U.S. Dollar Trading Weaker after Volatile Overnight Session

The U.S. Dollar is trading weaker overnight following a volatile trade. The initial move in the Dollar was to the upside as Germany announced that its economy had shrunk more than expected in 2009.

The U.S. Dollar is trading weaker overnight following a volatile trade. The initial move in the Dollar was to the upside as Germany announced that its economy had shrunk more than expected in 2009. German GDP contracted 5% which was its first decline in 5 years.

Hawkish comments from Federal Reserve Bank of Philadelphia President Plosser also triggered a rise in the Dollar. He said the Fed should raise interest rates as the economy improves and not wait for the unemployment rate to decline. Plosser is a voting member on the FOMC so his comments carry some weight.

The Dollar could not hold earlier strength and is now trading lower ahead of the New York session. Increased demand for higher yielding assets seems to be the developing theme. The key report today is the Fed Beige Book which is scheduled for a 1 pm Central Time release.

The EUR USD has recovered after overnight weakness triggered by Germany’s bearish GDP report. Short-covering ahead of tomorrow’s European Central Bank meeting could be the catalyst behind the turnaround. The charts indicate the Euro is still on pace for a near-term test of 1.4680.

The main trend turned up in the GBP USD overnight on the trade through 1.6240. The next upside target is 1.6355. Watch for a technical bounce at this level. The British Pound is being boosted by hawkish comments from Bank of England member Andrew Sentence. He said that the BoE has done enough to stimulate the economy and that interest rates should be allowed to rise this year.

The AUD USD is trading higher but inside of Tuesday range. Yesterday’s move by China to require banks to increase reserve requirements is helping to limit overnight gains. In addition, traders feel that higher interest rates and the end of government stimulus in China is likely to trigger a slow down of Chinese demand for Australian goods and services. The chart indicates that this market is trying to regain an uptrending Gann angle at .9254. Holding above this angle will put the Aussie in a strong position to rally further. Gains may be limited today as traders adjust positions ahead of tomorrow’s employment number.

The NZD USD is trading rangebound overnight. A breakout over .7436 could trigger a further rally to the November high at .7523. Otherwise, this market is setting up for a correction to uptrending Gann angle support at .7230 then a 50% correction to .7203.

The USD CAD tried to continue the rally which began two days ago and continued on Tuesday, but the rally stalled after the market slammed into downtrending Gann angle resistance at 1.0405. This price was also an old bottom on December 1. Watch for a minor pull-back to at least 1.0332.

The USD JPY is trading better overnight as demand for lower yielding assets is down. This pair is trading inside of yesterday’s range. The short-term picture indicates the start of a small rally, but the bigger charts indicate there is plenty of room to the downside with 89.30 the first objective.

The USD CHF is down and resting on a .618 level at 1.0143 after testing a 50% price at 1.0212. Downside momentum could drive this market lower and into a slow moving uptrending Gann angle at 1.0078.

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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