Dollar See-Saws before Closing Lower

The U.S. Dollar see-sawed most of the day, before closing lower. The lack of economic reports caused a choppy two-sided trade.

The U.S. Dollar see-sawed most of the day, before closing lower. The lack of economic reports caused a choppy two-sided trade. In addition, many traders stayed on the sidelines or evened up position ahead of this week’s many central bank reports. In most cases the Dollar continued its strength in a follow-through rally from Friday, but failed to hold on to its gains by the close. Technically, the Dollar Futures Index 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 traded inside of the 92.32 to 84.83 range. Technically overbought conditions pressured the market all day. The chart pattern and trading action suggests a pull-back to 87.80 to 87.10 is likely over the near-term.

The main trend is down on the daily chart for the EUR USD. The lack of follow-through to the downside after the main bottom at 1.4801 was broken suggests that this currency pair may be oversold and ripe for a retracement. The first upside target is 1.4950.

The GBP USD recovered after a hard sell-off overnight and early morning. The decline stopped slightly above a major 50% retracement level at 1.6292 and three main bottoms at 1.6271, 1.6261 and 1.6250. The current action suggests a possible retracement to 1.6516 to 1.6564 before new selling pressure 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 changed the trend to up following the overnight break out above 1.0222. The follow-through to the upside however was weak which could set up a correction back to1.0081 to 1.0042. The Swiss National Bank meets on December 10th. Expectations are for it to leave interest rates unchanged. The SNB’s major concern is deflation so another round of intervention has not been eliminated from the equation.

The USD CAD finished lower, but remained rangebound between 1.04590 and 1.0691. The Bank of Canada holds its next meeting on December 8th. Look for it to keep interest rates unchanged at 0.25%. Traders seem reluctant to take a position on either side at this time.

A drop in 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 sold off early in the trading session, but oversold technical conditions helped trigger a short-covering rally into the close. The chart pattern suggests a rally to .7189 to .7215 is possible before the selling stops again. The Reserve Bank of New Zealand is expected to hold interest rates at 2.50 percent at its next meeting on December 9th. A weak economy led by a deteriorating employment situation should force the RBNZ to leave rates unchanged until the third quarter 2010.

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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