The U.S. Dollar finished higher against most major
currencies on Tuesday, boosted by renewed trouble in Greece and comments from the
minutes of the Fedâ€™s last meeting.
problems began to resurface overnight as the troubled country was reportedly
asking for more favorable interest rates on loans from the European Union and
to amend certain parts of the bailout proposal from the International Fund.
The spread between Greek Bonds and German Bunds has been
widening, indicating that investors are asking for more protection in case of a
default by Greece.
The high price to service the debt is raising concerns about Greeceâ€™s
ability to finance its debt.
The Dollar received a late session boost following the
release of the minutes from the last Fed Open Market Committee meeting.
Investors were reacting to the debate by the Fed members over the use of the
term â€śextended periodâ€ť which has been used in several of the recent Fed policy
The term â€śextended periodâ€ť is difficult to translate into a
specific time period because of its ambiguity. The central banks of Canada and New Zealand have been more specific
with their forecasts as to when rates will most likely rise in these two
countries while the U.S. Fed remains unclear. Analysts have been looking for
the Fed to clarify this statement to remove some of the speculation from the
markets. Based on comments in the minutes, many analysts now believe the Fed
will remove â€śextended periodâ€ť from its next statement on April 28th.
In addition to discussions about the use of terms, the Fed
also reduced its forecast for economic growth and inflation.
On Tuesday, the Canadian Dollar reached parity with the U.S.
Dollar for the first time since July 2008. The strong Canadian economy and
banking system continued to attract global investors into the Canadian Dollar.
Firm crude oil and gold helped to weaken the Dollar/CAD today. Strong demand
for these Canadian resources should continue to help the economy grow. The
charts indicate that although parity with the U.S. Dollar is the first
objective of this move, downside momentum may not stop at this level.
The AUD USD closed higher after the Reserve Bank of Australia
raised its benchmark interest rate by 25 basis points to 4.25 early Tuesday
morning. This action came as no surprise but hawkish comments following the
rate hike helped this market surge to the upside. In its policy statement, RBA
Governor Stevens said further hikes are likely despite fears that they will
erode consumer spending. This currency pair took out the last swing top at
.9251, reaffirming the uptrend and set the tone for the rally to continue to
the high from the year at .9329.
The main trend on the NZD USD chart turned down early
Tuesday, but a late session short-covering rally turned the market around to
trigger a closing price reversal bottom. Last weekâ€™s IMF report calling the
currency overpriced has been putting pressure on this market for almost a week.
Traders are concerned that the high price New Zealand currency will hurt the
export market and keep the economy from growing.
Additional selling pressure came from the strong rise in the
Aussie Dollar. Tuesdayâ€™s New
Zealand business sentiment report showed an
improvement in optimism. Despite the sell-off, some traders still believe the
Reserve Bank of New Zealand
is on path to raise interest rates in June. This, along with oversold
conditions and the lack of sellers most likely triggered the strong
short-covering rally into the close.
The Euro was under pressure because of renewed fears that Greece may not
be able to fulfill its debt obligations. Greece is reportedly asking for
more favorable loan terms from the Euro Zone nations which have previously
pledged support. In addition, stories are circulating that Greece may try
to amend its agreement with the International Monetary Fund. The widening of
the spread between Greek Bonds and German Bunds indicates that traders are
taking protection once again against a default by Greece.
After three attempts to break out through a major 50% level
at 1.5297, the British Pound finally succumbed to selling pressure overnight
and now appears to be on a path to retrace to at least 1.5058 before attracting
potential buyers.The main trend remains
down, but it is possible that the British Pound is building a huge support base
before its next rally. The recent release of the 4Q GDP results show that the
economy is improving, but concerns continue to linger regarding the U.K.â€™s
exposure to the Greek fiscal problems as well as political uncertainty.
The Dollar/Yen traded lower following Mondayâ€™s closing price
reversal top. Japanese investors may begin bringing funds home because of risk
aversion. A weaker stock market could trigger a surge in the Japanese Yen. The
chart pattern suggests the start of a 2 to 3 day break or a 50% correction back
to 92.26. The latter scenario will likely take place if there is a huge
sell-off in U.S.
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Mon 10 Sep 2018 AA 08:30 GB- GDP, Trade, Output Tue 11 Sep 2018 AA 08:30 GB- Employment Decision A 09:00 DE- ZEW Survey Wed 12 Sep 2018 A 12:30 US- PPI A 14:30 US- EIA Crude A 18:00 US- Beige Book Thu 13 Sep 2018 A 1:30 AU- Employment AA 11:00 GB- Bank of England Decision AA 11:45 EZ- European Central Bank Decision A 12:30 US- Weekly Jobless AA 12:30 US- CPI Fri 14 Sep 2018 A 08:30 GB- GDP AA 12:30 US- Retail Sales A 13:15 US- Industrial Production AA 14:00 US- prelim University of Michigan
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