U.S. Dollar Being Pressured Across the Board

The U.S. Dollar is trading lower against most major currencies at the mid-session.

The U.S. Dollar is trading lower against most major currencies at the mid-session. A combination of desire for more risk along with overbought conditions is helping to generate the downside pressure. Trading has been light as investors assess their current position sizes amid this week’s central bank meetings and Friday’s U.S. Employment Report.

The Dollar has felt downside pressure since the opening although Treasury Secretary Geithner did trigger a slight short-covering rally when he talked about this administration taking steps to control the budget deficit. Other than that comment moving the market, the Dollar had a bias to the downside, led by demand for higher risk assets, especially gold and crude oil.

Early last night, the Reserve Bank of Australia announced that interest rates would remain unchanged at 3.75%. Its dovish statement came as a surprise to traders who anticipated a 25 basis point hike for the fourth consecutive month. The AUD USD plunged on the news, mostly on liquidation of unprofitable trades.

The EUR USD is posting a small gain at the mid-session. Traders are covering recent shorts as pressures from the financial crisis in Greece seem to be fading. On Wednesday, the European Central Bank is expected to announce that interest rates will remain steady. In addition, investors expect to hear more upbeat news tomorrow when the European Union releases its official opinion on Greece’s efforts to shore up its budget. Early talk is that Greece plans on slashing its budget deficit. 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 reversed earlier weakness and is now trading higher. Traders have turned less negative towards the economy despite a poor housing market, growing fiscal deficit and uncertainty regarding the upcoming U.K. election. Speculators are driving up the market today as there has been no indication from recent reports that the economy is ready to turn more robust. On Wednesday, the Bank of England is expected to announce that interest rates will remain near zero. Traders are still trying to decide whether the BoE increases quantitative easing. Last quarter’s poor GDP number may force its hand.

The USD JPY is trading lower at midday. We’ve seen a two-sided trade today as investors seem to be uncertain about which direction risk sentiment will take. The news from Australia may increase demand for lower yielding assets, but the rise in the U.S. stock market is saying something else.

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 helping to pressure 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.

NZD USD traders are choosing to ignore the weakness in the Aussie Dollar and have instead decided to focus on the renewed demand for higher yielding assets. Higher stocks, gold and crude oil are helping to drive up higher risk assets to the benefit of the Kiwi. Oversold technical indicators and thin trading conditions ahead of this Friday’s U.S. employment report are helping to trigger the light short-covering rally.

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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