China Raises Reserve Requirement; Bernanke Hits Back at Critics

Demand for risky assets fell overnight after China raised its bank reserve requirements by 50 basis points. This action sent worries throughout the market that perhaps the Chinese economy was heating up too rapidly. The move is expected to keep growth under wraps.

Demand for risky assets fell overnight after China raised its bank reserve requirements by 50 basis points. This action sent worries throughout the market that perhaps the Chinese economy was heating up too rapidly. The move is expected to keep growth under wraps.

Investors backed out of risky stocks and commodities on the news, pressuring the Australian, New Zealand and Canadian Dollars.

While commodity currencies were under pressure, Euro traders were optimistic that Ireland would approve the bailout plan proposed by the European Union and International Monetary Fund.

In a speech before European Central Bank members, Federal Reserve Chairman Bernanke defended the Fed’s current quantitative easing plan. In his speech, he said that he was“Fully aware of the important role that the dollar plays in the international monetary and financial system, the [Federal Open Market Committee] believes that the best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in the context of price stability in the United States,”

Bernanke’s comment had no lingering effect on the Dollar. Basically, the Euro is up because of optimism over Ireland and commodity currencies are down because of China’s tightening.

Technically, the EUR USD is poised to continue to move higher. The first upside objective is 1.3842. Based on the main range of 1.4282 to 1.3446, ultimately this market is likely to test the retracement zone at 1.3864 to 1.3963.

The GBP USD is under pressure. Based on the short-term range of 1.6299 to 1.5839, look for resistance in the retracement zone at 1.6069 to 1.6123. A downtrending Gann angle at 1.6079 provided resistance overnight.

Support could form inside a retracement zone at 1.5974 to 1.5898.

Bearish news from China is pressuring the AUD USD. The short-term range is 1.0182 to .9724, making .9953 to 1.0007 key retracement zone resistance. Additional resistance is at a downtrending Gann angle coming in at .9982. A quick rally is likely to find selling pressure at a resistance cluster at .9953 to .9982.

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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