Commodity-Linked Currencies Roaring Back after Early Set-Back

After selling off early in the trading session on renewedEuro Zone debt concerns and weak U.S. economic data,commodity-linked currencies are roaring back at the mid-session.

After selling off early in the trading session on renewedEuro Zone debt concerns and weak U.S. economic data,commodity-linked currencies are roaring back at the mid-session.

Overnight it was reported that the International MonetaryFund, the European Union and the U.S. Treasury were establishing a line ofcredit for Spain.This news raised concerns that Euro Zone sovereign debt issues were still outthere despite the recent moves by the E.U. to establish stability in theeconomic region. Traders pared positions overnight in the Euro and risky assetsas a precaution.

This morning it was reported that U.S. Housing Starts fell10% in May. This news raised concerns that the U.S. housing market was headed fora double-dip recession. Stocks broke on the news and the Dollar rallied astraders looked for protection. Later in the morning, a U.S. industrialproduction report showed a 1.2% rise in May. This news helped stabilize market.

Following the drop in the Euro overnight and the weakerglobal equity markets, the Australian, New Zealand and Canadian Dollarswere under pressure as traders sold off higher risk assets. The weakness wasn’ta surprise to technical traders who came into the day feeling these markets hadreached overbought levels.

After an early set-back driven by the weaker U.S.equity markets, commodity-linked currencies are making a comeback as stockprices shrugged off earlier weakness to move higher for the day.

The Australian Dollar is still trading lower but in aposition to test the high for the day. The daily chart indicates the main trendis up with .8727 the most likely upside target.

The New Zealand Dollar has turned positive ahead of themid-session. This morning’s weakness triggered a test of a 50% level at .6942.The charts indicate that holding this level is significant because it may setup a test of the .618 level at .7033.

Stronger equity and commodity markets are helping to supportthe Canadian Dollar. The USD CAD is currently in a position to weaken furtherafter failing to follow-through to the upside following Monday’s closing pricereversal bottom at 1.0223. A move through this level could trigger stops andtrigger an acceleration to the downside. The last main bottom at 1.0110 remainsa potential downside target.

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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