U.S. Dollar Trading Higher after Tumultuous Morning Session

The U.S. Dollar opened higher, driven by Wednesday’s strong U.S. economic data. Early during today’s session the Dollar got a boost from mixed economic news

The U.S. Dollar opened higher, driven by Wednesday’s strong U.S. economic data. Early during today’s session the Dollar got a boost from mixed economic news. The Producer Price Index was higher than expected, but weekly jobless claims rose. This was followed by a better than expected leading indicators report and Philadelphia Fed Survey.

Initially, these reports supported the Dollar but a recovery in the equity markets started traders on a path toward demand for higher risk. This slowed down the upside momentum in the Dollar as profit-taking began to takeover.

The Greenback accelerated to the downside on unconfirmed rumors that China and Russia were buying the Euro. After a sharp break, conditions settled and the Dollar turned positive once again.

The EUR USD had a volatile morning. Stronger than expected U.S. economic reports kept pressure on the Euro early in the session, but unconfirmed rumors of buying activity by China and Russia turned the Euro around. Trailing stops were hit as the market rallied, turning the Euro positive for the day. The rally was short-lived, however, as buyers failed to support the market on the subsequent retracement. Although the Euro is trading down for the day, the low at 1.3539 remains intact.

There is no evidence that China and Russia are still active on the long-side of the market, but downside pressure has subsided substantially since the early morning run-up. Traders should watch the close to see if buyers return in an attempt to post a closing price reversal bottom.

The GBP USD is trading lower. U.K. economic pressures continue to push the British Pound lower. Although there was a slight short-covering mid-morning rally, the currency was never able to turn positive. Expectations are for the Pound to continue to drift lower as fear that the U.K. recovery is falling far behind the U.S. is encouraging traders to keep up the selling pressure.

The USD JPY is trading better at the mid-session after early weakness. Overnight the Bank of Japan said it would refrain from buying Japanese Bonds. This gave the Yen a slight boost until better than expected U.S. economic reports gave investors strong reasons to sell the currency.

A surge in Canadian inflation pressured the USD CAD overnight, but stronger than expected U.S. economic data turned the market around. Lower gold prices and mixed crude oil results also encouraged traders to sell the Canadian Dollar. The U.S. Dollar could rally further if stock prices begin to weaken.

The USD CHF is up slightly. This pair rallied earlier in the session after talk circulated that the Swiss National Bank had intervened once again. The mid-morning short-covering rally in the Euro gave the Swiss Franc a boost, but these gains were erased once the Euro turned lower for the session.

The commodity-linked AUD USD and NZD USD had a volatile, two-sided trade this morning. Early strength in the Dollar pressured both the Aussie and Kiwi, but mid-morning demand for higher risk assets turned these pairs positive. A failure to follow-through to the upside and a strengthening Dollar, are driving both pairs lower at the mid-session.