Dollar Trading Mixed; Euro Falters after Quick Gain
The U.S. Dollar is trading mixed against the majors in a
tight and narrow range. The trade weighted Dollar Index is trading lower in a
follow-through move following Friday‚Äôs closing price reversal top on the daily
chart. The main trend is up and will not change to down unless 79.61 is
The lack of major U.S. economic reports today could
keep the Forex markets in a tight range until Fed Chairman Bernanke speaks at
10 AM CT.His comments could move the
markets. Today, he is expected to speak before the House Financial Services
Committee about employment growth prospects and whether fiscal stimulus is
Traders will be looking for Bernanke to give them clues
about the timing of future U.S.
interest rate hikes. If the Fed Chairman‚Äôs comments indicate tightening then
the Dollar is likely to rise. A dovish tone will be bearish.
The EUR USD is weakening after an early session surge
following Friday‚Äôs closing price reversal bottom. The overnight follow-through
rally stalled inside a minor retracement zone at 1.3615 to 1.3656. The main
trend remains down. A trade through 1.3788 will turn the main trend higher on
the daily chart. Looking at the bigger picture, this market is inside a major
retracement zone at 1.3800 to 1.3483.
In order for this market to rally, there has to be an
unexpected event such as major buying by China
If this becomes the case and the market rallies through 1.3788, then look for
the move to continue to a major 50% level at 1.4055.
Even if the ECB bails out Greece, there is no guarantee the
Euro will rally. The fear is the ECB will have to keep interest rates at
historically low levels while the U.S. is getting ready to remove stimulus
and then perhaps begin raising rates. Fiscal tightening in Greece, Portugal
will likely help to keep recessionary pressures on the Euro. This will force
the ECB to maintain its loose monetary policy.
A short-term rally may be just what speculators have been
waiting for because of their desire to maintain short-selling pressure on the
Euro. Speculators know that the Fed and the ECB are not on the same page and
have different timetables regarding the removal of stimulus. According to the
recent FOMC minutes, the Fed is getting ready to lift stimulus while the ECB
may have to abandon its plans to begin withdrawing stimulus. In addition, the
record 59,422 shorts currently being reported in the CFTC Commitment of Traders
Report have shown no signs of letting up.
The GBP USD is trading higher but inside of Friday‚Äôs range.
Oversold conditions may lead to a short-covering rally which could take this
market back to 1.5583 to 1.5637, but the trend will not turn up unless 1.5814
is violated.The economy and the U.K. budget
deficit continue to weight on the Pound. In addition, the country is facing an
election in which there is no clear leader. Furthermore, investors seem to be
losing confidence in the Bank of England‚Äôs ability to stem the economic
The USD JPY is trading lower overnight following Friday‚Äôs
closing price reversal top. This current rally is having trouble taking out a
retracement zone at 91.16 to 91.78. The current chart pattern suggests a break
to 90.34 to 89.92 is likely over the near-term. Appetite for risk seems to be
waning overnight which is leading to the strength in the Japanese Yen.
Friday‚Äôs strong rally in the Euro helped trigger a closing
price reversal top in the USD CHF. This helps to diminish the chances of
another intervention by the Swiss National Bank which will be friendly toward
the Swiss Franc. Clearly the USD CHF will take its direction from the Euro
today. The main trend is up and will turn down on a trade through 1.0646. If
this occurs, then look for a break to 1.0513 to 1.0423.
The USD CAD is feeling downside pressure overnight. Higher
gold and crude oil are helping to give the Canadian Dollar boost. In addition
to being supported by the rise in commodities, the Canadian Dollar faces
virtually no risk exposure while benefitting from an improving economy. Look
for a possible technical bounce at 1.0359 today, but a failure to hold this
level could trigger an acceleration to the downside.
The AUD USD mounted a strong recovery on Friday because of
the strength in the U.S.
equity markets. A slight pick-up in demand for higher risk assets overnight is
providing support this morning. A major .618 resistance level at .9035 may stop
the rally today however. A break under .8956 will be a sign of weakness.
Appetite for higher risk helped trigger a rally in the NZD
USD overnight, but the upside momentum seems to be slowing ahead of the U.S. opening.
This market appears to be waiting for a catalyst to drive it higher. Bernanke‚Äôs
talk before the House Financial Services Committee will most likely be today‚Äôs
market mover. A trade through .7078 will turn the main trend to up on the daily
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
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13:30 US Weely Jobless
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POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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