Dollar Finishes Mostly Up but Well Off Its Highs

The U.S. Dollar finished higher against most majorcurrencies but intraday profit-taking helped the Greenback close well off itshighs.
The U.S. Dollar finished higher against most majorcurrencies but intraday profit-taking helped the Greenback close well off itshighs.

The early session rally in the Dollar began overnight in thewake of a lawsuit filed by the SEC against Goldman Sachs on Friday. Aggressiveselling by investors of risky stocks and commodities helped trigger the rally.Weaker equities, gold and crude oil sent a message that risk was going to betaken off the table. Investors have been moving money to less risky, loweryielding currencies since Friday’s surprise announcement on speculation theinvestigation may broaden.

After an early session surge, the Dollar weakened throughoutthe day as commodity and stock indices recovered after anticipatedfollow-through selling during the New York session failed to materialize.

The EUR USD continued its slide early on speculation that Greece wouldhave to tap its rescue loans to meet its short-term obligations. The spreadbetween Greek Bonds and German Bunds continued to raise concerns that Greece was onthe brink of collapse if it couldn’t service its debt. News that European airtraffic resumed after being shutdown for several days seemed to give equitymarkets a boost which helped trigger a turnaround in the Euro late in thetrading session.

The British Pound was down sharply overnight and early inthe New Yorksession as concerns continued to mount about the possibility of a hungparliament following the May 6th election. Investors are worried that a virtualtie between the Labor Party and the Conservative Party will mean that the nextadministration will have a difficult time working out solutions to its currentbudget deficit crisis. Continue to lookfor volatility as traders speculate on the direction of the British Poundfollowing the release of pre-election poll results.

The falling Eurohelped send the USD CHF higher early in the trading session. Traders raisedconcerns that the Swiss National Bank would have to continue to intervene toprotect the Swiss economy, especially its exports.

Increased demand for lower risk assets helped give theJapanese Yen a boost overnight as nervous traders sold off positions in higherrisk, higher yielding assets. The inability to break stocks and commoditiesafter a sharply lower opening fueled an intraday rally in the USD JPY thatcarried over into the close.

The sharp sell-off in gold and crude oil triggered a strongrally in the USD CAD overnight, but the lack of selling pressure throughout theday helped the Canadian Dollar recover some of its earlier loss. This rally wasmost likely short-covering rather than buying. On Tuesday the Bank of Canadameets to discuss monetary policy. The Canadian financial markets are indicatingthat investors expect the BoC to lean toward increasing interest rates as earlyas June 1st rather than the earlier speculated July 1st.

Falling demand for higher risk assets as well as speculationthe Chinese will revalue the Yuan helped pressure the AUD USD and NZD USD earlyin the trading session. Both the Aussie and Kiwi turned around aboutmid-session after it became clear to investors that there would be nofollow-through to the downside in the equity complex.

Short-term oversold conditions also helped both of thesecurrency pairs cut their earlier losses. New Zealand Dollar traders cut theirlosses on speculation the Reserve Bank of New Zealand may talk about hikinginterest rates some time after June because of the improving economy. The RBNZmeets on April 28th.

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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