Dollar/CAD Ping-Pongs in Range; Dollar/Yen Consolidating

The USD CAD is still ping-ponging betweenretracement levels at 1.0282 to 1.0579. Continue to play these levels until themarket breaks out in either direction.

The USD CAD is still ping-ponging between retracement levelsat 1.0282 to 1.0579. Continue to play these levels until the market breaks outin either direction. The Canadian economy appears to be stuck because of theinfluence of the weakening U.S.economy. Uncertainty about future growth is cooling off the Canadian economy,leading to speculation that the Bank of Canada will leave interest rates at0.75%.

The USD JPY is still consolidating inside of the 84.73 to86.37 range. The market appears to be forming a support base as government andBank of Japan officials try to decide the effect of the high priced Yen on theeconomy and whether to intervene. This market is expected to remain inside of atight range until this decision is reached. This decision has the potential toexert a tremendous amount of influence on the market which is likely to lead tohigh volatility next week. In particular, a breakout to the upside couldproduce some tremendous gains as shorts will no doubt pay anything to get outof their positions.

The U.S. Dollar traded higher across the board under lighttrading conditions on Friday. Trader sentiment continued to remain lockedaround risk aversion as uncertainty over the strength of the global economyprevailed.

The British Pound broke minor 50% support at 1.5560 and anuptrending long-term Gann angle at 1.5549. This move tripped stops and caused asoft break into a .618 support level at 1.5457 before settling into a range.

It was reported this week that U.K. retail sales were strongerthan expected, but this news wasn’t enough to sustain the rally. Concerns aboutinflation and the effects of new taxes and spending cuts on the economycontinue to weigh on investors. Earlier in the week, the Bank of Englandminutes showed that the Monetary Policy Committee voted 8 to 1 to support thismonth’s interest rate decision. The minutes also showed that inflation wasdiscussed as well as a rate hike. The BoE seems to believe that inflation willfall back below the target rate of 2%, if left alone, by 2012. The central bankis basing this assessment on its evaluation of data which it interprets to meanthat the current high inflation rate has been caused by temporary events.

The Euro reaffirmed its downtrend when it broke a swingbottom at 1.2732. A new main top on the daily chart was formed at 1.2921. Thenext objective is the major retracement zone at 1.2605 to 1.2433. This arearepresents a retracement of the 1.1876 to 1.3334 range.

Talk surrounding the strength of the Euro Zone recoveryhelped pressure the Euro but the most bearish influence was comments fromEuropean Central Bank council member Weber who said he thought the ECB shouldwait until the first quarter next year before considering an exit strategy.This ignited a huge sell-off in the Euro as traders read the comments to meanthe Euro Zone economy was not as strong as perceived.

Flight to safety buying is driving the USD CHF higher.Former bottoms on the weekly chart are providing some light support, but thedaily chart suggests the market should continue to remain under pressure. Aseries of tops at 1.0675, 1.0640 and 1.0626 are major resistance. The trendwill remain down on the daily chart until these levels are violated.

Election concerns and the dumping of risky assets pressuredthe Australian Dollar early in the session before it stabilized. The trend isdown but the chart indicates there is room to break to .8644 over the near-termif sellers step back in after the week-end.

Polls are showing the election is too close to call withseveral analysts calling for a hung parliament. Taxes, spending cuts and theenvironment are key issues to be decided with this election.

The trend is down in the New Zealand Dollar. 7191 is newmain top on the daily chart. A trade through this level will turn the maintrend up. Downside momentum is slowing today, but could pick up again ifsellers show up. The chart indicates room to break to the .6977 level.

The Dollar Index finished the week on its high. Overall theshift in sentiment toward risk aversion triggered this week’s rally. Early nextweek the Dollar should react to U.S.housing data. At the end of the week, the GDP Second Estimate should have ahuge influence on the direction of the Greenback. The consensus is calling forgrowth of 1.3% versus 2.4% previously.

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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