Report that Germany May Buy Greek Bonds Boosts EUR USD

The Euro rallied on Friday after Bloomberg reported that Germany may buy Greek bonds.

The Euro rallied on Friday after Bloomberg reported that Germany may buy Greek bonds. Shorts read this as a potential vote of confidence for Greece and used the news as an excuse to cover positions. The strong rally put the EUR USD in a position to turn the main trend to up on a rally through the last main top at 1.3692.

Despite a rise in Fourth Quarter GDP, the GBP USD finished lower on Friday, but off its low. Friday’s action was an indication of just how weak the U.K. economy is. Traders still feel economic problems, political woes and the possibility of more quantitative easing by the Bank of England may be too much to overcome in the short run. The weak close put this market slightly under a key 50% level at 1.5271.

Greater demand for higher risk assets helped to pressure the USD JPY, but the break stalled following a test of an uptrending Gann angle at 88.77. This week’s action indicates that the stock market rally and demand for commodities is still alive which could pressure the USD JPY further. The current administration in Japan is not expected to intervene unless they feel the current strength in the Japanese Yen is being triggered by speculation and volatility. Look for an acceleration to the downside if the main bottom at 88.55 and the .618 level at 88.24 fail to hold on this current break.

Risk sentiment appears to be shifting once again toward demand for higher yielding assets. This helped to boost gold, crude oil and stock prices, sending the USD CAD lower. The recent rally did not change the trend to up and appears to have been a retracement into a resistance zone at 1.0574 to 1.0623. Look for more downside pressure next week, but for this market to remain inside the main range of 1.0224 to 1.0780.

The improving Euro helped to ease the possibility of an intervention by the Swiss National Bank. This triggered the weakness in the USD CHF. Friday’s break through 1.0714 turned the main trend to down, setting up the possibility of a break to 1.0513 to 1.0423 over the near-term.

Demand for higher yielding assets helped to boost the NZD USD and AUD USD. Volatility for both currencies was high this week, highlighted by several shifts in direction. Now that the Fed has made it clear that interest rates are going to remain low for “an extended period” and the recent hike in the discount rate was not a sign of a tighter monetary policy, downside pressure may be lifted from the Aussie and Kiwi. The Reserve Bank of Australia meets on March 2nd. Traders appear to be betting the RBA will leave interest rates unchanged for the 2nd consecutive month.

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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