Shorts Regain Control of Euro

Bearish short traders are slowly regaining control of theEUR USD overnight. On Friday weaker shorts bailed out of the Euro after Greeceannounced that it was going to formally announce to the European Union and theInternational Monetary Fund that it needed to trigger the loan mechanism builtinto the recent loan bailout proposal.

Bearish short traders are slowly regaining control of theEUR USD overnight. On Friday weaker shorts bailed out of the Euro after Greeceannounced that it was going to formally announce to the European Union and theInternational Monetary Fund that it needed to trigger the loan mechanism builtinto the recent loan bailout proposal.

The lack of clarity, as to how much funding Greece needsand how the loan mechanism works, are raising concerns among investors. At thiscrucial time, investors are looking for clarity. It seems to be the uncertaintyof the process that is encouraging renewed selling pressure this morning.Investors not only want to know if there will be plenty of money available for Greece, butalso the terms of the loans. One of the biggest concerns is will Greece have tokeep coming back to the EU/IMF for help. Traders also want to know if countrieslike Spain, Portugal and Ireland will have access to similarloans should problems escalate in those countries.

The weakness overnight is clearly a sign that the shorts arein control of this market. Furthermore, since capital market investors havebeen setting high premiums against default, they too have been enjoying adistinct advantage over the Greek government. Unless the EU/IMF comes up with aviable long-term solution to shoring up the Greek economy, look for downsidepressure to continue on the Euro. If the sovereign debt issues move across Europe, look for the Euro to accelerate to the downside.

Better economic reports and a weaker Euro are driving updemand for the GBP USD. Overnight momentum has this market in a position tochallenge the recent top at 1.5523. A breakout over this level could trigger afurther rally to a key 50% level at 1.5618. Traders seem to be ignoring thepossibility of a hung parliament following the May 6th election. Investors havebeen limiting gains recently on the thought that a hung parliament will meanthat reaching a solution to erasing the budget deficit will be difficult.

Expectations of a stronger opening in U.S. equitymarkets are helping to boost the USD JPY. Besides the threat of deflationagainst the Japanese economy, low interest rates continue to make this currencythe carry market of choice.

Demand for higher risk assets is helping to pressure the USDCAD after a two-day rally. Short-term, this market is a little oversold whichmay be leading to the slow down in downside momentum. Longer-term, thestrengthening economy and the threat of rising interest rates is making theCanadian Dollar a desirable long-term investment. Even if there is ashort-covering rally, a retracement zone at 1.0072 to 1.0106 is likely to stopthe rally.

Renewed demand for higher risk assets is helping to boostthe AUD USD. The main trend is still down, but upside momentum could drive thismarket through the last main top at .9337. In addition, this market couldtrigger an acceleration to the upside if a downtrending Gann angle is violated.Volatility sees to be building.

Technical factors are helping to drive the NZD USD higher.Friday’s close over a 50% level at .7124 was the key to this morning’sstrength. After several attempts to close over this level, bullish tradersfinally accomplished this late last week. Fresh buyers stepped in overnight andare now driving this market over another major .618 level at .7199. The chartsindicate that there is plenty of room to the upside. Traders seem to be pricingin the strong possibility of an interest rate hike by the Reserve Bank of New Zealandearlier than expected.

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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