Dollar Feeling Pressure at the Mid-Session

The Dollar Index is unchanged at the mid-session, but in a position to weaken in sluggish trading. Adding to the weakness were reports that U.S. Jobless Claims rose last week by the largest amount in five weeks and U.S. Retail Sales were down

The Dollar Index is unchanged at the mid-session, but in a position to weaken in sluggish trading. Adding to the weakness were reports that U.S. Jobless Claims rose last week by the largest amount in five weeks and U.S. Retail Sales were down. Both reports show that employment is still a major issue affecting the economy as well as consumer spending. Both reports also showed unexpected results. Traders seem to be pressing the Dollar because the economic data suggests the Fed will keep interest rates lower for a prolonged period of time.

The European Central Bank decided to leave interest rates at the historically low 1% level as expected. The EUR USD weakened a bit after ECB President Trichet failed to spark interest in the upside following his assessment of economic conditions in the Euro Zone region.

The AUD USD is trading better at the mid-session. Investors bought the Aussie and shorts covered positions following the release of a robust Australian jobs report early in the trading session. The Australian jobless rate eased in December while the economy added close to three times as many jobs as initially forecast.

The size of the rise in the number of jobs has increased the chances that the Reserve Bank of Australia will raise interest rates at its next meeting on February 2nd. Some economists are forecasting a 5.50% rate by December 2010. Gains could be limited by traders who believe a tighter monetary policy in Australia and an end to China’s stimulus measures will dampen Australian exports.

The bullish action in the Australian Dollar spread to the NZD USD. The Kiwi is trading higher but is rangebound during the New York session.

The weak U.S. economic data is pressuring the USD JPY. The failure to reach a 50% level at 92.24 was the first sign of weakness. The second sign will be a trade through the low for the week at 90.72. This move will put the market in a position to weaken further with 89.30 the next downside target.

The USD CHF tried to breakout to the upside through a 50% price at 10212 before failing to attract aggressive buyers. Downside momentum has pushed this market back inside a retracement zone with 1.0143 the next potential downside target. Weak U.S. economic data is making the Swiss Franc more attractive. Losses could be limited because of the threat of intervention by the Swiss National Bank.

The USD CAD is trading at a new low for the week. Greater demand for gold, copper and natural gas is helping to support the Canadian Dollar. Look for this currency to remain strong as long as there is demand for raw materials. Short-traders have to be careful down in this area because of possible action by the Bank of Canada to weaken the Canadian Dollar.

The GBP USD is trading higher at the mid-session after erasing earlier losses. The British Pound turned the main trend to up on the daily chart earlier in the week when it crossed a main top at 1.6240. This move was primarily driven by a Bank of England member’s call for higher interest rates later in the year. Furthermore, traders are beginning to believe that the need for further stimulus has dissipated. The first upside objective is a 50% level at 1.6355, followed by 1.6478.

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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