Trichet Comment Fuels Euro Rally

European Central Bank President Jean Claude Trichet fueled asurge in the Euro late this morning by stating that the ECB would maintain itsliquidity measures but not increase or add any. Investors liked this newsbecause it indicted that the central bank felt confident in the economy. TheEuro rallied on the news after the table was set for a strong short-coveringrally.

European Central Bank President Jean Claude Trichet fueled asurge in the Euro late this morning by stating that the ECB would maintain itsliquidity measures but not increase or add any. Investors liked this newsbecause it indicted that the central bank felt confident in the economy. TheEuro rallied on the news after the table was set for a strong short-coveringrally.

The inability to break the Euro overnight after a hardsell-off late in the session on Wednesday triggered the start of ashort-squeeze this morning. Short-traders scrambled to cover positions asdownside momentum dried up after the European Union got its act togetherearlier this week and announced final plans to rescue its troubled members.

Technically the Euro is still in a downtrend, but a new mainbottom has been formed, creating a range between 1.2453 to 1.1876. This hascreated a retracement zone at 1.2164 to 1.2233. Based on the current upsidemomentum, this zone is today’s target.

In addition, two main bottoms at 1.2143 and 1.2153 are alsotargets, forming a huge resistance cluster at 1.2143 to 1.2164. With the maintrend down, don’t be surprised if fresh shorts get reapplied in this clusterarea. Some bearish traders still believe the sovereign debt situation will getworse before it gets better and the Euro will eventually trade down to paritywith the Dollar.

An easing of tensions in the Euro Zone is also helping totrigger a rally in the British Pound. This market is starting to run to the upsideafter a successful test of a retracement zone at 1.4499 to 1.4435. The nextupside objective is 1.4769. A breakout over this price will change the maintrend to up and should ignite a further rally to 1.4947 over the near-term.

The USD CHF is losing ground at the mid-session. Thestronger Euro is easing speculation that the Swiss National Bank will continueto intervene to weaken its currency. Today’s action indicates that a test of1.1309 is likely over the short-run.

Stronger demand for higher risk assets is driving theCanadian Dollar higher. The strong rally in crude oil and U.S. equitieshelped to push the USD CAD through the last main bottom at 1.0333, turning themain trend to down on the daily chart.

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: