EUR USD Takes Out Last Week’s High

The EUR USD traded through last week’s high overnight, but attracted very little buying interest at this level.

The EUR USD traded through last week’s high overnight, but attracted very little buying interest at this level. The move to the upside was driven by a report out of China which said it’s been recommended that the Chinese government increase its holdings in the Euro and Japanese Yen at the expense of the U.S. Dollar. The Chinese analyst making the comment has since said that this was his “personal opinion”. This revelation forced the Euro to give back some of its gains.

The news from China overshadowed a report that showed that German Consumer Confidence turned down for the first time in over a year. The fear of higher unemployment is beginning to take its toll on consumers.

The GBP USD is trading flat to better. Traders should not be fooled by this move as the fundamentals still suggest much lower markets over the near-term. Last week’s news that the U.K. economy contracted during the Third Quarter is leading investors to think that the Bank of England will have to increase funding in its quantitative easing program once again.

The news out of China suggesting the government sell Dollar and buy Yen is helping to put pressure on the USD JPY this morning. The main trend remains up on the daily chart, but traders are approaching the market with much more caution this morning. The chart pattern suggests a move to 92.88 is likely over the intermediate term. The recent strength in the USD JPY could be an indication that Japanese investors are looking for the U.S. to tighten liquidity or raise interest rates sooner than expected.

News that the Swiss economy is showing signs of growth should help to support the Swiss Franc versus the Dollar. This news means that the Swiss government is likely to end its invention program which was designed to weaken the currency in an effort to prevent deflation.

The USD CAD is trading flat to lower. Oversold conditions are encouraging buying this morning of the Canadian Dollar. Fundamentally, the Canadian Dollar is likely to remain under pressure as the threat of possible action to weaken it by the Bank of Canada continues to loom. The BoC wants to see a weaker currency in order to give the economy a chance to recover and grow. Higher equity and crude oil markets today could provide additional support.

The weaker Dollar is helping to increase demand for the higher yielding AUD USD and NZD USD. Last week both of these markets weakened on report that China was considering ending its economic stimulus program. Traders took profits on the news but didn’t sell the market hard. Look for weakness to develop if this story begins to grow legs. Demand from China is probably the biggest reason why the Australian economy is one of the strongest in the world at this time.