Dollar Mixed Overnight; Traders Focusing on Greece and Economic Data

The U.S. Dollar is trading mixed overnight. The focus this morning will be on both risk and economic data.

The U.S. Dollar is trading mixed overnight. The focus this morning will be on both risk and economic data. This could create volatile trading conditions as some currencies are poised to break recent bottoms while others are finding support.

The EUR USD remains under pressure overnight after the sell-off on Wednesday erased all of the previous day’s gains. Both positive U.S. economic data and renewed concerns over debt issues in Greece helped drive the Euro sharply lower.

The Dollar rose against the Euro on Wednesday after fresh economic data showed improvements in housing, import prices and industrial production. The FOMC minutes released late in the session confirmed that the Fed is strongly considering becoming the first major economy to begin reducing stimulus measures. In addition, this report indicated that the Fed discussed strongly the possibility of a hike in the discount rate. While not actually resuming a “tight” economic policy, a move by the Fed to raise the discount rate will be one of the first signs that it is poised to begin lifting the Federal Funds rate later in the year if necessary.

Today, traders will be focusing on Conference Board and Philadelphia Fed data to reaffirm the strength in the U.S. economy. The Philly data is expected to move up from 15.2 to 17.0.

In addition to the better than expected U.S. economic news, Euro traders reacted negatively to the news that Moody’s Investor Services downgraded certain Greece hybrid bank debt after it was revealed that a number of unsecured transactions may have been used to conceal the debt.

The news that the European Central Bank extended loans of more than 15 billion Euros or $20.4 billion over February 11, 12, 15 and 16, is a sign that the region may be nearing a liquidity crisis. Furthermore, aggressive short traders failed to budge even after Tuesday’s strong short-covering rally and on reports that the EU had approved Greece’s plan to shore up its budget.

Finally, it has been reported that the International Monetary Fund is poised to resume gold sales in an effort to raise cash. This move strengthened the Dollar and may be a sign that the IMF is getting ready to inject cash into the Greek economy.

The GBP USD remains under pressure because of the weakening economy and the possibility of a debt rating downgrade should the budget deficit continue to grow. Investors may be losing confidence in the Bank of England’s ability to pull the economy out of its tailspin. Most traders feel that the U.K. economy is failing behind the U.S. economy and may be one of the last to post signs of a recovery.

The USD JPY is trading lower this morning after a strong rise on Wednesday. Although strong U.S. economic reports could turn this market around today, last night’s announcement by the Bank of Japan to reduce its buying of Japanese Bonds is lending support to the Yen this morning.

Higher than expected Canadian inflation, is helping to pressure the USD CAD. This is likely to be a short-term position evening move. The strengthening U.S. economy along with IMF sales of gold should exert pressure on the Canadian Dollar once this inflation news blows over.

The stronger Dollar and signs that the U.S. Fed are poised to begin removing stimulus and hiking interest rates, is pressuring higher yielding currencies such as the AUD USD and NZD USD. Technically, yesterday’s closing price reversal top was confirmed overnight which is a strong indication that a 2 to 3 day break is likely.

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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