Upbeat Fed Statement, Obama Speech Fuels Demand for Higher Risk
The U.S. Dollar is trading flat with a slight bias to the
downside after yesterdayâ€™s upbeat Fed statement and last nightâ€™s State of the
Union address from President Obama.
Traders are reacting to the Fedâ€™s statement calling for a
â€śmoderateâ€ť economy rather than a weak economy. President Obamaâ€™s call for a
jobs plan and political unification is giving investors confidence to take on a
little more risk.
Technical factors may also be playing a major role in the
developing weakness in the Dollar since many markets reached oversold status
after nearing old bottoms or major retracement levels.
Todayâ€™s Durable Goods and Jobless Claims Reports should
offer a little more insight into the condition of the U.S.
economy.Durable Goods are expected to
be better at 1.6%. Jobless Claims should show a seasonally adjusted increase of
36,000 to 482,000.
The EUR USD continued to weaken overnight after taking out
stops under the psychological 1.40 level. Regaining this level will be a sign
of strength, but the trend will not turn to up until it crosses 1.4194.
The British Pound continues to build a support base with a
bias to the upside. Although the U.K. economy showed weakness earlier this week
after it was reported the GDP rose less than expected, investors seem confident
that the economy has turned the corner.
The USD JPY is trading better overnight following the
friendly news from the Fed and the upbeat speech from President Obama.
Technically, this market tested a major 50% level at 89.30 which brought in
fresh buyers and triggered a profit-taking short-covering rally.The current chart pattern suggests a possible
retracement to 91.45 to 92.00.
Overbought conditions and profit-taking is helping to pressure
the USD CAD. Long traders finally gave up their positions after a key support
angle failed overnight. Demand for higher risk assets, such as equities and
commodities, is also helping to drive the Canadian Dollar higher. Higher
stocks, gold and crude oil could support a rally today. The chart indicates a
correction to 1.0458 to 1.0402 is likely over the short-run.
Overnight, the USD CHF continued its up move with a trade
through the December high at 1.0507.A
new main bottom has been formed at 1.0367. This market is rapidly approaching overbought
status and could begin a correction at any time. Watch for a closing price
reversal to signal the formation of a top.
Stronger demand for higher risk and oversold conditions are
helping to support the AUD USD. The Aussie is finding support inside of a
retracement zone which could trigger a short-covering rally back to .9119 to
.9169.Traders may also be squaring up
positions ahead of the February 2nd Reserve Bank of Australia meeting.
A similar situation is developing in the NZD USD. Although
the New Zealand
economy continues to remain weak and interest rates low until the middle of
2010, conditions are ripe for a short-covering rally back to .7231 to .7281.
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