U.S. Dollar Index Gains after Good U.S. Economic News

The U.S. Dollar Index rose early Wednesday morning and heldon to its gains throughout the trading session following better than expectedU.S. Durable Goods and New Home Sales Reports. The falling Euro also contributedsubstantially to the Dollar’s rise while trading mixed versus the BritishPound.

The U.S. Dollar Index rose early Wednesday morning and heldon to its gains throughout the trading session following better than expectedU.S. Durable Goods and New Home Sales Reports. The falling Euro also contributedsubstantially to the Dollar’s rise while trading mixed versus the BritishPound.

There were no fresh developments in the financial mess inEurope so traders used the good U.S.economic news as a reason to lean on the Euro. Last week’s optimism and robustclosing price reversal bottom seem to be long forgotten. Although the reversalbottom at 1.2143 remains intact, it seems that this daily chart bottom islikely to fail now that traders have rejected the Euro at the .618 retracementlevel at 1.2345.

Traders seem to be too worried about contagion and hedgefunds don’t seem too willing to let up on the selling pressure to trigger anykind of sustainable rally.

The chart pattern looks a little more optimistic for the GBPUSD. On Monday the market held last week’s low at 1.4229. This action triggereda short-covering rally that put this market back on path for a potential testof the retracement zone at 1.4810 to 1.4947.

Fundamentally, traders seem pleased by the recent activityby the new government. Late last week the U.K. government announced plans toslash the budget and reduce its debt load. The fact that they are actingswiftly to fix the financial problems facing the country has made investorsfeel a little better about the long-term prospects for the Sterling.

Stronger equity markets helped to boost the USD JPY earlyduring the trading session, but a late session sell-off in U.S. stockmarkets helped to turn this currency pair negative for the day. The Dollar/Yenis expected to remain weak as long as it remains under 91.61. Talk circulatingthat the Bank of Japan may be planning an intervention to weaken the Yen seemsto be the only reason why the Dollar/Yen isn’t trading sharply lower.

The boost in equity prices and strong crude oil helpedpressure the USD CAD until shortly after mid-session when stocks turned lowerfor the day. This action reversed the Canadian Dollar to down.

Rumors are out there that the Bank of Canada is poised tohike interest rates at its next meeting on Tuesday, June 1. Resistance has beenestablished at 1.0739. Watch for a near-term correction to at least 1.0481.

A late session reversal in U.S. equity markets helped toweaken the Australian Dollar and New Zealand Dollar. Both of these marketsremain sensitive to investor demand for higher risk assets.

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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