Euro Finishes Lower as EU Delays Greece Aid Package

The Euro finished lower as the lack of concrete news regarding the European Union’s plan to guarantee Greece’s debt caused investors to remain nervous and skeptical that a resolution would be reached over the next few days.

The Euro finished lower as the lack of concrete news regarding the European Union’s plan to guarantee Greece’s debt caused investors to remain nervous and skeptical that a resolution would be reached over the next few days.

The U.S. Dollar finished higher against most major currencies except the Canadian Dollar. The Dollar opened the New York session overnight and managed to hold on its gains throughout the day although earlier gains against the Canadian Dollar were erased.

Once investors became satisfied that the EU would postpone any announcements about the Greek deficit problem for a day or two, they turned their focus on the testimony of Fed Chairman Ben Bernanke.

Bernanke gave the Dollar a boost after hinting that the Fed was gearing to hike interest rates as part of its exit strategy. While most investors have been trying to forecast when the Fed would begin raising the Fed Funds Rate, Bernanke surprised everyone by stating that the Fed may raise the discount rate charged on direct loans to commercial banks.

Although it finished lower, the EUR USD closed inside yesterday’s range. The chart pattern suggests that a supportive base could be being built. Last week’s low at 1.3584 and this week’s high at 1.3838 are both holding indicating impending volatility. Depending on the outcome of the EU/Greece resolution, this market is set up for a break out in either direction.

The GBP USD finished sharply lower. Spillover selling from the weaker Euro provided some early selling pressure, but the bulk of the selling came after the Bank of England cut its inflation forecast and hinted at extending and expanding its quantitative easing stimulus.

Bernanke’s comments regarding higher interest rates helped the USD JPY rally. Today’s action was a pure interest rate differential play. Gains were limited on the possibility risk aversion would return to the markets if the EU was unable to come to a decision on the Greek debt problem. If Greece’s problems resurface, then look for investors to seek safety in the Japanese Yen.

The weaker Euro helped boost the USD CHF as it reignited the possibility that the Swiss National Bank would intervene to weaken its currency. A stronger Euro will pressure the U.S. Dollar versus the Swiss Franc. The failure to reach a resolution of the Greek debt problems could put more pressure on the Euro tomorrow while helping to boost the USD CHF. The size of the possible break in the Swiss Franc will depend on how strongly traders feel the SNB will intervene.

The USD CAD erased earlier gains and finished lower for the day. The U.S. Dollar posted strong gains early as traders shunned risky assets and Fed Chairman Bernanke hinted at raising interest rates. Oversold conditions were the primary reasons for the mid-to-late session rally in the Canadian Dollar. Gains were further boosted by stronger crude oil and a stable equity market.

Poor economic news out of China and risk aversion helped pressure the AUD USD and NZD USD. Early this morning, China’s import/export report showed that the economy was slowing down. The chart formations for both of these currencies suggest that a support base is being built. Last Friday, both markets posted closing price reversal bottoms which were confirmed on Tuesday. As long as last week’s low in the Aussie holds at .8577, this market could rally back to .8953 over the near-term. The Kiwi has to hold .6806 to trigger a possible rally to .6978 to .7019.

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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