Euro Gains Ground; Greece close to Multiyear Rescue Package

The Euro closed higher as traders became more optimisticthat a multiyear rescue package agreement would soon be reached between Greece, theEuropean Union and the International Monetary Fund.

The Euro closed higher as traders became more optimisticthat a multiyear rescue package agreement would soon be reached between Greece, theEuropean Union and the International Monetary Fund.

The EUR USD traded higher throughout the day but tradersremained cautious about the long side. Although the European Union and theInternational Monetary Fund are working out a loan bailout agreement, tradersare likely to remain skeptical about the Euro until the details of the plan arerevealed. News was also circulating that Moody’s Investors Services waspreparing to lower Greece’sdebt rating several notches.

Technically, the Euro made a closing price reversal bottom onWednesday. On Thursday on bottom was confirmed with a follow-through rally. Thecharts indicate that a 2 to 3 day rally is possible with 1.3402 to 1.3471 thenext likely upside target.

Despite this renewed optimism about Greece, traders should remember that the Euroremains vulnerable amid tensions regarding Spain,Portugal and Ireland.

An easing of tensions regarding Greece and a different attitudetoward the possibility of a hung parliament helped drive the GBP USD higher.Although election pools are indicating no clear winner emerging, investors arespeculating that the U.K.may still be able to tackle its deficit problem without a majority. Speculatorsare supporting the market after building a case that the Liberal Democrats maybe able to shift the power in case of a hung parliament. Many traders believethis party will take an aggressive approach toward balancing the budget.

Technically, the British Pound turned the main trend down onthe daily chart on Wednesday. Thursday’s action looks more like a retracementof the recent break rather than a change in trend. By the close, the Sterling was tradinginside of a retracement zone at 1.5310 to 1.5354.

Investors will be watching tonight’s televised debateclosely to see if one candidate emerges as the clear leader. During the debatebetween British Prime Minister Gordon Brown, Conservative leader David Cameronand Liberal Democrat leader Nick Clegg, traders will be listening to hear whichcandidate has the best ideas for the U.K.’s economic policy. Traderswant to hear a concrete plan to shore up the U.K. deficit problem. Traders should watch for volatility tonight.

Despite the strong U.S. equity markets, the USD JPY finishedflat. The expectation is for the Yen to weaken over the near-term due togreater demand for higher risk assets and Japan’s huge budget deficit.Traders may be pricing in the possibility that Japanese debt may downgraded.

The USD CAD weakened from the onset on Thursday, driven bygreater demand for higher risk assets. Wednesday’s Fed FOMC policy statementalso helped to boost the Canadian Dollar. The Fed said it would keep interestrates low for “an extended period” while the Bank of Canada is leaning towardhiking interest rates sooner than expected. The widening interest ratedifferential made the Canadian Dollar a more attractive investment.

About mid-session, the USD CAD pared some of its earlierlosses after BoC Governor Mark Carney said a strong Canadian Dollar may haveimpact on inflation or monetary policy. A strong currency tends to flatteninflation while reducing foreign demand for Canadian exports. By the close, theCanadian Dollar was able to finish higher, but a little off its lows.Institutions have been supporting the USD CAD the last two times it tradedunder parity, if they pull their bids the next time down, look for anacceleration to the downside. Aggressive traders have to be careful aboutshorting into parity.

The AUD USD continued its rally on Thursday followingWednesday’s closing price reversal bottom. Although the up move looks impressive,no change in trend has been signaled. In fact, the entire move has amounted toa .618 retracement of the .9387 to .9135 range. Traders bought the Aussieaggressively starting on Wednesday after the Fed announced that interest rateswould remain low for “an extended period”. Thursday’s rally was a combinationof a widening interest rate spread and demand for higher yielding assets.

Today’s action looked like a position adjustment day. Inother words, investors are not sure what the Reserve Bank of Australia is goingto due at its next meeting so they squared up their short positions after themarket became oversold earlier in the week. Earlier in the month a worse thanexpected mortgage approvals report signaled the RBA would leave ratesunchanged. This week’s better than expected inflation report was an indicationthat rates would be hiked.

Technically, the main trend is down on the daily chartfollowing a series of lower tops and lower bottoms. Downtrending Gann angleresistance comes in at .9317. The trend changes to up on a trade through .9337.

The New Zealand Dollar closed near its high for the day. Theoutlook for higher interest rates by the Reserve Bank of New Zealandhelped to boost the NZD USD throughout the day. Following Wednesday’s assessmentby the Fed that interest rates would remain low, traders is now beginning toprice in the possibility that the RBNZ is likely to raise interest rates beforethe Fed.

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: