End-of-Year Position Squaring Pressuring Dollar

The U.S. Dollar is down sharply overnight against most major currencies on end-of-the-year position squaring.

The U.S. Dollar is down sharply overnight against most major currencies on end-of-the-year position squaring. Although the Dollar is about to close lower for the year versus most currencies, this month it has shown signs of bottoming because of the improving economy and the possibility of an interest rate hike by the Fed earlier than previously estimated.

The Dollar could trade under pressure until the important U.S. Employment Report on January 8th. This report is likely to set the tone for the Dollar for several months. Last month’s report showed a surprising drop in the unemployment rate from 10.2% to 10.0%. Traders will be watching the next report to see if this was an aberration or the start of a trend. The direction of the Dollar for several months will be decided by this report. A better than expected number should put the pressure on the Fed to begin raising interest rates before the start of the third quarter. A bearish report will mean the Fed will wait until after June.

Technically, the daily chart is indicating the Dollar Index is ripe for a near-term correction. A trade through 77.33 will turn the main trend to down and set up a correction to 76.31 to 75.80. Today’s initial claims report will move the market today. Guesses are for the report to show 455,000 jobs were lost. A better number should help to limit losses.

The daily chart pattern in the EUR USD suggests the minor trend will turn up on a trade through 1.4457. The first upside objective over the short-term is 1.4680 to 1.4790.

The GBP USD is following through to the upside after yesterday’s spectacular turnaround. The daily chart indicates that this market has room to the upside with 1.6355 to 1.6478 the next objective.

The USD JPY is trading slightly lower overnight. Stronger equity markets and an improving economy have put the Dollar in a position to close higher versus the Yen this year. Minor support is being formed at 91.90. A break through this level could trigger an acceleration to the downside to 90.50.

The USD CHF is under pressure overnight. The daily chart indicates the minor trend will turn down following a break through 1.0278. The first downside objective is a retracement zone at 1.0212 to 1.0143.

After a 50% correction of its recent break, the USD CAD is once feeling selling pressure. The main trend turned lower earlier in the week. Look for more weakness to develop following a break under the .618 retracement level at 1.0459.

Stronger equity markets are helping to boost the AUD USD. The overnight action has put this market on the bull side of a minor 50% price at .8964. The next upside target is .9018. A breakout over this price is possible if upside momentum continues.
Yesterday, the NZD USD showed signs of strength by closing above a minor retracement zone at .7144 – .7185. These two prices are now support. The penetration of a downtrending Gann angle at .7215 helped contribute to the strength. The strong overnight action suggests that this market is in a position to challenge the recent main top at .7318. The main trend on the daily chart will turn up on a move through this price.

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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