U.S. Dollar Index Holding on to Gains

The U.S. Dollar Index is holding on to most of its earliergains. The falling Euro is contributing the most to the Dollar’s rise whilelosing ground to the British Pound.

The U.S. Dollar Index is holding on to most of its earliergains. The falling Euro is contributing the most to the Dollar’s rise whilelosing ground to the British Pound.

There have been no fresh developments in the financial messin Europe. 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 are helping to boost the USD JPY atthe mid-session. This currency pair remains weak however as long as it remainsunder 91.61. Talk circulating that theBank of Japan may be planning an intervention to weaken the Yen seems to be theonly reason why the Dollar/Yen isn’t trading sharply lower.

The boost in equity prices and strong crude oil is helpingto pressure the USD CAD. Rumors are out there that the Bank of Canada is poisedto hike interest rates at its next meeting on Tuesday, June 1. Resistance hasbeen established at 1.0739. Watch for a near-term correction to at least1.0481.

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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