U.S. Economic Concerns Help Boost Euro

The Euro rose against the Dollar overnight buoyed byconcerns that the weakening U.S.economy may be slowing the recovery. Based on recent data and testimony fromFed Chairman Bernanke, investors are bracing for a weak Second Quarter GDPreport on Friday. This is driving investors into the Euro as the Euro Zoneeconomy seems to be improving faster than the U.S. economy leading tospeculation the European Central Bank may hike interest rates before the Fedalthough both seem to be months away from taking such action.

The Euro rose against the Dollar overnight buoyed byconcerns that the weakening U.S.economy may be slowing the recovery. Based on recent data and testimony fromFed Chairman Bernanke, investors are bracing for a weak Second Quarter GDPreport on Friday. This is driving investors into the Euro as the Euro Zoneeconomy seems to be improving faster than the U.S. economy leading tospeculation the European Central Bank may hike interest rates before the Fedalthough both seem to be months away from taking such action.

Technically, after several days of beating on thepsychological 1.30 price level, the Euro finally broke through taking out stopsand attracting fresh breakout buyers on the move. The key to sustaining thecurrent uptrend will be the Euros ability to hold 1.30 as support. A failure todo so will signal the end of the up move.

The British Pound is trading higher but barely holding on toearlier gains following a test of a major 50% level at 1.5635. Slowing theSterling’s upside momentum today is a U.K. housing price report which showedthat home values fell in July for the first time in five months. Tighterlending conditions and concerns that government spending cuts will sloweconomic growth were to blame for the drop.

Last week it was reported that the U.K. economygrew more than expected during the Second Quarter but that was before theimplementation of new government austerity measures. Concerns that new taxesand spending cuts will hurt the economy could be the factors which contributeto the start of a short-term decline. Technically, investors should begin towatch for a technical closing price reversal top to signal the end of thecurrent rally.

The New Zealand Dollar is trading weaker versus the U.S.Dollar after the Reserve Bank of New Zealand hiked its key lendingrate by 25 basis points to 3.00%. Although this hike was expected, the mainreason behind the weakness is the comment from RBNZ Governor Alan Bollard. Thecentral bank Governor stated after the report that the “pace and extent” offuture increases would be more moderate than earlier projected. Investors readthis a sign that the central bank will refrain from an additional rate hike atits next meeting on September 15.

Technically the Kiwi reached its closing price reversal topobjective at .7211. A normal reaction to this pattern is a 2 to 3 day declineof 50% of the last swing up. Further weakness will be indicated if .7211 failsto hold as support.

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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