Thursday April 29, 2010 - 20:46:37 GMT
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Euro Higher; Traders Remain Cautious
The EUR USD is trading higher at the mid-session but traders
remain cautious about the long side. Although the European Union and the
International Monetary Fund are working out a loan bailout agreement, traders
are likely to remain skeptical about the Euro until the details of the plan are
Technically, the Euro made a closing price reversal bottom on
Wednesday. Last nightâ€™s trading action confirmed the bottom. The charts
indicate that a 2 to 3 day rally is likely with 1.3402 to 1.3471 the next
likely upside target.
An easing of tensions regarding Greece and a different attitude
toward the possibility of a hung parliament is helping to drive the GBP USD
higher. Although election pools are indicating no clear winner emerging,
investors are speculating that the U.K. may still be able to tackle
its deficit problem. Speculators are supporting the market after building a
case that the Liberal Democrats may be able to shift the power in case of a
hung parliament. Many traders believe this party will take an aggressive
approach toward balancing the budget.
Technically, the British Pound turned the main trend down on
the daily chart on Wednesday. Todayâ€™s action looks more like a retracement of
the recent break rather than a change in trend. At the mid-session, the Sterling is trading
inside of a retracement zone at 1.5310 to 1.5354.
Despite the strong U.S. equity markets, the USD JPY is
trading flat to higher. Expectation is for the Yen to weaken over the near-term
due to greater demand for higher risk assets and its huge budget deficit.
Traders may be pricing in the possibility that Japanese debt may downgraded.
The USD CAD weakened from the onset on Thursday, driven by
greater demand for higher risk assets. Yesterdayâ€™s Fed commentary also helped
to boost the Canadian Dollar. The Fed said it would keep interest rates low for
â€śan extended periodâ€ť while the Bank of Canada is leaning toward hiking interest
rates sooner than expected. The widening interest rate differential is making
the Canadian Dollar a more attractive investment.
Near the mid-session, the USD CAD is paring some of its
earlier losses after BoC Governor Mark Carney said a strong Canadian Dollar may
have impact on inflation or monetary policy. A strong currency tends to flatten
inflation while reducing foreign demand for Canadian exports.
The AUD USD continued its rally following Wednesdayâ€™s
closing price reversal bottom. Although the up move looks impressive, no change
in trend has been signaled. In fact, the entire move has amounted to a .618
retracement of the .9387 to .9135 range. Traders bought the Aussie aggressively
starting on Wednesday after the Fed announced that interest rates would remain
low for â€śan extended periodâ€ť.
The outlook for higher interest rates by the Reserve Bank of
is helping to boost the NZD USD at the mid-session. Following Wednesdayâ€™s
assessment by the Fed that interest rates would remain low, traders is now
beginning to price in the possibility that the RBNZ is likely to raise interest
rates before the Fed.
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