Friendly U.S. Manufacturing Data Weakens Dollar

A friendly U.S. Manufacturing report is helping to weaken the Dollar at the mid-session by driving up demand for higher yielding assets.

A friendly U.S. Manufacturing report is helping to weaken the Dollar at the mid-session by driving up demand for higher yielding assets.

The Dollar opened the first trading session slightly better but a strong surge in U.K. and China manufacturing data helped to pressure the Dollar overnight. These two better than expected reports triggered renewed interest in demand for higher risk assets.

The daily chart pattern in the EUR USD suggests the first upside objective over the short-term remains 1.4680 to 1.4790. Whether traders go after this level will be determined by a slew of U.S. economic reports this week especially the employment report on January 8th.

The GBP USD followed through to the upside after last week’s late turnaround, but is failing to attract fresh buying at the mid-session because of short-term overbought conditions. 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 weaker after a steady to higher opening. The current chart pattern suggests a possible closing price reversal top formation. Traders feel the market has advanced enough and are reacting to overbought technical factors. In addition, renewed demand for higher yielding assets is helping to pressure the Dollar. The chart indicates a break to the old top at 92.32 is likely over the short-run.

The USD CHF rallied over night but ran into technical pressure at a .618 level at 1.0419. Renewed interest in higher risk assets could send this currency pair back to 1.0212 to 1.0143 over the near-term. Watch for a possible technical bounce on the first test of this level.

After a slight retracement late last week, the USD CAD is once again under pressure. The main trend is down. The chart indicates developing selling pressure is likely to accelerate under an old main bottom at 1.0405, setting up a further decline to 1.0265. Strong rallies in gold and crude oil as well as equity markets are the driving forces behind today’s weakness in the USD CAD.

The AUD USD started the session steady to better, but surged to the upside following a pick-up in demand for higher risk assets. The strong rise in U.S. equity markets is helping to create demand for the higher yielding Aussie. Technical factors are also signaling new strength as this market has broken through a pair of retracement levels at .8964 to .9018. Continuing strength could drive this market to .9144 over the near-term.

The New Zealand Dollar overcame initial weakness with a quick turnaround last night on the news of the improvement in Chinese manufacturing. Strong upside momentum fueled by greater demand for higher yielding assets has put the NZD USD in a strong position to test Gann angle resistance at 73.30. Solid support has been established at .7185.

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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