Dollar Move Indicates Break from Risk Sentiment

This morning’s recovery in the U.S. Dollar could be a sign that risk sentiment may not be the driving force behind price action much longer.

This morning’s recovery in the U.S. Dollar could be a sign that risk sentiment may not be the driving force behind price action much longer. Investors may begin to use positive economic reports as a reason to buy the Dollar rather than higher yielding assets.

The EUR USD is trading weaker at the mid-session. The improving U.S. economy and lingering debt issues in Greece, Portugal and Spain are likely to continue to pressure the Euro. Longer-term charts indicate a move to 1.3800 is likely.

The British Pound is trading lower. The chart indicates the next potential downside target is 1.5980. Traders are repositioning ahead of tomorrow’s Final Third Quarter GDP report. Economists’ are guessing an upward revision to -0.1% from an earlier guess of
-0.3%. This figure will be a positive for the GBP USD and indicate that the U.K is getting ready to return to growth during the 4th quarter.

The Dollar is trading slightly better against the Yen. Declining demand for lower yielding assets is helping to boost the Dollar. Carry-trade action is also putting pressure on the currency as investors sell Japanese Yen to buy stocks.

The USD CHF turned around shortly after the New York opening. Traders should pay close attention to the gold market. Weaker gold prices will weaken the Swiss Franc.

The USD CAD is trading lower. This currency pair has been rangebound since October. With both economies starting to show signs of improvement, traders will be watching the reports to see which country develops a solid trend or which one has the strongest numbers.

The Aussie and the New Zealand Dollar are both under pressure. Although U.S. equity markets are trading higher, demand for higher yielding assets has been falling as traders reassess the Fed interest rate position. Lower economic expectations are also pressuring the NZD USD and AUD USD. Today’s lower markets suggest that risk sentiment may not be the driving force behind these markets anymore.

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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