Dollar finishes higher led by Consumer Confidence Surprise

The Dollar reversed earlier weakness to close higher after U.S. consumer confidence data came out better than expected.

The Dollar reversed earlier weakness to close higher after U.S. consumer confidence data came out better than expected. The friendly report served as further evidence that the U.S. economy may be recovering faster than the Euro Zone. This means the Fed is likely to begin raising interest rates before the European Central Bank.

Upside momentum slowed considerably overnight which helped weaken the Euro on the New York session opening. The buzz over the European Union/International Monetary Fund Greece bailout plan seemed to be fading also. As expected, the EUR USD broke back into a minor 50% retracement level at 1.3402. This price held, but the short-covering rally following the test of this level was weak.

Traders also reacted to a shift in the interest rate spread between U.S. Treasury and German financial instruments. 10-Year Note yields rose above the German Bund making an investment in U.S. Treasuries a more attractive investment. This also helped to pressure the EUR USD throughout day session.

Finally, the Dollar rose against the Euro as Greece’s seven-year notes fell in the initial day of trading. News that the auction of Greek 12-year bonds attracted less than half the debt offered also contributed to the weakness in the EUR USD.

The GBP USD posted a strong gain early in the trading session following an upward revision in Fourth Quarter GDP. The final GDP figure showed the economy expanded by 0.4% during the fourth quarter, up from the previous estimate of 0.3%. Economists claim upward revisions in services and construction were responsible for the increase.

Despite the bullish news, this market is still in a down trend and struggled with a key 50% level at 1.5080. By the end of the day, the British Pound was trading well below its high for the day.

The lower Euro helped to underpin the USD CHF after breaking out above the .618 retracement level at 1.0628. The next upside target is another 50% level at 1.0703. The trend will remain down until 1.0751 is violated.

The USD JPY weakened initially overnight, but turned positive after global equity markets rallied and U.S. Consumer Confidence came out better than expected. Overbought conditions are still limiting movement in this currency pair along with a slow down in upside momentum in U.S. stock markets. This afternoon’s attempt to breakout to the upside did not have much following, which again indicates the lack of fresh buyers.

Speculators drove the USD CAD lower on expectations of a strong U.S. jobs report on Friday. Many traders feel that strong jobs data will also help the Canadian economy and bring the Bank of Canada closer to raising interest rates before the Fed. Sellers pressed this pair into a .618 support level near 1.0152. Shorts covered their positions following a test of this level and when it was reported that U.S. Consumer Confidence was better than expected. Technically the USD CAD could be forming secondary higher top which indicates more upside potential but today’s low volume makes it difficult to make a clear reading at this time.

The AUD USD continued its surge to the upside, buoyed by bullish comments from over the week-end by Reserve Bank of Australia Governor Stevens. The central bank leader said that improvements in the Australian housing market may warrant another interest rate hike in April. In addition, speculators are anticipating a bullish Retail Sales Report on Wednesday. Now that this market has crossed to the bull side of a retracement zone, look for a test of the last main top at .9251. A slow down in the U.S. stock market rally led to some position evening in the Aussie which is causing it to back off the high.

Greater demand for higher risk helped to drive the NZD USD into a key 50% retracement level at .7124. Sellers came in after this price was tested and U.S. equity markets weakened. A breakout over this level could trigger at test of the .618 level at .7199. A rally in U.S. equity markets this week is needed to trigger another surge to the upside.

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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