U.S. Dollar Trading Sideways-to-Lower

The U.S. Dollar is trading sideways-to-lower at the mid-session after backing off a two-month high versus a trade-weighted basket of currencies overnight.

The U.S. Dollar is trading sideways-to-lower at the mid-session after backing off a two-month high versus a trade-weighted basket of currencies overnight. The news that Dubai received $10 billion in financing from Abu Dhabi to pay part of the debt held by the state-owned Dubai World is acting as the catalyst behind today’s weakness. This event is helping to alleviate one of the concerns which drove traders into the safety of the Dollar last week, the others being downgrades in Greece, Portugal and Spain. The overnight selling pressure is a sign that traders have become less averse to risk. This could help maintain a strong tone in higher risk assets today.

Another reason for the lackluster trade is the fear of stepping out in front of this week’s Federal Reserve Open Market Committee meeting on December 16th. Since its last meeting in November, the U.S. unemployment rate has dropped to 10% and retail sales have risen above expectations. Job losses and the lack of consumer spending are two key determinants studied by the Fed. Traders are looking for the Fed to look at these two reports and perhaps issue a more hawkish statement. A dovish statement will be a surprise which is not likely to bode well for the Dollar.

The EUR USD is up slightly after bouncing off a 50% price at 1.4594. The initial thrust in this market overnight was provided by the surprise news out of Abu Dhabi regarding its partial bailout of Dubai World. Gains have been muted, however, by the news that Euro Zone industrial production fell for the 18th month while employment extended its decline.

The GBP USD rebounded after a bout of early weakness this morning. The news out of Dubai did not helping the British Pound. British Pound traders have enough on their tables than to worry about sovereign debt issues in the Middle East. The U.K. has budget and debt issues of its own.

The USD JPY is receiving pressure from traders reversing their long positions initiated last week because of debt concerns in Dubai. The chart indicates the possibility of a pull-back of this currency pair into 50%/Gann angle support at 87.80 to 87.58.

The USD CHF is trading slightly lower in light trading. Resistance is being provided by last week’s high at 1.0367. Weakness is being indicated by this pair’s failure to hold the old main top at 1.0337. This is usually a sign that conditions are overbought and that the last drive higher was most likely stop driven rather than fresh buying.

Demand for higher yielding assets is helping to boost the AUD USD and NZD USD. The news out of Dubai is helping to alleviate fears about holding higher risk assets.
Today’s turn around in the New Zealand Dollar is a sign that traders are ready to resume the strong up move triggered by last week’s surprise hawkish statement by the Reserve Bank of New Zealand.

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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