Upbeat Beige Book Fails to Turn Dollar Positive

The U.S. Dollar finished lower after a choppy trading session. Even upbeat Beige Book data failed to stimulate buying interest in the Dollar.

The U.S. Dollar finished lower after a choppy trading session. Even upbeat Beige Book data failed to stimulate buying interest in the Dollar. The Greenback traded higher last night after Germany announced that its economy had shrunk more than expected in 2009. Hawkish comments from Federal Reserve Bank of Philadelphia President Plosser also triggered a rise in the Dollar.

The Dollar could not hold its earlier strength and broke sharply lower ahead of the New York opening before mounting a strong recovery in the Cash Dollar Index to 77.03. Increased demand for higher yielding assets was the theme today.

This afternoon’s Beige Book confirmed the improvements in the U.S. economy but offered no solid evidence that the Fed is getting ready to raise interest rates sooner than expected.

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 EUR USD recovered after overnight weakness triggered by Germany’s bearish GDP report. Short-covering ahead of Thursday’s European Central Bank meeting could have been the catalyst behind the turnaround. The charts indicate the Euro is still on pace for a near-term test of 1.4680. Trading on Wednesday was primarily sideways on low volume.

The AUD USD closed inside of Tuesday’s range with a bias to the upside. This is usually an indication of impending volatility. The move earlier in the week by China to require banks to increase reserve requirements helped to limit gains. In addition, traders felt that higher interest rates and the end of government stimulus in China was 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. Trading was also tight as investors await Australian employment news.

The NZD USD was rangebound all day. 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, but stalled after the market slammed into downtrending Gann angle resistance at 1.0405. This price was also an old bottom on December 1. By the end of the day, this market closed at its session low. The Canadian Dollar is nearing a level which makes the Bank of Canada uncomfortable. Don’t be surprised if it expresses its concerns more sternly regarding the rise in the Canadian Dollar and its harmful effects on the economy.
The USD JPY finish higher as demand for lower yielding assets was down. This pair is still 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 short-term objective is 92.25.

The USD CHF closed unchanged and in the center of a retracement range. Throughout the day the USD CHF ping-ponged inside a retracement zone at 1.0143 to 1.0212. The threat of an intervention by the Swiss National Bank may be pressuring the Swiss Franc.

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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