U.S. Dollar finishes Mixed; Chinese Revaluation Likely to Pressure Aussie Dollar

U.S.economic reports this morning helped weaken the Dollar after Weekly Initial JobClaims and Industrial Production were less than stellar. The job claims reportshowed more Americans filed for unemployment aid while factory production camein below expectations. Both reports signaled interest rates would remain low.

U.S.economic reports this morning helped weaken the Dollar after Weekly Initial JobClaims and Industrial Production were less than stellar. The job claims reportshowed more Americans filed for unemployment aid while factory production camein below expectations. Both reports signaled interest rates would remain low.

Last night Chinareported that its Gross Domestic Product grew 11.9 percent from a year ago.This was slightly better than the median guesses of 11.7 percent.  The news, that China’s economy accelerated morethan expected in the first quarter, raised concerns that it may be overheating,prompting more talk of a possible interest rate like. Traders are also increasingspeculation that Chinamay revalue its currency as soon as next week. If this takes place, look forthe Japanese Yen to strengthen and the U.S. Dollar to weaken along with theAustralian and New Zealand Dollars.

 News that China’sGDP was up slightly more than expected during the first quarter helped topressure the USD JPY. Technically, the charts indicate that downside momentumcould take this market down to 92.26 over the near-term. Traders should alsonote that the general consensus suggests that the Japanese Yen is likely togain when Chinadecides to revalue its currency.  Arevaluation of the Yuan is likely to put pressure on commodity-linkedcurrencies to the benefit of the lower yielding Japanese Yen.

 Short-covering ahead of next week’s Bank of Canada meetingon April 20th may have helped to underpin the USD CAD. The chart formationsuggests the possibility of a short covering rally to 1.0020 to 1.0046.Oversold conditions are also helping this market recover after touching a newlow for the week on Wednesday.

 For over a year, Bank of Canada Governor Mark Carney haspledged to keep interest rates at a record low of 0.25% through June. Canadianfinancial markets are indicating, however, that rates may rise as early as June1. This helped pressure the USD CAD below parity recently.  The bigger picture suggests the CanadianDollar is likely to continue to rise because of the stronger-than-expectedeconomic recovery and expectations for interest rate increases.

 The AUD USD rose overnight following China’s strong GDP report. Weakerdemand for higher yielding assets, however, quickly brought in sellers. Therecent two day rally may be setting up the market for a break. This is possibledue to the closing price reversal top at .9387 which is still weighing on themarkets. A trade through .9223 will turn the main trend down. Bullish tradersappear to be approaching the long-side with caution following rumors theChinese will revalue the Yuan next week. This action could spell decreaseddemand for Australian commodities and raw materials.

 The NZD USD felt similar pressure but this market continuesto remain glued to a major 50% price level at .7124. This price is controllingthe short-term direction of the Kiwi. The longer-term charts indicate that downsidepressure is likely as long as the Kiwi remains below .7200. A break through.7086 will turn the main trend down. Traders may begin selling the New Zealand ahead of next week’s possiblerevaluing of the Yuan by China.

 The GBP USD closed higher after a report showed theopposition Conservative Party’s lead over the Labor Party widened, easingconcerns that the May 6th election will produce a hung parliament. Traders hadbeen pressuring the British Pound lately because of concerns that a hungparliament would result in a government too weak to tackle the U.K.’shuge budget deficit. Gains could be limited on speculation that bullish traderswill begin to liquidate their long positions ahead of the election.

 Technically, this currency found support following an earlytest of an uptrending Gann angle support at 1.5397. Look for this market tocontinue to remain strong as long as this angle holds as support. The nextupside objective is a 50% level at 1.5618.

 The EUR USD finished down off its low. Following a sharplylower opening, the Euro mounted a small comeback throughout the day as reportssurfaced that the International Monetary Fund will meet with Greece on Monday to discussfinancial aid options.

 Market participants are feeling jittery again because ofconcerns over Greece.Investors are worried that the IMF/EU $61 billion financial aid plan will notbe enough to help the Greek economy and restore confidence in the Euro. At thistime, the Euro is facing serious credibility issues.

 

 

 

 

 

 

 

 

 

 

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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