Tuesday June 1, 2010 - 18:36:58 GMT
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British Pound Soars on Speculation
The GBP USD soared 1 percent Tuesday morning boosted by
speculation that U.K.
insurer Prudential may withdraw its takeover bid of AIA. This news combined
with renewed interest in the Euro and diminished risk aversion is helping to
push the British Pound to within striking distance of a key 50% level at
The EUR USD remains down at the mid-session but well off its
low. Early Monday night, the Euro took out Mayâ€™s low at 1.2143 but failed to
attract fresh selling pressure. This market was trading lower primarily on the
news of the resignation of German President Kohler and on concerns that France
may become the latest country to face sovereign debt issues or a debt reduction
by the credit agencies.
The inability to attract new shorts and a turnaround in U.S. equity
markets helped to encourage a mid-day short-covering rally. The main trend is
down, but the chart pattern suggests that bearish sentiment may be shifting. A
trade through 1.2453 will turn the main trend to up.
The USD CHF is in a position to post a daily closing price
reversal top after failing to break out to the upside. Watch for a lower close
today to set up the formation. In addition to the potential top formation, this
market is set up to change the main trend to down on a trade through the last
swing bottom at 1.1484.
With the U.S.
stock markets wavering between plus and minus, the USD JPY is taking on a
similar pattern. The bigger picture suggests that 91.61 could become a key
resistance level if the equity markets weaken. This 50% price was tested on
Monday and was rejected. Regaining this level will be a sign of strength with
92.41 the next upside target.
Early this morning the Bank of Canada announced a 25 basis
point interest rate hike and the market hardly moved. This indicated that the
main focus of traders at this time is aversion to risk. Overnight, lower crude
oil and equity prices helped to drive up demand for the USD CAD. Once equity
markets settled and rallied, the Canadian Dollar began to make its move. At
this time, the Dollar/CAD is trying to establish support inside a retracement
zone at 1.0481 to 1.0394. Holding this zone could trigger a retracement to
1.0633 over the near-term.
Overnight the Reserve Bank of Australia announced that it would
leave interest rates unchanged. This was a sign that it is concerned that a
slowdown in the global economic market would pressure the Australian economy.
In addition earlier weakness in the global equity markets helped drive down
demand for higher yielding currencies. After testing a minor 50% level at
.8308, the AUD USD is mounting a small comeback rally. A strong finish in U.S.
equity markets could put this currency pair back on track for a test of a major
50% retracement price at .8727.
The NZD USD is trading higher after testing and rejecting a
50% support level at .6706. The current
chart pattern suggests that upside momentum is building which could change the
trend to up on the daily chart on a move through the last swing top at .6862.
Investor sentiment is playing a major role in todayâ€™s trading action. Higher
equity and commodity prices could convince traders to take on more risk. This
shift in sentiment will help support the Kiwi.
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