Dollar Trading Mixed Against Major Currencies

The U.S. Dollar is trading mixed against most major currencies after a volatile, two-sided overnight trade.

The U.S. Dollar is trading mixed against most major currencies after a volatile, two-sided overnight trade. Thinning trading conditions and position squaring ahead of this Friday’s U.S. Non-Farm Payrolls Report is having an influence on this week’s trading action.

The Reserve Bank of Australia announced overnight that interest rates would remain unchanged at 3.75%. It is being reported that this was surprise news, but the handwriting was on the wall a couple of week’s ago when China decided to begin tightening its monetary policy. This led to speculation the Australian economy would be threatened which I believe was a major influence on the RBA’s decision. The RBA wants to see how recent events affect the economy before making its next decision.

The EUR USD is trading better as pressures from the financial crisis in Greece seem to be fading. Investors expect to hear more upbeat news on Wednesday when the European Union releases its official opinion on Greece’s efforts to shore up its budget. Upside momentum could take this market back to the last main bottom at 1.4029. Key support remains 1.3800. This price represents a major 50% retracement level.

The GBP USD is trading lower as traders continue to express their concerns over a poor economy, growing fiscal deficit and the upcoming U.K. election. The overnight trade indicates buyers are still stepping in close to the late December bottom at 1.5832 which could mean a support base is being built.

The USD JPY is trading mixed. Traders seem to be uncertain about which direction risk sentiment will take today. Overnight, U.S. equity markets are higher, which is an indication that demand for higher risk assets is increasing. On the other hand, the move to leave interest rates unchanged by the Reserve Bank of Australia could stifle demand for higher yielding assets. These two events are causing choppy trade in the USD JPY market.

The rally in the Euro continues to take the pressure off the Swiss National Bank to intervene which is helping to weaken the USD CHF. Traders should continue to monitor the situation in Greece to see if it triggers another sharp break in the Euro. Look for renewed pressure on the USD CHF if the Euro continues to strengthen. Based on current conditions, this pair may break back to 1.0495 before finding support.

Firmer equities, gold, and crude oil are pressuring the USD CAD. Yesterday’s closing price reversal top was confirmed overnight and a new main top was formed at 1.0720. The chart indicates that a minimum 2 to 3 day retracement is likely with a downside target of 1.0472.

The news that the Reserve Bank of Australia left interest rates unchanged is putting a little pressure on the NZD USD. The New Zealand central bank is already committed to leaving interest rates unchanged until at least the middle of 2010. The entire Pacific Rim region is likely to feel some economic contraction now that China has decided to tighten interest rates and reign in stimulus spending.

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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