Dollar Falls against Most Majors; Risk appears to be Back On

The U.S. Dollar fell against most major currencies in overnight trading as investor appetite for risk increased while tensions over Irish debt issues eased. Pressure increased on the Dollar amid optimism that a bailout for Ireland will prevent contagion across the Euro region’s debt markets.

The U.S. Dollar fell against most major currencies in overnight trading as investor appetite for risk increased while tensions over Irish debt issues eased. Pressure increased on the Dollar amid optimism that a bailout for Ireland will prevent contagion across the Euro region’s debt markets.

Talk is circulating that Ireland will ask for a “substantial” bailout from the European Union and International Monetary Fund. This helped strengthen the Euro as well as global equity markets. Commodity currencies also rose amid strong demand for risky assets.

Rumors, that a support package is in place has definitely led to a calmer trade overnight. Risk sentiment is improving as traders pare short positions in the Euro and the risk currencies – Australian Dollar, New Zealand Dollar and Canadian Dollar.

It looks as if short-covering is helping the Euro to recover following a lengthy break from the top at 1.4282. Earlier this week, the EUR USD stopped its break at 50% of the 1.2587 to 1.4282 range at 1.3434.

Expectations are for the Euro to begin to mount a major rally against the Dollar as nervous conditions abate in the Euro Zone over Irish debt issues. Based on the near-term range of 1.4282 to 1.3446, look for a possible rally to 1.3864 to 1.3963.

Downtrending Gann angle resistance comes in at 1.3882. This makes 1.3864 to 1.3882 a resistance cluster. Although it is highly unlikely that this cluster will be reached today, it does highlight how much room is available to the upside.

After a sharp sell-off earlier in the week, the AUD USD has rebounded and is now in a position to retrace at least 50% of the recent break from the all-time high.

Technically, the Aussie’s short-term range is 1.0182 to .9724. This makes .9953 to 1.0007 the next potential upside target. A downtrending Gann angle comes in at 1.0002, making 1.0002 to 1.0007 a key resistance cluster and likely near-term upside target.

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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