The U.S. Dollar is
trading mixed at the mid-session as profit-taking and volatility
dominate the trade. Earlier in the session, the U.S. Dollar surged as
traders took protection against a shift in Chinaâ€™s expansionary
The overnight announcement, that Chinaâ€™s
economic growth and inflation figures exceeded expectations fueled
speculation that it was poised to begin restricting loans and ending
stimulus. Fear that the economy may overheat triggered demand for lower
yielding assets at the expense of higher risk assets.
the New York session, aggressive buyers backed away from chasing the
Dollar higher, leading to a profit-taking break. Overbought conditions
and intraday turnarounds in the Euro and Yen were the primary causes
behind the Dollarâ€™s developing weakness.
The EUR USD weakened
further during the New York session, but losses were limited by a rumor
which said the European Union was preparing to loan money to the
country to shore up its budget deficit. The rumor was denied, but
investors, nonetheless, took protection against a possible massive
short-covering rally by lightening up positions.
pattern suggests the EUR USD is holding the psychological level of
1.4000; however, 1.3800 remains the next valid downside target.
Short-covering today could send this market back to the old bottom at
The GBP USD weakened further overnight on the news that
the U.K. budget deficit widened. A lack of confidence in the economy
could also be a driving force behind the recent weakness as investors
fear that the U.K. may be falling behind its peers in the midst of the
The current two-day break has created two key
ranges: 1.5832 to 1.6457 and 1.5895 to 1.6457. These ranges create
retracement zones at 1.6144 to 1.6071 and 1.6175 to 1.6108. The overlap
of these two retracement zones suggests possible support developing
inside 1.6144 to 1.6108. In addition, uptrending Gann angle support is
at 1.6132 today. At the mid-session, the GBP USD found support inside
this zone at 1.6124.
The USD JPY rose overnight on speculation
the Japanese Yen is poised to once again become the worldâ€™s carry
currency. Additional weakness hit the Yen following a report that
demand for lending dropped. The Yen turned higher following a sharp
break in U.S. equities. This signaled that traders were buying the Yen
The USD CHF continued to soar overnight but
backed off as it approached the December high at 1.0507. A failure to
hold an uptrending Gann angle at 1.0450 triggered profit-taking stops,
which led to a short-term collapse and turned the USD CHF lower. A
lower close today will form a closing price reversal top and could
trigger the start of a sizeable correction.
are pressuring the USD CAD now that it has retraced greater than 50% of
its recent break. Based on the main range of 1.0745 to 1.0224, the key
retracement zone is 1.0484 to 1.0546. This market is currently testing
this area. A failure to hold uptrending Gann angle support at 1.0424
will be another sign of weakness. Downtrending Gann angle resistance is
at 1.0515. This price was tested early last night when the market
rallied to 1.0524.
Fundamentally, the recent action by the Bank
of Canada suggests that it will defend against a rapid rise in the
currency. This creates a potentially long-term bullish scenario.
Short-term conditions are overbought, which may trigger a mild
The AUD USD traded slightly better this morning
before falling as traders began to dump higher yielding assets.
Currently, this market is finding support at a 50% level at .9031. A
failure to hold this level could trigger further weakness to .8961.
recent actions by China to tighten up its lending policies could have
long-term implications on the Australian economy. The formation of a
secondary lower top will be a strong sign that a top has been formed.
The next Reserve Bank of Australia meeting is February 2nd. Traders are
leaning toward another rate hike, but have cut down the probability of
the hike now that China has begun tightening.
The NZD USD
continued to weaken following a break in U.S. stock markets. Demand for
higher risk assets is falling, leading to the liquidation in the Kiwi.
Key Fib support at .7150 has been violated which could trigger further
weakness to .7075 over the near-term.