Euro Pressured by Greece Bond Sales Slump

The EUR USD is trading weaker overnight after a slump in Greece bondsales helped escalate worries about European sovereign debt issues.

The EUR USD is trading weaker overnight after a slump in Greece bondsales helped escalate worries about European sovereign debt issues.

The Euro finished higher on Wednesday after reversingearlier weakness following a weak assessment of the U.S. economy by the Federal OpenMarket Committee. Based on the overnight action, it appears that this wasshort-covering rather than new buying.

Federal Reserve officials downgraded their outlook for theeconomy, saying that the recovery was “proceeding”, not strengthening as theyhad said in their previous FOMC policy statement in April. The change in thestatement indicates that there was less then favorable data reported since thecommittee last met.

In addition to the change in the view of the economy, theFed left the target federal funds rate at the current range of zero to 0.25%and reiterated that interest rates will remain low for an extended period.Policymakers put some blame on the slowdown in the economy on the European debtcrisis.

The late session break in the Dollar on Wednesday againstthe Euro reversed earlier bullishness. At the mid-session, the Greenback wastrading mixed against most currencies. Trading was light, but the Dollar didget a boost following a plunge in the U.S. housing market. Gains probablywould have been greater if volume was at average levels.

Early during the session the Euro broke after a reportshowing a drop in new U.S.home sales weighed heavily on higher risk assets. Traders looked for safety inthe Dollar as the report indicated a still weak U.S. economy and the possibility ofa double-dip recession in the housing market.

At the mid-session, the Euro was nearing a key retracementzone at 1.2174 to 1.2102 but never quite reached this level. The turnaround inthe Euro suggests that a secondary higher bottom may be forming which indicatesbuyers may be trying to wrestle the trend away from the sellers.

Although a break into the retracement zone is stillpossible, upside momentum indicates that the market may make a run at the lastswing top at 1.2467. This breakout move will set up a further rally into amajor downtrending Gann angle formation at 1.2609.

Overnight action suggests that the Euro may succumb to bothfundamental and technical pressure which should help it resume its move intothe retracement zone at 1.2171 to 1.2102. Risk sentiment seems to be shiftingwhich means investors will continue to shed risky assets while seeking shelterin the safer U.S. Dollar.

A drop in demand for higher risk assets is pressuring thecommodity-linked currencies this morning. Downside pressure is clearly on theAustralian, New Zealandand Canadian Dollars. A weakening global economy should keep the pressure ondemand for goods and services from these major suppliers of raw materials.

The three day break in the AUD USD creates a range between.8081 to .8868. Should downside momentum continue, traders should watch for acorrection into the retracement zone at .8469 to .8378.

A short-term range has also been created in the NZD USD at.6572 to .7159. This may be setting up a possible retracement to .6865 to.6796. This chart looks vulnerable to the downside but needs a catalyst totrigger the down move. The slowdown in the global economy could be the triggerfor this correction.

Following a closing price reversal bottom on Monday at1.0137, the USD CAD has rallied back into a retracement zone at 1.0394 to1.0481. The main trend is down so sellers may re-emerge inside of this zone,setting up a secondary lower top. The market’s reaction inside this area willdetermine the direction of the market as well as demand for risky assets.

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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