Euro Poised to Breakout Over 1.2453 Main Top

The U.S. Dollar traded down against all major currencies,driven lower by increased demand for higher risk assets. Risk appetite wasstrong this morning following the news that last night’s Spanish Bond auctionovernight was oversubscribed, easing tensions about renewed sovereign debtissues in the Euro Zone.

The U.S. Dollar traded down against all major currencies,driven lower by increased demand for higher risk assets. Risk appetite wasstrong this morning following the news that last night’s Spanish Bond auctionovernight was oversubscribed, easing tensions about renewed sovereign debtissues in the Euro Zone.

This morning’s good news erased worries that the Dollar waspreparing to strengthen after several consecutive weak days. The U.S. Dollaredged slightly higher against most major currencies on Wednesday as investorspared positions in higher risk currencies on economic worries and Spainconcerns. Now that tensions have eased about Spain,traders turned their focus on today’s slate of U.S. economic reports.

After the early morning rally, triggered by the Spanish bondstory, the Euro surged to the upside after a series of disappointing U.S.economic reports. This move surprised traders since recent poor economicreports had triggered a flight to safety rally into the Dollar. Today’s movehelped scare weak shorts out of the market, thereby extending the early rally.

Technically, the Euro closed in a solid position and seemsto be poised to breakout over the last main top at 1.2453. This move will turnthe main trend up for the first time since early April. Following a change intrend to up, look for the rally to continue to the next main top at 1.2671, butthe ultimate target remains a major 50% price level at 1.2784.

The GBP USD confirmed Wednesday’s closing price reversal topbut quickly turned higher as traders reacted to mixed news about the U.K. job situation and the bullish news from Spain.

Although momentum was strong early in the session, ittapered off as the session continued with the Sterling finding resistance at a 50% pricelevel at 1.4810. The close over this level is friendly and it indicates apotential drive to the next resistance level at 1.4947. Thursday’s trading action suggests that withthe main trend now up on the daily chart, investors will be looking to buydips.

The USD JPY lost ground on Thursday as traders reactednegatively to the increase in U.S. Weekly Jobless Claims. Investors read thisas a sign the U.S.economy was still weak, driving funds into the lower-yielding Japanese Yen.Later in the morning, the Japanese Yen received an additional boost after thePhiladelphia Fed reported a drop in regional manufacturing and the ConferenceBoard said it expects lower growth for the rest of the year. Traders flocked tothe Yen for safety as the bearish reports were a strong indication the Fed willkeep interest rates low until at least the first quarter of 2011.

The stronger Euro helped push down the USD CHF because itrelieved pressure on the Swiss National Bank to continue to intervene in orderweaken the Swiss Franc and protect the Swiss export market. Technical factorscontributed to the weakness as two key support areas were taken out early thismorning, triggering an acceleration to the downside. The charts indicate that1.1064 is the next downside target.

There was very little moment in the commodity-linkedAustralian, New Zealandand Canadian Dollars. Despite stronger equity markets early in the treadingsession, traders for the most part shied away from risky currency markets. WeakU.S.economic data most likely contributed to the lack of buying in thesecurrencies.

The AUD USD is nearing a key resistance level at .8727. Thecurrent rally looks tired which could mean that another round of weak economicdata will send it lower. The chart indicates there is room to the downside with.8377 the next likely 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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