Oversold Technical Conditions Boost U.S. Dollar Overnight
The U.S. Dollar is trading higher overnight based on
oversold technical conditions.Yesterdayâ€™s comments from Fed Chairman Bernanke regarding the Dollar may
also be triggering a short-covering rally as well a position-lightening.The overnight action has not been sufficient
enough to call for a change in trend.
Yesterday, Bernanke expressed concern for the Dollar, which
was a surprise to some since the Fed Chairman rarely talks about the U.S. currency.In his speech, he said he remains committed
to a strong Dollar like the Treasurer usually says, but he failed to come up
with a strategy to boost the greenback.In addition, he talked about interest rates remaining â€śexceptionally
lowâ€ť for â€śan extended periodâ€ť.Itâ€™s hard
to believe that the long-term down trend will change for the Dollar given that
interest rates are expected to remain low.
The short-term trend may reverse temporarily because traders
usually get nervous whenever a central bank official talks about their
currency.This usually leads to
counter-trend trading as investors reel in profits and adjust positions to
protect their exposure to any sudden changes.This appears to be what is going on overnight and could develop into the
theme for the day.
Although he talked about the Dollar, Bernankeâ€™s main concern
is to protect his mandate to grow employment and protect price stability.It is likely that he will accept a lower
Dollar as long as it doesnâ€™t interfere with his plans.The problem is interest rates.If he raises rates too soon to protect the
Dollar then he may derail the economic recovery.
The EUR USD is trading lower overnight.Each time this market has approached the
$1.500 area there has been selling pressure.Traders seem to fear the wrath of the European Central Bank if the Euro
rises too far, too fast.Early this
morning, ECB President Trichet made a comment which in effect was an attempt to
talk up the Dollar. Technically, the Euro could break back to 1.4837 to 1.4825.
The GBP USD is weaker this morning.Yesterdayâ€™s rally was triggered by positive
comments from Bank of England member Andrew Sentance.This was a departure from last weekâ€™s comments
from BoE Governor King who tried to talk down the British Pound.The charts indicate a possible pullback to
1.6706 to 1.6697.
Short-term oversold conditions and the fear that the Bank of
Canada may enter the market to drive down the currency are helping to boost the
USD CAD.The charts indicate support at
1.0435.The current rally could drive
the market to 1.0643 to 1.0650.
The AUD USD is trading under pressure overnight following
comments from the Reserve Bank of Australia regarding further
interest rate hikes.The RBA said that
possible rate hikes are â€śan open questionâ€ť.Based on the short-term range of .8905 to .9405, traders should look for
a retracement to at least .9155 to .9096.
The USD JPY is trading higher.The chart pattern suggests a possible closing
price reversal formation.Look for a
short-term rally to 90.45 to develop.
The NZD USD is piggy-backing the move in the Aussie
Dollar.Watch for a correction back to
.7302 to .7301 over the short-term.The
current chart pattern suggests a possible 2 to 3 day break.
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