Wednesday January 6, 2010 - 18:53:10 GMT
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Dollar Weakens as Investors Seek Higher Yields
The Dollar is trading
weaker at the mid-session as investors sought higher yielding assets
amid news that the U.S. economy may be improving. This morningâ€™s
reports showing that private sector job losses had slowed and that the
service sector of the economy improved helped encourage investors to
demand higher risk investments.
Todayâ€™s weakness is taking
place after the U.S. Dollar rallied overnight after yesterdayâ€™s closing
price reversal bottom. The first objective was met at 77.77. Upside
momentum then took the market to the upper end of the retracement range
at 77.93 where it met strong selling pressure. Look for a resumption of
the downtrend with 76.31 to 75.80 the next downside objectives.
USD JPY is trading better at the mid-session. Earlier today, this
currency pair completed a retracement of the 93.20 to 91.24 range at
92.22. Gann angle support at 91.28 also limited losses. As long as this
angle holds as support, the market will remain strong. Fundamentally,
traders are reacting to an improving global economy while expectations
remain for the Japanese economy to remain under pressure. News of
Finance Minster Fujiiâ€™s resignation but slight pressure on the market
as this event seems to have been already priced in.
The EUR USD
weakened into a retracement area at 1.4350 to 1.4319 before holding and
beginning a strong rally. A close over this zone will be a positive
development which could put the Euro back on pace to challenge a major
retracement zone at 1.4680 to 1.4790. Traders will be watching for news
regarding a possible bailout of Greece. Overnight, the Euro weakened
after ECB member Juergen Stark said that markets cannot assume other
nations will bail out Greece.
The main trend remains down in the
GBP USD at the mid-session but this market is trying to establish
support in a retracement zone at 1.6036 to 1.5988. Holding this zone
could trigger a short-covering rally. Tomorrow the Bank of England will
hold its first meeting of the year. Expectations are for the BoE to
hold interest rates steady while continuing to provide stimulus to the
economy in hopes of the start of a recovery.
The USD CHF is
showing weakness at the mid-session following a test of a 50% price at
1.0379. Look for the weakness to continue as long as this market
remains under 1.0409. The bigger picture suggests a break to 1.0212 -
1.0143 is possible following todayâ€™s short-term correction. Traders are
also anticipating a possible intervention by the Swiss National Bank if
the currency continues to appreciate against the Euro.
downtrend in the USD CAD resumed late in the trading session after
trading in a tight range overnight. The direction of gold and crude oil
will continue to exert the biggest influence on this currency pair.
Todayâ€™s strong rally in gold is helping to underpin the Canadian
Dollar. Todayâ€™s downside action suggests this market is well on its way
to a test of an old main bottom at 1.0265. Downside momentum may slow
as the market approaches this level on concerns the Bank of Canada may
try to support its currency.
The AUD USD broke out to the
upside as traders renewed their interest in higher yielding assets. The
rally above the .618 retracement level at .9144 is positive while the
move through .9200 turned the main trend to up. Market participants
will now try to establish support at .9144.
The NZD USD
weakened overnight while confirming yesterdayâ€™s closing price reversal
top, but selling pressure stopped, triggering a short-covering rally
which has erased the earlier loss. At this time, the Kiwi is retesting
a pair of downtrending resistance angles at .7333 and .7355. Sellers at
these two angles could put pressure on this market once again, setting
up a potential break to .7180 over the near-term. Taking out these two
angles could trigger an acceleration to the upside.
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