Thursday March 4, 2010 - 18:29:05 GMT
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U.S. Dollar Higher as Risk Aversion Dominates Trade
The U.S. Dollar is up
sharply against all major currencies. Traders seemed a little nervous
this morning and maintained their risk adverse stance throughout the
session. One of the biggest concerns for investors at this time is the
continuation of the global recovery. Some feel that the sovereign debt
issues in Europe are stalling the recovery. This combined with a
possible loss of jobs in tomorrowâ€™s U.S. Non-Farm Payrolls Report is
triggering todayâ€™s flight to the relatively safer, lower-yielding U.S.
The EUR USD was stable this morning as traders seemed
pleased with investor demand for Greek bonds. It began to fall apart
after the European Central Bank left interest rates unchanged and ECB
President Trichet said that growth in the Euro Zone would be uneven.
fear that a slow down in the Euro Zone will hamper the ECBâ€™s ability to
raise interest rates. This will lead to deflation as most countries
will be forced to cut spending. In addition, the Euro may lose the
interest rate differential battle if other countries such as Canada and
the United States begin to withdraw stimulus and hike their benchmark
interest rates. This is most likely the primary reason behind todayâ€™s
The Bank of England also left interest rates
unchanged along with its quantitative easing program. Some traders felt
going into the report that the BoE would either expand or extend its
asset buyback program. Nonetheless, the GBP USD is selling off at the
mid-session mostly due to the weakness in the Euro. Other bearish
factors such as the weak economy, political uncertainty and the wide
budget deficit continue to make the British Pound one of the weakest
The USD JPY is trading higher despite increased
demand for lower yielding assets. Technical factors could be
contributing to the intra-day rise as strong buying came in after a
test of a major Fibonacci retracement level at 88.24. In addition, the
failure to accelerate to the downside after breaking a previous swing
bottom at 88.55 may have scared shorts out of the market. At this time,
the minimum upside target is 89.30. A rally through this level could
trigger a further move to 90.14 over the near-term.
The USD CHF
is up sharply at the mid-session due to the weakness in the Euro.
Traders once again feel that an intervention by the Swiss National Bank
is imminent as it tries to protect its valuable export market.
AUD USD is down after failing to hold a 62% retracement level at .9042.
Increased demand for lower risk assets is contributing to the weakness.
Concerns over the economy and a drop in demand for higher yielding
assets are pressuring the NZD USD. Downside momentum has put this
currency pair in a position to test the recent main bottom at .6806.
weaker gold and crude oil prices have triggered a sell-off in the
Canadian Dollar. Oversold conditions in the USD CAD and fear that the
Bank of Canada may â€śverbally intervene is also contributing to the
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