U.S. Dollar under Pressure This Morning

The U.S. Dollar is trading lower against most majorcurrencies this morning. The Dollar is down against Europe, Japan and Canadawhile posting a modest gain versus the Pacific Rimcurrencies.

The U.S. Dollar is trading lower against most majorcurrencies this morning. The Dollar is down against Europe, Japan and Canadawhile posting a modest gain versus the Pacific Rimcurrencies.

This morning, the Euro is surging through a 50% level at1.2783. Upside momentum indicates that the Fib retracement level at 1.2998 isnow the next target. A failure to hold 1.2783 could attract selling pressure.

Fundamentally, the Euro turned around overnight following aflat-to-lower overnight trade after it was reported that a government bond salein Spainattracted greater than expected demand. This news helped to relieve concernsthat Euro Region countries won’t be able to fund their deficits.

The Dollar/Yen is also under pressure this morning as theslow outlook for the U.S.economy and Chinacurtailed demand for higher-yielding assets. Wednesday’s report by the Fed forecasting asluggish jobs market and a reduced outlook for GDP contributed to the weaknessin the USD JPY.

News that China’seconomic expansion eased to 10.3 percent in the second quarter and industrialproduction declined more than forecast in June helped boost demand for thelower yielding Japanese Yen.

The AUD USD dropped the most in two weeks on speculation China will cutdemand for commodity exports because of a slowdown in the economy. The call forhigher U.S. equity markets,however, eased the pressure, leading to a call a steady to lower opening in New York.

Wednesday’s Fed report may have taken the spotlight awayfrom earnings season for the time being. A clash between those who want to sellthe Dollar because of better than expected earnings and those who want to buythe Dollar because of renewed risk aversion may be on the horizon. This conflictbetween the two forces could trigger volatile conditions over the near-termwith sudden shifts in direction. It’s hard to predict at this time which waythe trend will develop, but what is clear is that traders are in for a rockytime in the markets over the short-run until one of the forces takes control.

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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