Euro Higher; Traders Remain Cautious

The EUR USD is trading higher at the mid-session but tradersremain 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.

The EUR USD is trading higher at the mid-session but tradersremain 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.

Technically, the Euro made a closing price reversal bottom onWednesday. Last night’s trading action confirmed the bottom. The chartsindicate that a 2 to 3 day rally is likely with 1.3402 to 1.3471 the nextlikely upside target.

An easing of tensions regarding Greece and a different attitudetoward the possibility of a hung parliament is helping to drive the GBP USDhigher. Although election pools are indicating no clear winner emerging,investors are speculating that the U.K. may still be able to tackleits deficit problem. Speculators are supporting the market after building acase that the Liberal Democrats may be able to shift the power in case of ahung parliament. Many traders believe this party will take an aggressiveapproach toward balancing the budget.

Technically, the British Pound turned the main trend down onthe daily chart on Wednesday. Today’s action looks more like a retracement ofthe recent break rather than a change in trend. At the mid-session, the Sterling is tradinginside of a retracement zone at 1.5310 to 1.5354.

Despite the strong U.S. equity markets, the USD JPY istrading flat to higher. Expectation is for the Yen to weaken over the near-termdue to greater demand for higher risk assets and its 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. Yesterday’s Fed commentary also helpedto boost the Canadian Dollar. The Fed said it would keep interest rates low for“an extended period” while the Bank of Canada is leaning toward hiking interestrates sooner than expected. The widening interest rate differential is makingthe Canadian Dollar a more attractive investment.

Near the mid-session, the USD CAD is paring some of itsearlier losses after BoC Governor Mark Carney said a strong Canadian Dollar mayhave impact on inflation or monetary policy. A strong currency tends to flatteninflation while reducing foreign demand for Canadian exports.

The AUD USD continued its rally following Wednesday’sclosing price reversal bottom. Although the up move looks impressive, no changein trend has been signaled. In fact, the entire move has amounted to a .618retracement of the .9387 to .9135 range. Traders bought the Aussie aggressivelystarting on Wednesday after the Fed announced that interest rates would remainlow for “an extended period”.

The outlook for higher interest rates by the Reserve Bank ofNew Zealandis helping to boost the NZD USD at the mid-session. Following Wednesday’sassessment by the Fed that interest rates would remain low, traders is nowbeginning to price in the possibility that the RBNZ is likely to raise interestrates before the 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: