U.S. Dollar Trading Mixed; Waiting for Fresh News

The U.S. Dollar istrading mixed against most major currencies after trading sharply higher duringa volatile overnight session.

The U.S. Dollar is trading mixed againstmost major currencies after trading sharply higher during a volatile overnightsession. The main concerns for investorstoday has been the thought that Friday’s weak U.S.employment report is a sign the economy is still mired in slow growth and thedebt problems in Hungary.

The Euro is trading lower but mostlysideways since the New Yorkopening. The overnight follow-through to the downside following Friday’s sharpsell-off has put this market in an oversold position leading to a conflictbetween the fundamental traders who believe that lower prices are coming andthe technical traders who feel the market needs to retrace over the short-runto set up fresh selling.

Technically, the Euro is in a down trendbut in a position to post a daily closing price reversal bottom. Watch for ahigher close today to set up a possible 2 to 3 day rally and/or a 50%retracement of the last leg down. The chart pattern suggests that the two oldbottoms at 1.2143 to 1.2153 could become a wall of resistance.

The GBP USD is trading slightly betterafter earlier weakness. This currency pair is trading inside of a retracementzone at 1.4499 to 1.4435. The main trend is down, but this market may be tryingto form a secondary higher bottom which could indicate the start of a freshrally. A close over 1.4499 will be a sign of strength. A close under 1.4435will indicate further weakness.

The direction of the U.S. equitymarkets is controlling the movement in the USD JPY. Stronger equity marketsmeans greater demand for risk and a higher Dollar/Yen. Risk aversion willweaken the Dollar/Yen. The key price level to watch is the 50% price at 91.61.This price is acting as a pivot today.

The steady Euro has helped increaseappetite for risky assets. This is the reason for the turnaround in theCanadian, Australian and New Zealand Dollars. All three of these commodity-linked currencies are in downtrends, butripe for the start of 2 to 3 day short-covering rallies.