U.S. Dollar Mixed; Euro, Pound under Pressure

The U.S. Dollar is trading mixed overnight. The Greenback istrading higher against he heavyweight Euro and British Pound and down versusthe Japanese Yen and New Zealand Dollar. There is no major theme yet, buttraders seem to be leaning against risk.

The U.S. Dollar is trading mixed overnight. The Greenback istrading higher against he heavyweight Euro and British Pound and down versusthe Japanese Yen and New Zealand Dollar. There is no major theme yet, buttraders seem to be leaning against risk.

There are two economic reports today that may move theDollar. U.S. Housing Starts are expected to show a modest increase to 0.605Mfollowing a drop to 0.575M in February. Traders are speculating that weather improvementsand the new spring building season may have lead to the increase in the numberof new units. The fundamentals remain weak however, based on the supply of newand existing homes available. Foreclosures are also a major problem.  A lower than expected number should weakenthe Dollar as it would indicate lower interest rates.

U.S. Consumer Sentiment is expected to show a rise in March.This month’s report is expected to come in at 75.0 versus a February figure of73.6. The improving jobs picture apparently had a major influence on consumers.Earlier this week it was reported that consumers spoke with their pocketbooksafter retail sales rose more than expected. This report is not likely to havethat big of an effect on the Dollar unless it is way of line with expectations.

Late in the trading session, Kansas City Federal ReserveBank President Thomas Hoenig speaks. In his 12:30 pm EDT speech, Hoenig isexpected to discuss the reasoning behind his demand that the Fed begin raisinginterest rates. At the last two FOMC policy meetings, Hoenig was the lonedissenter. Hoenig is also expected to warn about potential asset bubblesbecause of the Fed stance to keep interest rates low for an “extended period”.His speech may catch traders off guard late in the trading session. Talk ofhigher interest rates may spook the equity markets while driving traders intothe U.S. Dollar.

The EUR USD is trading lower ahead of the New York session. Last night’s low at 1.3513almost filled the gap left Sunday night at 1.3498. The daily chart indicatesthat the break may not stop there with 1.3486 to 1.3438 the next potentialdownside target. With the main trend up on the daily chart, don’t be surprisedby a technical bounce following a test of this retracement zone.

Fundamentally, the Euro remains weak and faces a credibilitycrisis because of the lingering sovereign debt problems in Greece.Although a financial aid package was supposedly agreed upon on April 11th, tradersare beginning to realize that this may have been a short-term fix rather than along-term solution. With fiscal problems still lingering, the InternationalMonetary fund has agreed to meet with Greece on Monday to discuss itscurrent financial issues.

The spread between the Greek Bond and the German Bundcontinues to be the best indicator that problems exist. Investors have drivenup the premium to buy Greek Bonds to over 400 basis points, or its highestlevel since the rescue plan was announced. The consensus among traders is thatthe proposed $61 billion aid package may not be enough to help Greece.Furthermore, traders are now looking for the Euro Zone’s sovereign debt issuesto begin spreading to Portugal.Without a viable plan to fight the spread of additional fiscal problems, lookfor hedge funds to continue to press the Euro lower as well as sell rallies.

The British Pound is trading weaker overnight following anelection debate in the U.K.which once again raised concerns about the possibility of a hung parliament.Doubts are being raised by traders as to whether major parties involved in theelection have viable plans to contain the country’s growing budget deficit. Manytraders are also losing confidence in this current rally as they suspect thatlong traders will begin liquidating their positions as the May 6th electiondate draws near.

Technically, this market weakened overnight when anuptrending Gann angle from the 1.4797 bottom at 1.5337 was violated. This moveindicates impending weakness with a strong possibility of a break to at least1.5160 on April 20th.

The weaker Euro is helping to boost the USD CHF overnight.Traders are anticipating another round of intervention by the Swiss NationalBank to protect its currency and exports. For the fourth time this week, thismarket is having trouble penetrating a 50% retracement level at 1.0609 whichmeans a breakout through this price is likely to lead to an acceleration to theupside.

The USD JPY is trading weaker overnight. Traders could bebracing for a sell-off in U.S.equities or anticipating a revaluation of the Chinese Yuan as early as nextweek. The daily chart indicates a move to 92.26 to 92.02 is likely over thenear-term. A failure to hold this area indicates a further decline to 91.67.

Position evening ahead of the April 20th Bank of Canadameeting is helping to boost the USD CAD. Based on the short-term range of1.0104 to .9952, the retracement zone at 1.0028 to 1.0046 could prove to bestrong resistance. The main trend remains down until 1.0104 is taken out.Short-term, the Canadian Dollar may be overbought, but the consensus is thiscurrency is likely to continue to rise because of a better than expectedeconomy and a series of interest rate hikes.

The AUD USD is under pressure overnight as rumors of apotential revaluation of the Chinese Yuan are most likely triggering aliquidation break. The current chart formation suggests that this week’s twoday rally may be setting up a secondary lower top following Monday’s closingprice reversal top. Traders should recall that the Australian Dollar broke hardearlier in the week after it was reported that mortgage approvals were lessthan expected. This raised questions as to whether the Reserve Bank of Australia willhave enough reason to raise interest rates for the 6th time in 7 months. Theshort-term chart indicates a change in trend will take place on a trade through.9223 with .9194 the next downside target.

The New Zealand Dollar is trading slightly better overnight.Traders continue to use .7124 as a pivot price. Don’t expect this market tomove very much until it pulls away from this price. In fact, don’t expect anacceleration to the upside until this pair closes over .7200. Watch for achange in trend following a break under the last swing bottom at .7085.

 

 

 

 

 

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

Disclainer: