Economic Woes Weigh on U.S. Dollar

The EUR USD rallied on Thursday as economic woescontinued to pressure the U.S. Dollar. Weakness in the stock market triggeredby a so-so weekly jobless claims report and only a slightly better thanexpected durable goods report encouraged traders to pressure the Dollar.

The EUR USD rallied on Thursday as economic woes continuedto pressure the U.S. Dollar. Weakness in the stock market triggered by a so-soweekly jobless claims report and only a slightly better than expected durablegoods report encouraged traders to pressure the Dollar.

With the outlook for the economy looking bleaker, and theproblems in Europe already priced into themarket, today’s action is a sign that traders may be willing to shed positionsin the Dollar in favor of the Euro at least in the short-run.

Early in the session, the Euro was down against the Dollarafter a slump in Greecebond sales overnight raised some concerns about the quality of debt in the EuroZone. The weak U.S.data, however, allowed the Euro to overcome this weakness and move higher.

Monday’s closing price reversal top in the EUR USD was anindication of selling pressure, but this move ended following an expected 2 daybreak. The market approached its minimum objective at 1.2172 but never reachedit on Wednesday as weak housing data and a gloomy outlook by the Fed for theeconomy triggered a sell-off in the Dollar.

The current pattern suggests that move upside is possiblewith 1.2609 the next objective. It is also possible that a secondary higherbottom is forming which will be even more confirmation that the Euro is set upfor a rally.

Following two days of strength in celebration of the budgetreleased by the new U.K.government, the GBP USD was unable to hold on to its gains and closed lower. This pattern could be indicating a tiredmarket. With the main trend up however, only a 2 to 3 day break can beexpected. A test of 1.48100 is likely during this time period. A close underthis price indicates more serious selling pressure is developing.

The strength in the Euro triggered a sell-off in the USDCHF. A new main top was formed at 1.1137. Short-traders will likely trail theirstops to slightly above this level. Thursday’s action took out the last mainbottom at 1.0995. Downside momentum indicates that a Fib retracement level at1.0916 is likely. A break through this level should trigger an acceleration tothe downside.

The weakening global economy and drop in U.S. equitymarkets pressured the USD JPY on Thursday. When the outlook for the economylooks bleak, traders have a tendency to seek shelter in lower yielding assetssuch as the Japanese Yen.

Weaker equity markets and a general dislike for risky assetsbecause of the gloomy outlook for the global economy underpinned the USD CAD onThursday. Gains may have been limited by the strength in gold. Technically, themarket is running into a cluster of resistance at 1.0471 to 1.0481. A break outover this zone should trigger an acceleration to the upside. A break back underthe support cluster at 1.0407 to 1.0394 is likely to attract selling pressure.

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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