U.S. Dollar Falls as Traders Downplay Dubai Concerns
The U.S. Dollar is declining overnight as speculators are
downplaying the debt problems in Dubai.
Over the week-end, the United
Arab Emirates central bank said it â€śstands
behindâ€ť the countryâ€™s lenders. This
helped to ease concerns that the state owned Dubai World will default on its
debt.Traders now believe that this is a
local economic problem rather than one with global ramifications.With these assurances in place, speculators
are increasing their demand for higher yielding currencies.
Despite these assurances by the central bank, traders should
continue to watch how the Dubai
debt situation unfolds.The debt problem
has exposed the fragility of the world financial markets.Although there may be a short-term pick-up in
global demand for risk, upside momentum in foreign currencies may slow if
investors decide to be a little more defensive in their speculative plays.Traders may decide to adopt a â€śtrade not to
loseâ€ť mentality which could create volatile trading conditions as investors
will be quick to take profits following any appreciation.
Over the week-end, Chinese Premier Wen Jiabao rejected calls
for a stronger Yuan. European Central Bank members had traveled to China hoping to
convince Chinese officials to allow its currency to rise. Their premise was
is distorting trade and limiting its own monetary policy options by keeping the
Yuan tied to the weakening U.S. Dollar.Wen said that keeping the Yuan stable is best for Chinaâ€™s economy.He also implied that a stable Yuan would be
beneficial for the global recovery.European officials feel that Chinaâ€™s currency policy is hurting
exports because it drives the Euro higher and that this policy is actually
detrimental to the Euro Zoneâ€™s economic recovery.
Dollar Index futures are trading lower overnight, but
holding above last weekâ€™s low at 74.27.The late session rally from the overnight low at 74.54 indicates that
traders are tentative about pressing this market further.
A rise in consumer prices is helping to boost the EUR USD
overnight as well as a return of demand for higher yielding assets.The main trend is up with a new main bottom
at 1.4801.A trade through this price
turns the main trend down.1.5144 is a
new minor top.
The GBP USD is trading sideways overnight.Pressure is coming from the thought that the U.K. economy
will continue to weaken over the short-term.A recent GDP report shows that despite additional stimulus, the economy
is not as robust as previously forecast.Technically, the main range is 1.5706 to 1.6878.The 50% price at 1.6292 held last week after
a sharp sell-off.Additional support is
coming from a pair of main bottoms at 1.6261 and 1.6250.
The USD JPY hit a 15-year low last week at 84.83.The current short-term retracement is normal
because of oversold conditions.Continue
to look for sideways to lower trading unless this market regains the old bottom
at 87.99.Speculators are also a little
confused as to whether the Japanese government will intervene.It is well-known that they are concerned
about the detrimental effect a rise in the Yen has on exports, but traders
arenâ€™t sure if the BoJ will intervene to pressure the Yen.Japanese Finance Minister Fujii said over the
week-end that the government wonâ€™t act to curb the Yenâ€™s gains, but later
denied the comment.No one is sure what
the government has in mind.This could
produce volatile trading conditions.
The recent Commodity Futures Trading Commission Commitment
of Traders Report shows that speculators are looking for the Swiss Franc to
rise.This new strategy could be based
on the thought that the Swiss economy will outperform the other European
nations.The USD CHF is under pressure
with the trend not likely to turn back up unless 1.0222 is violated.Last weekâ€™s intervention by the Swiss
National Bank helped trigger a bottom at .9918 and a closing price reversal
up.If this action is going to weaken
the Swiss Franc then 1.0047 to 1.0017 must hold as support today.
The USD CAD is in an uptrend, but short-term range
bound.Resistance is at 1.0730.Support has formed at two main bottoms at
1.0449 and 1.0416.Canadian Dollar
traders are waiting for signs from the equity and crude oil markets that demand
for risk is returning.If these two
markets continue to weaken, then look for the USD CAD to advance to the upside.
Renewed demand for higher risk assets is giving the AUD USD
a boost this morning.This is most
likely short-covering as the recent decoupling of this currency from the stock
market indicates lower prices to follow.Based on the range created by the July bottom at .7702 to the November
top at .9405, traders should look for a possible break to .8553 to .8352 before
major buyers step up to stop the break.The main trend is now down and the current lower-top, lower-bottom
formation indicates that selling pressure is beginning to build.
The main trend is down in the NZD USD.The charts indicate that .6914 to .6744 is
the next potential downside target.Diminishing demand for higher risk assets could pressure this market
until the end of the year.
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