Euro Closes Higher; Poised to Continue Up Move

The Euro closed the week higher and in a position to continue the rally as financial tensions have eased enough in Greece to warrant the beginning of a short-covering rally.

The Euro closed the week higher and in a position to continue the rally as financial tensions have eased enough in Greece to warrant the beginning of a short-covering rally. Technically, the main trend is up on the daily chart with 1.4009 a possible near-term target. Although most of the strength in the Euro this week was attributed to the easing of the financial crisis in Greece, there are rumors out there of a possible $50 billion bailout by France and Germany. If this bodes to be true, then look for another spike to the upside next week.

The GBP USD finished the week strong. Oversold conditions and renewed optimism about the economy helped to boost prices. The current move is not likely to change the trend to up on the daily chart, however. The fundamentals still suggest lower prices are likely. Concerns over the economic recovery, political uncertainty and the lack of confidence in the Bank of England should limit gains or trigger fresh selling after a retracement.

The USD JPY closed the week higher, driven mostly by the strong U.S. equity markets and demand for higher risk assets. Technically, this pair reached a major 50% price at 90.95. A breakout above this level should send the market to 91.62. The direction of the stock market will dictate the moves in the Japanese Yen. A weaker stock market should drive the Yen higher. A stronger stock market will renew interest in the carry trade and pressure the Yen. Early Friday, the Japanese government expressed concern about the strength in the Yen. The “verbal intervention” helped to weaken the Yen.

The stronger Euro helped to pressure the USD CHF. The higher the Euro goes, the weaker this pair should get. The stronger Euro removes the pressure from the Swiss National Bank to weaken its currency through intervention. The daily chart indicates that there is enough downside momentum developing to send this market down to 1.0513.

The weaker Dollar and early demand for higher risk assets helped drive the USD CAD through the October bottom at 1.0205. At first traders approached this price level with caution out of fear of an intervention by the Bank of Canada. The BoC has been quiet however, due to the fact that the strength in the Canadian Dollar is being driven by economic reasons rather than speculation. Downside momentum is building which could send the Canadian Dollar to parity with the U.S. Dollar. It’s not suggested to get aggressively short at current levels since there is still a chance the BoC may intervene.

Strong demand for higher yielding assets and a spike in U.S. equity markets helped drive the AUD USD higher Friday morning. Selling pressure weakened this market at the mid-session because of the drop in U.S. equity markets. Technically, a closing price reversal top has been formed. A follow-through to the downside is needed, but once confirmed, should trigger a correction to at least .8997.

The NZD USD finished the week higher. Increased demand for higher risk assets contributed to the stronger showing. Earlier this week the Reserve Bank of New Zealand announced that interest rates would remain the same, but failed to offer any additional negative views on the market. The central bank’s statement provided some relief to the bulls who believe the RBNZ is poised to begin raising interest rates shortly after the end of the 2nd quarter.

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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