U.S. Dollar Finishes Week Lower; Reversal Top Likely to Pressure Greenback

The U.S. Dollar traded higher against most major currencies onFriday, but lower for the week. Technically, the Dollar Index posted a weeklyclosing price reversal top which could lead to the start of a 2 to 3 week breakif confirmed next week. The Dollar Index chart indicates there is room toretrace back to 84.92.

The U.S. Dollar traded higher against most major currencies onFriday, but lower for the week. Technically, the Dollar Index posted a weeklyclosing price reversal top which could lead to the start of a 2 to 3 week breakif confirmed next week. The Dollar Index chart indicates there is room toretrace back to 84.92.

The EUR USD traded slightly lower after the four-day rallyfell just short of a minor 50% price level at 1.2164. The daily chart indicatesthat a near-term break to 1.2014 is likely if selling pressure prevails. Thisprice could prove to be strong support if traders try to form a secondaryhigher bottom.

On the upside, 1.2164 to 1.2233 continues to be anobjective, but Friday’s daily closing price reversal top indicates that sellingpressure may be building.

The weekly Euro chart paints a more upbeat picture as thismarket is poised to post a weekly closing price reversal bottom. Onceconfirmed, this pattern suggests a 2 to 3 week rally or a move to 1.2784.

The direction of the Euro next week hinges on traderperception of risk. Last week the Euro went through a relatively quiet period.Fed Chairman Bernanke helped to support the Euro by saying the European Unionhas the means and the money to prevent a collapse in the currency, whileEuropean Central Bank President Trichet boosted the single currency by statingthe ECB would not expand liquidity measures.

The British Pound traded sharply lower on risk concerns andbearish U.K.economic data. Last week’s three day rally fell short of testing a main top at1.4769 and a 50% price level at 1.4810 before buying interest dried up. At theclose this market was testing a short-term retracement zone at 1.4499 to1.4435. This area must hold or the current secondary higher bottom pattern willbe at risk.

The USD CHF finished higher, boosted by the lower Euro andthoughts of another round of Swiss Bank intervention. The downside targetremains.1.1326 but the market may have to retrace to 1.1563 to 1.1603 beforenew selling pressure emerges.

The mixed trade in U.S. equity markets today caused asideways trade in the USD JPY. For most of the day, this currency pair huggedat a major 50% price level at 91.61. This price is acting like a pivot. TheDollar/Yen will strengthen above it, but weaken below it.

The Dollar/CAD finished slightly better but inside ofThursday’s range. A drop in demand for riskier assets led by the break in U.S. equitiesis the catalyst behind today’s strength. The main trend is down on the dailychart and likely to continue to weaken if U.S. equity markets continue torise. The fact that New Zealand increased interest rates is a signthat the Bank of Canada is likely to do the same in July.

Weaker equity markets and the disappointing U.S. RetailSales Report pressured the AUD USD at the mid-session but this market made afull recovery into the close. Traders were paring long positions on the notionthat the global economic recovery may not be as strong as previously estimated.Technically this pair stopped short of breaking out above the last main top at.8550. The late session recovery in U.S. equity markets helped trigger ashort-covering rally in the Aussie which put it in position to blast off to theupside this week. Upside momentum could trigger a steep rally to .8727.

The NZD USD closed on its high after turning the main trendup on the daily chart earlier in the day. The first upside objective is a 50%price level at .6942. Holding about this level targets .7033. The Kiwi was boosted by greater demand forrisky assets on Friday, but the rally was set in motion earlier in the weekwhen the Reserve Bank of Australiaraised interest rates, initiating its tightening cycle. In addition, upbeatcommentary by the RBNZ helped provide some fuel for the rally.

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: