Thursday January 28, 2010 - 19:25:43 GMT
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Forex Hound - www.forexhound.com
Dollar Strengthens as Sentiment Shifts Toward Safety
After trading relatively
flat in the hours before the New York opening, the U.S. Dollar
strengthened as sentiment shifted back toward safety. Late yesterday
and overnight, the Dollar appeared to be ready to weaken as demand for
higher risk assets began to pick up.
Early in the trading
session, news began to leak about Greece debt concerns causing the U.S.
stock market to sell sold off. The release of less than stellar U.S.
economic reports triggered additional selling pressure as investors
pared equity market positions in anticipation of an economic slowdown.
This rattled traders who then began selling higher price assets while
seeking safety in the U.S. Dollar.
The EUR USD continued to
weaken throughout the session while taking out sell stops under the
psychological 1.40 level. Todayâ€™s selling pressure has been triggered
by news that Greeceâ€™s budget woes have resurfaced. For several days,
traders had become complacent while under the belief that a new bond
issuance would make the Greek debt problems go away. 1.3800 remains the
most likely downside target.
The British Pound is trading lower
but remains inside of its five day range. Itâ€™s hard to tell at this
time which direction investors prefer. Fear, and demand for lower risk
is likely to drive the market lower.
Demand for safer assets
helped the USD JPY turn lower. Early in the session, the Dollar was
rallying versus the Yen after completing a 50% retracement and a
closing price reversal bottom. A sell-off in U.S. equity markets,
however, sent traders scrambling for safety, sending the USD JPY lower.
conditions and profit-taking helped to pressure the USD CAD early but
the sell-off in U.S. equity markets changed risk sentiment, triggering
an intraday reversal. Look for the Canadian Dollar to feel pressure as
long as investors continue to shun risk. Lower crude oil and gold are
also contributing to the strength in the USD CAD.
The USD CHF
held on to early gains after an overnight rally took this market
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. This pattern is unlikely to
occur today unless risk sentiment shifts away from safety.
intraday break in U.S. equity markets triggered a break from the high
in the AUD USD as traders dumped risky assets. A similar situation
developed in the NZD USD as traders became more risk averse and decided
to re-enter on the short side of the market or liquidate losing long
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