The U.S. Dollar fell sharply on Monday as bullish traders
pared positions on the thought that the U.S. economy will not be able to
keep pace with the global recovery.Before the Forex markets opened, China solidified itself as the
driving force behind the global economic recovery when it reported more upbeat
The Greenback traded sharply lower as China reported
a 17.7% increase in exports and a 55.9% increase in imports.The surge in exports was the first rise in 14
months.Pre-report guesses were for only
a 4% increase. Due to the timing of the report, and its extreme bullishness,
the Australian and New Zealand Dollars both had rare gap openings Sunday night.
Dollar bulls were still reeling from the soft U.S. Non-Farm
Payrolls report on Friday.Traders had
been looking for the report to show that job losses had remained flat or
perhaps that new jobs had been created during December.Instead the government reported that 85,000
new jobs were lost.
Adding more fuel to the bearishness were comments from St.
Louis Fed President James Bullard who signaled that interest rates werenâ€™t
going to move higher over the near-term.Bullard said, â€śinterest rates may remain low for quite some timeâ€ť.He also added that the Fedâ€™s zero interest
rate policy is â€śon holdâ€ť.He could not
have made his position any clearer. In addition to talking about the future
direction of interest rates, Bullard said the Fed faces a challenge when
adjusting its asset-purchase program because of the possibility of inflation.
Mondayâ€™s light economic calendar gave traders a chance to
digest Fridayâ€™s Non-Farm Payrolls report and its impact on the economy. Bets were
placed on a weaker Dollar and renewed interest in higher yielding assets as
evidenced by todayâ€™s early surge in equity and commodity prices.Traders should note that the soft employment
report has not changed the outlook for a recovery, but it has pushed back the
Fedâ€™s timetable for increasing interest rates.
The technical outlook is as follows.
The cash U.S. Dollar Index is in a downtrend.Expectations are for the weakness to continue
until this index reaches a major 50% price level at 76.31.
The Euro broke through Gann angle resistance at 1.4524.It also broke out to the upside after forming
a support base.The first upside target
is 1.4680, followed by 1.4790.
The GBP USD broke away from a retracement zone at 1.6036 to
1.5988.A new higher bottom was also
formed at 1.5895.The main trend will
turn up on a trade through 1.6240.The
first upside target is 1.6355, followed by 1.6478.
The USD JPY traded weaker after confirming last Fridayâ€™s
closing price reversal top on the overnight move through 92.28.Selling pressure put this market on the
bearside of an uptrending Gann angle at 92.33 tomorrow.This is a sign of weakness. The chart
indicates there is room to the downside with 89.30 to 88.24 the next target.
The USD CHF broke an uptrending Gann angle at 1.0218 and a
50% price at 1.0212. This move helped to accelerate the break to the .618
retracement level at 1.0143 where it found support throughout the day.The next downside target is a slower moving
Gann angle at 1.0068.
Losses were limited because of the threat of an intervention
by the Swiss National Bank.Although
this action will be meant to curtail the Swiss Francâ€™s rise versus the Euro, it
should also have a positive effect on the U.S. Dollar.Overnight, Swiss central bank President
Hildebrand said intervention was possible to prevent â€śany excessive
appreciationâ€ť.He also added that the
SNB will â€śmonitor exchange market developments very closely.â€ť
Surges in natural gas, crude oil and gold helped put the
Canadian Dollar in a strong position early in the trading session until
Canadian Prime Minister Harper expressed his concerns about the effects of a
strong Canadian Dollar on the economy.This breaking news helped trigger a short-covering rally and formed a
closing price reversal bottom.This
pattern is likely to trigger a 2 to 3 day retracement to the upside.
The surge in Chinaâ€™s
exports helped trigger a gap higher opening in the AUD USD while triggering
talk of a move to parity with the U.S. Dollar.An uptrending Gann angle held as support at .9174 today.Look for higher markets as long as this angle
remains intact.On Tuesday, it moves up
The NZD USD also gapped higher on the good news from China.Some traders feel that the jump in China demand
could support the whole Pacific region.This
market had very little follow-through to the upside during the New York session and
failed to accelerate after regaining Gann angle support at .7410.Tomorrow this angle moves up to .9450.
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