The U.S. Dollar closed out the month of January sharply
higher as aggressive buyers helped the Greenback surge to the upside following
Friday morningâ€™s better than expected U.S. GDP report. The report which blew
out forecasts encouraged traders to buy with both hands as investor sentiment
turned more optimistic toward a strong U.S. economic recovery.
Earlier in the week, the Dollar was bolstered by a more
upbeat statement by the Federal Reserve. Although the FOMC left interest rates
unchanged, it did change its outlook on the economy from â€śweak growthâ€ť to
â€śmoderate growthâ€ť.The markets responded
by driving up the Dollar in anticipation of higher interest rates and a much
better outlook for the economy going forward.
Most of the time this week, the Dollar showed strength as
investors became more optimistic about the U.S. economy, but demand for safety
because of concerns over sovereign debt issues in Greece and Portugal also contributed
greatly to the rally.These problems are
likely to linger over into next week and until a viable solution is reached.
The EUR USD finished the month sharply lower and in a
position to test 50% of last yearâ€™s July to November rally.The main range is 1.2329 to 1.5144 with retracement
levels at 1.3800 to 1.3483. The combination of an improving U.S. economy and concerns over sovereign debt
issues in Greece and Portugal
pressured the Euro. Look for this down trend to continue until this market
becomes oversold or until Greece
and the European Union reach a solution on how to shore up the Greek budget.
The GBP USD closed slightly lower for the month. The lack of
growth continues to plague the U.K.
economy.On Friday, the Pound finished
sharply lower following a robust U.S. GDP Report. The long-term chart indicates
that this market may be vulnerable to a correction back to 1.5271. Watch for an
acceleration to the down side to begin following a break down under 1.5706.
The USD JPY finished the week slightly better, but still
lost ground for the month. Renewed strength in the U.S. economy helped the Dollar rise
sharply over the Yen on Friday. For the month, this pair traded between two 50%
levels at 93.13 and 89.30.A breakout
over either one of these prices in February is likely to trigger a big
move.At times, the USD JPY showed
strength because of improvements in the U.S. economy.Other times, the Yen strengthened when
investor sentiment shifted toward safety. Something is going to have to give
soon.Either investors are going to sell
the Yen hard as the economic outlook for the U.S. improves, or the Yen will
rally sharply higher if traders turn more risk averse.
The USD CHF turned the main trend to up on the weekly chart,
following a breakout over 1.0507.In
addition, this market posted its second consecutive higher month and now
appears to be on pace for a rally to 1.0942.Not only was the strengthening Dollar underpinning the market, but the
weakening Euro versus the Swiss Franc also helped to trigger concerns that the
Swiss National Bank was getting ready to intervene.One of the main concerns for the SNB is its
appreciation versus the Euro.In this
case, the sovereign debt issues in Greece
have helped weaken the Euro enough to make the Swiss France look strong.
The monthly USD CAD charted formed a closing price reversal
bottom which indicates the possible start of a huge rally to the upside. This
type of pattern usually suggests the formation of a major bottom.In addition, following the formation of this
pattern the market rallies 50% of the last break over a 2 to 3 month
period.This projects a possible move to
1.1633 by April.The stronger U.S.
economy coupled with weaker crude oil and gold prices is not very supportive
for the Canadian Dollar.In January, the
Bank of Canada reiterated its stance against a stronger currency and vowed to
take whatever action it deemed necessary to prevent a strong currency from
derailing the economic recovery.
The AUD USD closed lower for the second consecutive month.A shift in fundamentals is starting to exert
a bearish influence on this market. During January, China showed several signs that it was
getting ready to tighten its monetary policy.This move is already pressuring demand for raw materials.A drop in demand from China will
weaken Australian exports and could trigger the start of a sizeable correction
back to .7706. On February 2nd, the Reserve Bank of Australia is expected to leave
interest rates unchanged after two consecutive increases. Depending on the tone
of the language in its official statement, the Aussie Dollar could be poised to
move sharply lower to the down side.
The New Zealand Dollar closed lower for the month and in a
position to drop further. A slow down in the New
Zealand economy at the same time the U.S. is beginning to strengthen
could put pressure on the Kiwi next month.The longer-term chart indicates plenty of room to the downside with
.6263 a potential target. With the U.S.
projected to raise interest rates later in the year and the Reserve Bank of New Zealand
committed to holding rates low until the middle of the year, a tightening of
the interest rate differential will favor the Dollar. Furthermore, less demand
from China is likely to hurt
the New Zealand
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