at its next meeting on December 9th. It may also adopt a dovish stance as it addresses a deteriorating labor market while reiterating its stance to hold rates down until the 3rd quarter 2010. The charts indicate that there is plenty of room to the downside with .6560 a possibility by the week-ending December 25th.

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

Disclainer: