U.S. Dollar Camping on Three-Month High

The U.S. Dollar reached a three-month high this morning following a strong surge fueled by the S&P Corp.’s downgrade of Greece’s credit rating.

The U.S. Dollar reached a three-month high this morning following a strong surge fueled by the S&P Corp.’s downgrade of Greece’s credit rating. This strong rally started last night but has continued to gain strength on the possibility that more downgrades of Euro Zone sovereign debt are to follow. Investors now fear that the spread of bad debt throughout the region could trigger serious problems banking issues, curtailing the current economic recovery.

The Euro took out a major 9-month trend line overnight and accelerated to the downside. Both fundamental and technical factors are contributing to this morning’s weakness. Excessive speculation tied to debt problems in the Euro Zone could trigger a late session rally if short-term conditions become oversold.

In addition to the weakness in the European currencies, the GBP USD is under pressure because of a disappointing retail sales report. This news overwhelmed Wednesday’s better than expected jobless claims data. Technically, the British Pound failed to hold retracement zone support and is now trading on the weak side of a 3-month 50% price at 1.6292. The chart indicates this market is vulnerable to a further decline to 1.5941.

Lower stock prices and the possibility of higher interest rates in the U.S. are pressuring both the AUD USD and NZD USD. Speculators are shying away from higher risk assets. The Aussie is the weaker of the two. Yesterday’s report showing slower than expected 3rd Quarter growth triggered selling pressure as it sent a sign to traders that the Reserve Bank of Australia was likely to take a pause from hiking interest rates over the near-term. Technically, the Aussie turned the weekly main trend down on the trade through .8905. The chart indicates the first objective is .8780, followed by .8633. The NZD USD is trading weaker but the downside momentum could accelerate following a trade through .6952.

Falling gold prices and the weakening stock market are pressuring the Canadian Dollar at the mid-session. Technically, the USD CAD broke out to the upside on a move through 1.0691. The next upside target is a swing top at 1.0748. The weekly trend will turn to up on a trade through 1.0991.

Demand for higher yields, an improving economy and the reversal of the carry trade is helping to trigger a strong rally in the USD JPY. This morning this currency pair took out the downtrending Gann angle which stopped the market last week and accelerated to the upside. A close above this angle on the daily chart signals the possibility of a further rally to 91.16.

Demand for the U.S. Dollar and debt problems in the Euro Zone are helping to pressure the Swiss Franc. Traders are factoring in the possibility that Swiss banks face exposure to debt issues in Greece, Portugal and Spain. The longer-term chart indicates a possible surge to 1.0469 to 1.0600.

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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