Dollar Finishes Lower in Lackluster Trade

The U.S. Dollar finished the day session lower in lackluster trading with very few highlights. Profit-taking overnight led to a lower opening, but news that S&P lowered the credit rating of Spain helped the Dollar limit losses.

The U.S. Dollar finished the day session lower in lackluster trading with very few highlights. Profit-taking overnight led to a lower opening, but news that S&P lowered the credit rating of Spain helped the Dollar limit losses. Later in the trading session, the Dollar reversed course and began to lose ground once again as traders reassessed the fundamentals and decided that the recent rally may have been overdone.

Global debt concerns are the main issue this week and should continue to be until countries like Greece and Dubai step up and back their debt commitments. Earlier in the week, a flight-to-quality rally in the Dollar was triggered by credit rating downgrades in Dubai and Greece. Traders will continue to monitor these situations for further developments. The biggest fear is the spread of credit problems. At this time, the concerns have been confided to small areas, but today the S&P Corp. added Spain to the watch list.

At the mid-session, the EUR USD erased all of its earlier gains, but recovered by the close. The intraday weakness was triggered when the S&P Corp. lowered the debt rating for Spain. Yesterday, Fitch cut the credit rating of Greece. Traders are reacting as if a trend is developing. The chart pattern suggests that the next downside target is 1.4625 although it is likely this will not take place until after a formidable short-covering rally.

Demand for lower yielding currencies is helped to drive the USD JPY lower. This news comes on the heels of an early morning report which showed that the Japanese economy grew slower than expected. Traders had very little reaction to the lower than expected GDP Report and instead chose to focus their interests on the weakening demand for higher yielding currencies.

Downside pressure could continue in the GBP USD now that key support at 1.6250 has been broken. The charts indicate that a break to 1.6148 is possible. Earlier today, the U.K. government released preliminary plans to shore up its finances. Traders rejected the plan and began another selling spree. Traders are also keeping an eye on the debt situation in Dubai because some U.K. bank may face exposure to the bad debt.

The USD CAD is down today but still trading inside a tight range. Throughout the New York session, this currency pair straddled a pair of 50% retracement levels at 1.0598 and 1.0537. Yesterday the Bank of Canada announced that interest rates would remain at 0.25 percent until at least June 2010 and that it was still concerned about the strength of the currency and its possible negative affect on exports.

The USD CHF erased most of its earlier losses, but still managed to close lower for the day. Profit-taking helped put in the original top, but losses were limited as buying pressure grew throughout the day because of concerns about growing debt issues in the Euro Zone. Credit ratings have been cut for Greece and Spain this week. These actions are making Swiss Franc traders nervous because of the possible exposure to Euro Zone and Swiss banks. By the end of the day, this pair was able to post a reversal top which could lead to the start of a 2 to 3 day break if 1.0219 can be penetrated.

On December 10th the Swiss National Bank is expected to leave its benchmark interest rate unchanged and offer clarity as to its future monetary policy plans. Most traders expect the SNB to discuss its concerns about deflation and the possibility of another round of intervention if the Swiss Franc appreciates too much against the Euro.

The AUD USD is struggling to hold on to its early morning gains, but by the end of the day was able to post a daily closing price reversal bottom. Intraday aversion to risky assets helped the Aussie give back some of its earlier gains, but by the close, this market was able to hold on to those gains. Last night it was reported that the Australian economy is beginning to show signs of weakness after three interest rate hikes. Higher borrowing costs contributed to drops in consumer confidence, home loans and investment lending. There is a possibility that this market could rally back to .9167 before selling pressure resumes.

A pick-up in demand for higher yielding assets helped give the NZD USD a boost. Tomorrow traders will be looking for the Reserve Bank of New Zealand to leave interest rates at 2.5% until at least the Third Quarter 2010 when it makes its monetary policy statement. Unemployment and a drop in exports continue to slowdown the 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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