Australian Dollar Plunges as Investors Shed Risky Assets

The AUD USD plunged this morning through an old swing bottomat .9001 and a major 50% price level at .8983. The Aussie broke as traders liquidated positions in higher yieldingcurrencies and risky assets.

The AUD USD plunged this morning through an old swing bottomat .9001 and a major 50% price level at .8983. The Aussie broke as traders liquidated positions in higher yieldingcurrencies and risky assets.

Technically, the Aussie is testing uptrending Gann anglesupport at .8897 and a major Fibonacci retracement level at .8886. A breakthrough this support cluster will likely trigger an acceleration to thedownside. Regaining the 50% level will be a sign of a developing short-coveringrally.

The NZD USD is trading sharply lower in an expanded range.Traders are dumping higher yielding assets in favor of safety. This morning aminor retracement level at .7188 to .7156 failed, setting up further decline toa major uptrending Gann angle at .7126. This angle has held several times inthe past few weeks. A failure to hold this time down sets up a further declineto last swing bottom at .7052. A break through this level will turn the maintrend to down on the daily chart.

Weaker equities and crude oil are helping to fuel an upsidebreakout in the USD CAD. This morning the Dollar/CAD broke through a 50%retracement level at 1.0366. This triggered a further rally to the Fibonacciretracement level at 1.0463. Watch for a possible technical bounce at thislevel. It is likely to be short-term however, as upside momentum indicatesfurther upside action is possible.

In an unusual move today, the USD CHF is trading lowerdespite the weaker Euro. For months a weaker Euro meant a weaker Swiss Franc. Traders had been selling the Swiss Franc inanticipation of further intervention by the Swiss National Bank. Today, it hasbeen rumored that the SNB had reached its objective and is no longer going toflood the market with Francs. This is the catalyst behind today’s weakness inthe Dollar/Swiss.

The GBP USD is plunging at the mid-session. Downsidemomentum is strong enough, making the late March bottom at 1.4797 the nextlikely price target. Traders are reacting to the on-going election andspeculation that a hung parliament may result. Furthermore, Sterling investorsrealize that this election means that the U.K. government is getting closerto proposing austere financial measures in an effort to tighten up the hugebudget in order to avoid a slash in its debt rating.

The huge drop in the stock market is triggering a flight tosafety rally in the Japanese Yen. The USD JPY is down sharply after the trendchanged to down on Wednesday. Investors are dumping U.S.equities and repatriating their funds to Japan to pay off loans made in Yen.Downside momentum is building which means the mid-April bottom at 91.59 is thenext target.

This morning the Greek government passed its new costcutting measures, making Greeceeligible for the bailout money offered by the European Central Bank and theInternational Monetary Fund. The Euro continued to weaken however, as bearishtraders are no focusing their attention on similar fiscal problems developingin Spain and Portugal.

This morning the ECB voted to leave interest rates unchangedat 1.0%. It also added that rates would remain low with financial uncertainty stillexpected to be a draw on the Euro Zone economy. ECB President Jean ClaudeTrichet offered no solid relief to investors in his post-meeting press conference.Many traders had expected him to make a much stronger statement regarding theEuro Zone problems but his talk failed to instill any confidence in investors. Infact, the Euro continued to break sharply after his press conference.

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