The Forex Pattern, Price & Time Report

Higher Equity Markets Should Ignite Breakout Rallies in AUD USD and NZD USD

2009-07-19T10:29:00Z

Sellers took it easy on the Dollar on Friday following a week which saw the greenback give back much of its recent gains. Stronger appetite for higher yielding assets fueled by better than expected earnings reports and perceptions that the U.S. economy would recover sooner rather than later contributed to the weakness.

Despite the weaker Dollar, the individual Forex markets stayed within their June to July ranges and all merely mounted percentage retracements of these ranges.

Traders pressured the GBP USD late in the week following a retracement to 1.6452. The main trend is down and this week’s rally and subsequent break may be signaling that a secondary top is forming.

The EUR USD closed flat on Friday but up for the week. A new higher bottom has been formed at 1.3832 but the inability to take out the recent swing top at 1.4201 is still providing a reason to think that this pair is topping.

The USD JPY posted a reversal bottom this week on the daily chart at 91.73. Although the trend is down, the follow-through to the upside indicates that the buying may be greater than the selling at current levels. The weekly reversal up is an even stronger sign that higher prices are coming. A trade through 94.46 will confirm the weekly reversal bottom and could trigger a rally to 96.80.

Despite closing lower in limited trading on Friday, the AUD USD finished the weekly session in a position to challenge the high for the year at 82.64. A strong rally in the equity markets next week will most likely encourage more buying in the Australian Dollar.

Like the Aussie Dollar, the Kiwi or New Zealand Dollar is in a position to make a new high for the year. This market is moving almost lock-step with the stock market. A strong surge in equities next week could launch this currency pair through .6590.

The USD CAD plunged sharply lower this week led by higher oil and equity prices. Currently this currency pair is having trouble with a retracement level at 1.1142. A close below this level could fuel a fast break to the low for the year at 1.0783.

The Bank of Canada meets on July 21. The results of this meeting should provide short-term direction for this currency pair. Traders will be looking for news regarding financial stimulus. Since May the BoC has taken a “wait-and-see” stance on the economy.

The biggest issue facing the Canadian economy at this time is the rapid appreciation in the Canadian Dollar since March. The BoC has tried to talk this currency down out of fear that a high priced Canadian Dollar would cause buyers to back away from exports. Recently the force driving this currency higher has been demand for higher-risk assets.

There is really nothing the BoC can do about the rise in the U.S. equity markets, but it may attempt to pressure the Canadian Dollar by applying quantitative easing or announcing another stimulus plan both of which add more money to the economy. Any one of these actions could weaken the currency and trigger a USD CAD rally.

Better Economic News and Earnings Weaken U.S. Dollar

2009-07-16T22:00:00Z

What started out to be a sideways day ended with the U.S. Dollar taking another hit as investors renewed their quest for risk late in the trading session and into the close.

Even before the U.S. Forex trading session started there were signs that today would be an unusual day as stories were circulating that CIT Group would file bankruptcy following the news that the U.S. government would not provide assistance to them. This triggered an almost immediate flight-to-safety rally as traders flocked to the U.S. Dollar and Japanese Yen for safe-haven protection.

Later in the morning session but prior to the New York opening JP Morgan Chase announced better than expected earnings. This news froze the markets as it created a desire for risky investments but traders were still worried about the CIT news.

Throughout the trading session, upside momentum began to build when finally the equities markets took off to the upside triggering a break in the U.S. Dollar. The Japanese Yen which had been trading higher most of the day reversed to the downside as investors once again sold in an effort to draw a better yield.

Higher-yielding currencies such as the New Zealand and Australian Dollars also posted gains as traders chased these markets higher into key retracement zones. Retaking these technical levels would be strong signs that these currency pairs will test new highs for the year fairly soon.

In economic news, the U.S. Initial Claims report showed that more jobs were lost. This helped weaken the Dollar as traders looked toward the British Pound and Euro for better appreciation. Both of these markets are also at or approaching key retracement levels that will dictate the direction over the next few weeks.

Despite a rebound in crude oil prices, the Canadian Dollar was unable to overcome technical resistance and traded flat to lower into the close.

Looking at the chart patterns, it appears that the clash over the next few days will be between the fundamental and the technical traders. Both types of traders can build both bullish and bearish cases. On the bullish side, the desire for better returns driven by better than expected U.S. earnings reports is helping to support the current rally. Bearish technical traders cite the fact that the major currencies are merely making retracements of their two year ranges and not new highs for the year as the reason why they are vulnerable to a correction from current levels.

Unless there is earth-shattering fundamental news, continue to look for the major Forex pairs to remain range bound. Some traders remain skeptical about the global economy and may not be willing to chase these markets at current levels. If buying dips is the preferred trading strategy then look for another short-covering rally in the Dollar to develop over the short-run.

U.S. Dollar Under Pressure as Investors Seek Better Returns

2009-07-15T22:05:00Z

The GBP USD is still in a down trend because of the lower top, lower bottom formation but this did not stop this pair from testing a retracement level at 1.6452.

The USD JPY was the only positive Dollar-based major currency. This pair is continuing the rally which began on Monday following a closing price reversal bottom at 91.73. The chart indicates a move to 94.36 to 94.98 is likely over the short-term.

The USD CHF is still trading inside of the major range of 1.0590 to 1.1020. This pair is currently pressing the bear side of a retracement zone at 1.0754.

The main trend is down in the USD CAD. The break through 1.1437 turned the trend lower earlier in the week. This pair easily penetrated a 50% retracement price at 1.1253. The charts indicate that a test of 1.1142 is likely over the short-run.

The AUD USD experienced a strong surge to the upside. The main trend will remain down until the last swing top at .8155 is violated. Gains are currently being limited by a retracement level at .8049.

The NZD USD picked up the rally from yesterday which turned the main trend to up. Early in today's trading session this market blew through a retracement zone at .6370 to .6422 fairly easily. This zone is now key support. The charts indicate that upside momentum is likely to take this pair to .6549 to .6590 before it meets more solid resistance.

There is no real strong economic news to report to rationalize the weakness in the Dollar. The "herd" just seems to be looking for higher yields and willing to sell the Dollar in search of better returns.

Better U.S. Earnings Reports Support Euro Rally

2009-07-15T22:01:00Z

The EUR USD traded higher throughout the day driven by increased appetite for risk. Global equity markets also traded better which led investors to seek higher yields in more risky currencies like the Euro.

Stock futures markets led by the S&P 500 Index were sharply higher boosted by strong earnings from Intel Corp. and Goldman Sachs. The recent data releases and earnings reports out of the U.S. have been buoying equity markets while putting pressure on both the U.S. Dollar and lower yielding Japanese Yen versus the Euro.

Despite being nervous over earnings results from other leading U.S. banks later this week, risk seeking investors are providing the buying power which is supporting the current rally. This surge to the upside is flying in the face of investors who are still approaching the financial markets with caution. Many investors are still far from convinced that the Euro Zone and U.S. economies are on a steady path to recovery from the deep recession that has been gripping both economies.

While the West struggles to right the ship, China is on track to reach its annual goal of 8% growth. The European Central Bank on the other hand is still debating whether the stimulus packages introduced several months ago are working or have to be expanded. This debate by ECB authorities is one of the reasons for the sideways trade this currency has seen over the past sixty days.

Demand for more risk is definitely the driving force behind the Euro strength this week as the economic data picture has been mixed at best. Earlier this week the ZEW indicator of confidence in the German economy was well below expectations. European consumer prices also fell for the first time in June led by declines in energy costs. Rising unemployment also helped contribute to a cut in household spending.

The Euro Zone economic reports do not suggest the need to buy the Euro at this time, but given the relatively higher yield versus the U.S. and Japan, investors are leaning toward the better yield in exchange for the extra risk.

Continue to look for more upside in the EUR USD especially if no stopper shows up over 1.4200. This appears to the next acceleration point on the charts.

Forex Investors Find Opportunity in Risky Assets

2009-07-14T22:07:00Z

The U.S. Dollar finished mixed on Tuesday as investors for the most part looked for opportunities in more risky assets. U.S. equity markets rallied, increasing the desire to buy oversold higher-yielding assets such as the Australian and New Zealand Dollars, while selling the safe-haven Japanese Yen. Some Forex majors changed their daily chart trends to up indicating the potential for more upside movement while others appeared to be headed toward major retracement levels. For the most part the Dollar majors remained inside of their six-week ranges.

USD CAD Falls on Bullish Canadian Economic Outlook

2009-07-14T22:06:00Z

The USD CAD opened lower as expected and continued to weaken throughout the day. Risk came back into this market as investors felt confident once again in holding higher-risk, higher-yielding assets.

Yesterday's rise in equities along with a friendly Bank of Canada quarterly report helped the Canadian Dollar recover from its lowest level since May. A shift in sentiment triggered a reversal in the USD CAD on Monday. This pair had been rallying for about six weeks on concerns over the deteriorating global economy.

The Business Outlook survey from the Bank of Canada showed that business executives felt their sales would grow over the next year. In the survey, 61% of executives surveyed felt their sales would grow while only 23% were looking for a decline. The gap between the two figures suggests that sentiment in the business community may be shifting.

This news may be what the Canadian Dollar needs to put in a bottom, but improvements in the equity markets and crude oil are going to be necessary to help turn the current down trend back up.

Technically, the USD CAD closed yesterday in a position to turn the main trend back down on a move through 1.1437. The follow-through to the downside today triggered a change in trend. A failure to hold on to the major retracement zone at 1.6340 was also a bearish indicator. Expectations are for this break to move lower into 1.1253 to 1.1142 before it finds support. Watch for a technical bounce to the upside triggered by profit-taking or short-covering to trigger a possible retracement of the break from the top at 1.1724. If this pair is indeed turning bearish then new sellers should step in following another retracement to the upside.

Technical Reversal in USD JPY Signals Bottom

2009-07-14T22:05:00Z

The desire to hold on to Japanese Yen for protection diminished as demand for higher yielding assets increased. Yesterday's closing price reversal bottom in the USD JPY was confirmed by the follow-through rally today. The short-term range is 96.98 to 91.73. If the counter-trend rally continues tomorrow then look for a retracement to 94.36 to 94.98 before new shorts are entered.

Rally Fuels NZD USD Change in Trend

2009-07-14T22:04:00Z

Despite still remaining inside of its main range of .6590 to .6151, the NZD USD turned its main trend to up when it crossed a swing top at .6393. The close inside of the retracement zone at .6370 to .6422 indicates there is more upside potential. Higher equity and commodity markets helped to generate interest in this higher yielding currency.

Equity Rally, Resistance Levels Keep Pressure on U.S. Dollar

2009-07-14T22:02:00Z

At this time the major Dollar pairs remain range bound, but the inability of the Dollar to break through major resistance levels, coupled with the rallying equity markets, is putting the Dollar in a position to break substantially. The longer these markets remain in tight ranges the bigger the break in the Dollar. While no signal has been generated at this time, traders will most likely be watching the equity markets as to which way the Dollar will move. Needless to say, if earnings come out bad and equity markets fail at upside retracement levels then look for the Dollar to resume its uptrend.

Equity Market Rally Encourages Flight from Dollar

2009-07-13T22:07:00Z

The U.S. Dollar started the week on the bull side of the market as its uptrend was expected to remain intact. Trading was anticipated to be defensive. Investors were most likely to remain risk averse while stocks continued to remain weak and the global economic picture was once again moving toward bleak. The overnight rally highlighted the fact that traders were becoming more sensitive to the weakening equity markets and more attracted to safe-haven currencies like the Yen and the U.S. Dollar.

This scenario changed early Monday morning when analyst Meredith Whitney upgraded her recommendation in the Goldman Sachs Group from neutral to buy and made other bullish comments regarding the banking sector. Her comments were the surprise event that equity markets were looking for given the recent downtrend and oversold status. The subsequent short-covering rally in the stock markets forced currency traders to rethink their risk adverse positions and encouraged liquidation to more acceptable sizes given the possible shift in investor sentiment from bullish Dollar to bearish Dollar.

Although it is too early to tell if this is going to lead to a change in trend in the major Forex pairs, it is important to note that a possible short-term bottom may have been formed in the equity markets that could trigger 50% or more retracements in the major Forex pairs.

Traders should note that while Ms. Whitney's bullish comments may have put in a short-term bottom, the real decision making for the future direction of the Dollar will be based on earnings and economic reports over the next few weeks. Should her bullish comments gain additional support from friendly earnings and economic reports then the Dollar should get hit hard to the downside. If her comments cannot be backed up by solid bullish news then the Dollar is likely to redevelop its temporarily interrupted up trend.

The EUR USD is in a downtrend but having trouble breaking support at 1.3748. This coupled with the banking sector upgrade news could be triggering the start of a short-covering rally. Traders should look for a minor retracement to 1.4015 to 1.4059. A major retracement to 1.4042 to 1.4112 is also possible. Given these two retracement zones, 1.4042 to 1.4059 seems to the key area this pair has to get through to trigger a breakout to the upside.

The USD CAD appears to be running out of gas to the upside which makes this market vulnerable to a correction. Based on the main range of 1.2507 to 1.0783, this pair has been finding resistance at a retracement zone at 1.1634 to 1.1837. Topping out in this area is likely to lead to a short term retracement to 1.1253 to 1.1142.

The USD JPY has been getting hit hard lately due to risk averse Japanese investors repatriating their risk capital back to the homeland. Today's events, which may lead to a prolonged or sizeable rally in the equity markets, may have triggered the start of a short-covering rally. This pair just recently completed a retracement to 94.26 to 92.57. Regaining 92.57 on Monday after posting a lower-low for the recent down move sets up a reversal bottom which may trigger a retracement rally to 96.58 to 97.73.

The bearish fundamentals which had been putting pressure on the GBP USD were largely ignored by traders once the stock markets took off to the upside. Looking at the charts, today's action indicates that a short-covering rally to 1.6362 to 1.6452 is likely.

The USD CHF remained range bound between 1.0590 to 1.1020. Holding above a retracement area at 1.0805 to 1.0754 gives this market a slightly friendly tone. Breaking under this support could trigger a retest of the 1.0590. Everything depends on whether the rally in the equity markets is real or just short-covering.

The fear of holding risky assets has recently pressured the AUD USD and NZD USD to multi-month lows. Today's rally in the equity markets helped put in reversal bottoms in both of these pairs. Although their down trends are not threatened at this time, both pairs appear to be destined to complete short-covering rallies to retracement zones at .7982 to .8049 for the Australian Dollar and .6392 to .6439 for the New Zealand Dollar.

In summary, the battle the next few days will be over an analyst's comments and economic reality. Traders will have to decide whether to once again become more risk tolerant and bet on the Dollar weakening or let the Dollar weaken before jumping back on the long side. Technical retracement areas may be the deciding factors over whether the Dollar remains weak or strong.

Falling Equity Markets Dictate Yen and Euro Direction

2009-07-10T22:07:00Z

Both the Japanese Yen and Euro were in the spotlight on Friday. Both are being affected by the same news but both are moving in opposite directions versus the Dollar.

The central theme driving investors out of the Euro is risk aversion. Speculation that the global economic recovery is stalling is leading investors to shun higher priced assets and move to lower-yielding currencies. This speculation is encouraging the selling of the Euro while triggering buying interest in the U.S. Dollar and the Japanese Yen. This was apparent today when a drop in U.S. consumer sentiment weakened the stock market and the Euro while pushing up the Yen.

Heavy selling pressure in the global equity markets is leading investors to believe that an economic recovery in 2009 and early 2010 is highly unlikely. This is encouraging longer-term traders to reallocate money into the U.S. Dollar and eventually into the U.S. Treasury markets. Furthermore, Japanese Yen investors are pulling their money out of global equity markets and bringing their money back home despite receiving literally no return on capital. This move by the Japanese investor is a clear sign that return of capital is more important than return on capital at this time.

Declining economic data led by the news that China’s economy may not be as rosy as investors thought earlier in the year is leading to speculation that the global economic recovery is stalling and that investors will be more defensive in their investment strategy going forward.

Earlier in the week the International Monetary Fund said the global economy will shrink 1.4 percent this year before expanding 2.5 percent next year. While next year’s forecast seems a little too optimistic, traders are focusing on the current economic environment and reacting as if the 1.4 percent contraction this year may be difficult to obtain. The surge to the upside in the Japanese Yen this week is a strong indication that a defensive strategy is the best strategy.

Besides the faltering global economic picture, Euro traders are feeling pressure from reports that the International Monetary Fund is actively discussing aid programs with distressed Eastern European nations. The problem with toxic assets in the Eastern European banks has been swept aside since February but has now risen to the spotlight again. With these problems lingering investors have become more risk averse toward the Euro. This is leading to selling pressure on the Euro as traders are seeking safety in the U.S. Dollar and the Japanese Yen.

The issue developing in Europe is whether the IMF will ask the European Central Bank to help provide aid to the distressed Eastern European banks and governments. This is helping to put pressure on the Euro. This news should not come as a surprise to the ECB which can be accused of dodging the toxic asset problem for months. Its general feeling is that these Eastern European countries created their own problems by trying to expand to aggressively and taking on more debt than they could handle.

The Japanese government is also becoming concerned about the rapid rise in the Japanese Yen. Despite being the beneficiary of this risk-averse driven environment, the Japanese do not want to see the Yen appreciate to rapidly. Concerns are being raised that a higher priced Yen will hurt both exports and corporate profits. This may lead to speculation that the Bank of Japan may once again begin talking about an intervention.

Technically, the Japanese Yen rally has been triggered by momentum buying through technical resistance levels. While the current up side momentum is not expected to continue at its current pace, the former resistance levels are expected to act as support. The EUR USD on the other hand has been drifting lower without much down side momentum. Traders seem to be complacent with the current trading action with many analysts calling this market range bound or sideways. This complacency is exactly what could trigger a volatile market next week. Often the more complacent traders become the greater the chance of volatility returning.

In addition to the falling Euro, traders should note that the selling pressure is also beginning to take its toll on other higher-yielding currencies such as the Australian Dollar and New Zealand Dollar.

In summary, the global currency markets are currently in the midst of a risk-averse environment. As long as the global economy continues to show signs of faltering and equity markets continue to retreat, look for investors to shun the possible appreciation in higher yielding currencies like the Euro for the safety of the lower-yielding currencies like the U.S. Dollar and the Japanese Yen.

Technical signs are beginning to indicate that there is more downside expected in global equity markets. Earnings surprises could trigger volatile days. Look for the risk aversion trend to continue with more downside expected in the Euro and a continuation of the rally in the Yen unless the Bank of Japan decides otherwise.

GBP USD Rallies as Bank of England Surprises Investors

2009-07-09T22:08:00Z

After a six-day sell-off, the British Pound is finally attracting buyers. Fundamentally this market has been getting beat-up since June 30th when an economic report showed that the U.K. economy had its worst quarter since 1958. Since then there have been signs that the economy is improving. The service sector is beginning to show growth, housing prices have stabilized and inflation is running ahead of the Bank of England’s target.

Despite these small signs of recovery, the Bank of England announced early this morning that it had decided to leave interest rates at their historically low level of 50 basis points.

This news came as no surprise since investors do not expect the BoE to touch interest rates until they are absolutely sure the U.K. economy is well on its way to recovery. Although there are small signs of a recovery, credit issues still exist with lending to businesses down well from recent peaks. Mortgage approvals are also down which is a common problem all around the world.

Interest rates may not be an issue at this time, but rumors that the Bank of England would increase the level of funds available for quantitative easing helped trigger a sharp sell-off in this market since Sunday night. Quantitative easing which is essentially the printing of money is an economic program in which the central bank buys government assets. It is a very dangerous maneuver because it can lead to an inflationary environment which will lead to a debasing of the economy.

The GBP USD surged to the upside following the news that the Bank of England would refrain from increasing the amount of funds available for the purchase of government assets. This came as a surprise to traders who had factored in an increase in the amount of funds available for quantitative easing.

Technically, the British Pound is in a down trend, however it may be short-term oversold. This means this market may retrace 50% of its recent break back to 1.6362 to 1.6452.

At this time the current up move looks like a simple counter-trend retracement. This means this market is likely to attract sellers on the first test of the retracement zone at 1.6362 to 1.6452. Traders will have to watch this market carefully while this zone is being tested to determine if new shorts start to build positions.

It may take a couple of days to determine whether this market is going to resume the uptrend or start a serious retracement to the downside.

Dollar Traders Need to Focus on the Real Issues

2009-07-08T22:07:00Z

While some traders were distracted by the G-8 meeting and the possibility the BRIC nations will propose a plan to make central banks less dependent on the U.S. Dollar as the world's reserve currency, other traders focused on why they should be long the Dollar at this time. These traders live in the now and are not distracted by future plans.

The main short-term factor that is controlling the market at this time is that investors are afraid of losing money. They are once again feeling the need to bring the money back home to avoid the risk of losing it again in the equity market or some other higher yielding asset.

Investors are once again showing that they are willing to take almost nothing in the short-term Treasury markets in exchange for return of their capital rather than return on their capital.

As long as equity markets remain under pressure, look for traders to be averse to risk. This should help support the Dollar against most Forex majors. Investors do not seem to care about the Treasury issuing more debt, about inflation or about the Dollar losing its status as the world"s reserve currency.

What traders want today is safety and security. No matter how much the Dollar gets bashed in the press by the People's Bank of China and the Russian government. Global investors are showing that during times of economic uncertainty, they know they always have the Dollar to which to turn.

Pound Traders Fear U.K. Economy Worse than Estimated

2009-07-08T22:05:00Z

The GBP USD continued to lose ground on the thought that the Bank of England may announce that it is increasing the amount of funds available for quantitative easing. This is in effect an announcement that the BoE is willing to flood the market with British Pounds. If the BoE announces the new plan then it is telling traders two things: one, the U.K. economy is worse than previous estimated, and, two, quantitative easing is bearish for a currency and it may lead to inflation.

USD JPY Falls as Investors Seek Shelter from Falling Equity Markets

2009-07-08T22:04:00Z

The weaker equity markets and thoughts of the U.S. economy starting another lower slide are helping the Japanese Yen appreciate. Trader demand for higher risk assets is diminishing. Japanese investors who moved money out of the Yen for higher yields are now buying Yen for protection against a loss. Look for the USD JPY to feel downside pressure as long as money is being lost in the equity markets.

Speculators Battling Swiss National Bank

2009-07-08T22:02:00Z

The USD CHF traded slightly better in tight trading on Wednesday. This should come as no surprise because this market has been in a tight range for several weeks.

Three factors seem to be responsible for the holding pattern developing in this market.

Firstly, there is no interest rate differential with which to work. Both the U.S. Federal Reserve and the Swiss National Bank have held interest rates at close to zero for several months. This means that neither country is more attractive than the other when it comes to interest rates. Although expectations are for U.S. rates to be higher one year from now, this line of thought is not being reflected in the market at this time.

Secondly, the sensitivity of the Swiss Franc to the price of gold has put downside pressure on the market. There is no question that at times the Swiss Franc moves lock-step with gold. The Swiss Franc has felt modest pressure since the gold market topped in early June. Since then the trend in both markets has been sideways-to-lower. Look for this pattern to continue unless gold makes a sharp move downward. If this occurs then the Swiss Franc should break support and accelerate to the downside.

Finally, speculators seem to be challenging the Swiss National Bank's efforts to weaken its currency through intervention. Since March the SNB has made no secret that it wants to see a weaker currency against the Euro. This has led to two significant interventions in which the SNB aggressively bought the Euro and the U.S. Dollar while simultaneously selling Swiss Francs. Both interventions had dramatic one day effects on the Swiss Franc but each time speculators stepped in to stop the decline.

The latest action by the Swiss National Bank on June 24 triggered a massive break in the Swiss Franc but speculators went on a buying spree the very next day which helped start a rally that took back more than 50% of the intervention break.

The battle between speculators and the Swiss central bank has created a range bound market that is trading both sides of a 50% level 1.0805. The sideways action and the relative ease that speculators have moved the currency in the wake of the interventions have raised questions about the effectiveness of the SNB's strategy.

History has shown that despite having access to seemingly unlimited amounts of funds, central banks can lose the intervention battle. This may be inflationary over the long-term if the situation is not monitored or kept in check. With a solid bottom established at 1.0590 and the intervention top set at 1.1020, do not be surprised if this market stays in a range for a couple more months. Based on an intervention in March and June, the Swiss National Bank may not try to intervene again until September. This pattern may change depending on how aggressive the SNB wants to get. Traders should also note that the SNB may decide to sell gold in an effort to weaken its currency.

USD CAD Running into Wall of Resistance

2009-07-07T22:07:00Z

Lower equity prices and crude oil have been helping to support the USD CAD, but a nearby resistance level is preventing this currency pair from rallying sharply higher. Although it is unclear fundamentally why this market is stalled from rallying up to its main upside target at 1.1922, it is clearly not attracting the buying power that it saw over the past month. One reason could be that the declines in the equity and crude oil markets have already been factored into the price. Another reason could be that the Bank of Canada is ready to take action to stimulate the economy. Whatever the reason, traders should watch the trading activity at 1.1748 for clues as to whether this market is getting ready to roll over to the downside.

On June 1 the USD CAD bottomed at 1.0783. This low finished a huge break that began on March 9 at 1.3062. The entire break coincided with the rally in equities and commodities and clearly demonstrated investor desire for higher yielding assets.

As equities rallied along with gold and crude oil, traders sold U.S. Dollars and bought Canadian Dollars. Another reason for the break in the USD CAD was that the Canadian economy seemed to be in a better position to recover than the U.S. economy. Certainly the Canadian banking system was not as devastated by the credit crunch as the U.S. system, and the Bank of Canada had not pumped that much stimulus into its economy.

As the U.S. Dollar was facing weakness because of the threat of inflation, the Canadian Dollar was not expected to face such a threat. In addition, the Bank of Canada only threatened quantitative easing while the Fed spent billions trying to keep interest rates down. Clearly the Canadian Dollar looked like the better of the two currencies.

Around June 1, the Bank of Canada began expressing concerns regarding the rapid rise in the Canadian Dollar. It felt that the rise in its currency would hurt the export market, which is a major component of the Canadian economy. At this time speculators began to lighten up positions in anticipation of action by the Bank of Canada. Some assumed that the BoC would intervene while others thought that the BoC would enact quantitative easing to try to boost the economy. Whatever the reason, speculators began liquidating and the Canadian Dollar began a short-term correction.

Recently the USD CAD rally began to slow down its rate of assent despite lower gold, crude oil and equity markets. This could be a sign that the selling was becoming greater than the buying.

Technically, this market is currently finding resistance at 50% of the April high at 1.2713 and the June low at 1.0783. If this market establishes resistance at this level of 1.1748, then traders should start to look for top pickers to begin to trigger the start of a short-term break which could take the USD CAD back to at least 1.1184 to 1.1089.

Trader Appetite for Risk Diminishes

2009-07-06T22:07:00Z

The U.S. Dollar traded substantially higher as trader appetite for risk diminished amid news that the global economy would recover at a much slower pace than previously estimated. Furthermore, news that China, Russia and India are prepared to introduce a proposal to the G-8 that calls for central bank reduction of Dollars kept in foreign currency reserve.

Bank of England Rumor Turns GBP USD Trend Down

2009-07-06T22:06:00Z

The GBP USD declined hard on Monday on rumors the Bank of England would increase its quantitative easing program to $40 billion. The main trend turned down on the trade through the last swing bottom at 1.6187 but could not accelerate to the down side as this pair reached a technically oversold area.

Based on the first leg down from 1.6743 to 1.6094, traders should look for a selling opportunity on a rally back to 1.6419. If resistance is found at this price then the next move down should take the GBP USD to 1.5770.

Retracement Level Puts Halt to USD CAD Rally

2009-07-06T22:05:00Z

The USD CAD tried to accelerate to the upside on its breakout through the 50% price at 1.16450 but the buying dried up and the market posted a closing price reversal top. A breakdown through 1.1585 will confirm the reversal top and indicate the possibility of a further decline to 1.1231 to 1.1125. The short-term trend will turn down when this pair crosses the last swing bottom at 1.1437, but the longer-term charts indicate that this market is likely to attract buying following a test of this important retracement zone.

Fundamentally, USD CAD traders are still concerned about the possibility of a "verbal intervention" by the Bank of Canada in an effort to control the rise in the Canadian Dollar. The BoC feels that a higher-priced currency will curb demand for Canadian exports.

USD JPY Declines on Talk of Diminished Role for U.S. Dollar

2009-07-06T22:04:00Z

The USD JPY traded sharply lower for a couple of reasons. The first and main reason is flight-to-safety. The second reason is the call for nations to diversify away from the U.S. Dollar.

Global equity and commodity markets were down sharply on Monday as traders liquidated their positions in higher-priced, higher-yielding assets. The current weakness in the equity markets was triggered by a larger than expected U.S. job loss in June. This news was reported on July 2nd but many traders took the day off ahead of the U.S. market holiday on Friday. The weakness overnight triggered a lower opening in the European and Asian markets as traders who missed the move on Thursday picked up the selling where it left off on Thursday.

The USD JPY broke sharply lower from the start in Asia as traders sought the safety of lower yielding assets. This break was a continuation of the move from the top which started in early June when the equity markets topped and Thursday's flight-to-safety rally in the Yen following the release of the bearish U.S. unemployment number.

The weakness in the equity markets caused Japanese investors to repatriate investments in higher yielding assets which were purchased to combat the excessively lower yields in Japan. Traders who borrowed Yen at cheap rates in an effort to leverage their investments in higher risk assets bought Yen to pay back loans.

Flight-to-safety buying is not the only reason for the rally in the Japanese Yen. Longer-term traders believe that the Japanese Yen will benefit if the central banks get behind the movement to reduce the U.S. Dollar"s role as the world's reserve currency.

China, Russia and India are expected to introduce the topic of reducing the world's reliance on the U.S. Dollar as the premier currency at this week's G-8 meeting. Russia commented over the week-end that the system is "flawed." India's finance minister is urging his nation to reduce its U.S. Dollar holdings. The French also joined the movement by stating their opinion that the system should be improved.

The best sign that the trend is beginning to shift away from the Dollar was the move by three Chinese corporations to settle imports and exports in Yuan. This move marked the first time that contracts were settled this way and was designed to make the Yuan more attractive to central banks.

The Yen could benefit if the Dollar loses its luster as the most popular reserve currency because central banks are likely to spread the reserves among the Yen, Yuan, Euro and U.S. Dollar.

Technically the main trend turned down on the trade through 94.87. There was no acceleration to the downside following a penetration of this number but the weak close put this pair in a position to challenge the last two main bottoms at 94.45 and 93.84.

Losses in the USD JPY may be limited if the Bank of Japan issues commentary regarding the rapid appreciation in the Yen. Recent rallies have been curbed by commentary from the BoJ as they expressed their concern that a higher priced Yen would hurt exports. This form of "verbal intervention" has been highly effective in the past when volatility and prices rose too rapidly.

Worse than Expected U.S. Employment Report Curtails Demand for Higher Risk Assets

2009-07-02T22:07:00Z

The June U.S. Non Farm Payrolls Report showed that employers cut more jobs last month than estimated, curtailing demand for higher-risk, higher-yielding assets while sending the U.S. Dollar sharply higher.

Pre-report guesses indicated that traders were positioning themselves for a job loss of 365,000. The Dollar rose sharply higher when the U.S. Labor Department reported a total loss of 467,000. The unemployment rate rose to 9.5%, slightly better than the estimate but nonetheless setting the stage for a possible move to double-digits sometime in the near future.

The surprise weakness in the U.S. employment picture drove investors into the Dollar as traders became more averse to risk and attracted to the relative safety of the Greenback. This report was another sign that forecasts of "green shoots" in the economy may have been overblown. At this time it looks as if sentiment indicators may have mislead investors into thinking the economy was on the road to recovery while hard economic reports such as consumer inflation and GDP were showing a slowdown in growth and indications that there would be no rapid recovery.

Today's report may have been the evidence that Dollar bulls needed to prove that the end of the recession is not near.

In early trading on Thursday ahead of the U.S. employment report the U.S. Dollar was trading firmer. Overnight, China dropped its hard line stand against the Dollar's status as the world's reserve currency and called for a more stable Dollar. This squashed speculation that had been brewing all week that China would introduce a new international currency at the next Group of Eight meeting.

EUR USD Falls asTrichet Says Recovery to Start Middle of 2010

2009-07-02T22:06:00Z

Not to be overlooked, the European Central Bank had its monthly meeting today. The consensus going into the meeting was that the central bank would leave interest rates alone despite room to cut. The ECB came through as expected and left its benchmark interest rate at 1.0%.

The already weakening Euro declined after the announcement and the break accelerated even further when a comment from European Central Bank President Trichet said a "phase of recovery" for the Euro Zone will probably start in the middle of 2010. This was an indication that the EZ economy was not improving and would probably need additional stimulus. Traders that had been expecting a comment on an exit strategy were disappointed and reacted by selling the EUR USD.

ADP Report Pressure U.S. Dollar

2009-07-01T22:07:00Z

The U.S. Dollar felt pressure overnight on Tuesday because of stronger Asian and European stock markets and struggled even more after the release of the ADP Employment Services Report.

The move into equities triggered more demand for higher yielding assets and kept pressure on the low yielding U.S. Dollar. The move was a surprise because of Thursday's U.S. Unemployment Report. Some traders felt the rally was overdone because of thin trading conditions ahead of the report.

Wednesday's ADP Employment Services Report encouraged more selling pressure on the Dollar as the actual report fell 26,000 jobs short of pre-report guesses. The actual number of jobs lost was 473,000 versus a guess of 498,000.

Despite being better than expected, this report showed that the labor market is still worsening while the whole U.S. economy may be showing signs of improvement. Investors realize that labor is a lagging indicator and that improvements may not be seen for months. Nonetheless, this number showed that the unemployment rate may hit 10%.

EUR USD Breakout Fails on Thin Market Conditions

2009-07-01T22:06:00Z

The EUR USD poked its head over a main top at 1.4177 to technically turn the main trend to up. There was no acceleration to the upside following this move which leads me to believe that thin market conditions helped to contribute to the attempted breakout.

The European Central Bank meets on Thursday. Traders expect the ECB to leave interest rates unchanged at 1.0% even though earlier in the week, the Euro Zone reported negative inflation. Instead of cutting rates, the ECB may be considering an alternative stimulus plan to help revive the economy. Traders will be glued to the comments after the report to help gauge future movement of this currency pair.

Among investor concerns is the price level of the Euro. Some investors fear the ECB will take action if the rise in the Euro shows that it has had a negative effect on Euro Zone exports.

Bad GDP Number Continues to Put Heat on GBP USD

2009-07-01T22:05:00Z

Traders continued to react negatively to the report showing the U.K. economy had its biggest drop since 1958. The recession currently being felt by Britain is now even deeper than previously estimated. The Bank of England is on record warning people that the road to recovery will be long and hard.

After posting a new high for the year on Tuesday, the GBP USD closed lower and followed through to the downside on Wednesday. The short-term weakness is no threat to the uptrend, but a close under 1.6522 on Friday will reverse the week to down and could lead to selling pressure next week.

Weak U.S. Unemployment Report Could Break USD JPY

2009-07-01T22:04:00Z

The USD JPY continued its slow grind higher on Wednesday, but weakened into the close as traders took precautions ahead of Thursday's U.S. Non-Farm Payroll Report. Some traders lightened up their positions while others bucked the trend and went short in anticipation of a worse than expected employment number.

Forex Traders Estimate Loss of 365,000 U.S. Jobs

2009-07-01T22:01:00Z

Traders are estimating that today's U.S. Non Farm Payroll Report will show a loss of 365,000 jobs in June. This figure would push the U.S. Unemployment Rate to 9.6%. Because of Friday's U.S. market holiday, it is hard to say whether traders will be around to trade the number or if they will wait until Monday to trade the news. Either way, the initial reaction should be volatile especially if the guesses miss by a lot.

Bearish News Tops GBP USD

2009-06-30T22:07:00Z

The GBP USD surged to the upside overnight despite news that the U.K. economy shrank more than previously forecast. The U.K. Gross Domestic Product report showed that during the first quarter the economy suffered its biggest contraction since 1958. Weakness was seen across the board in the economy as everything from construction to services showed some sort of weakness.

The three-month long rise in the British Pound has defied most analysts who are in the same camp as Bank of England Governor Mervyn King who believes that the road to recovery will be long and hard. Even if the global economy is beginning to bottom, the U.K. economy still faces rising unemployment. This is a lagging indicator, but if unemployment continues to march higher then eventually consumer spending will suffer. If consumer spending falls along with confidence then the economic recovery may slow considerably.

Although the fundamentals do not support the 90-plus day rally, today's closing price reversal top is a sign that a major top may have been reached. Earlier this month the British Pound formed a pair of tops at 1.6663 and 1.6621. The subsequent break from the highest high dropped this market to 1.5801. The break was short in duration and never really attracted heavy selling pressure. The quick recovery from this bottom was a sign that this market was not ready to correct despite the build-up of negative fundamentals.

Following the release of the news regarding the U.K. Gross Domestic Product, traders drove the GBP USD through the two main tops to reaffirm the uptrend, but ran into selling pressure following the test of a major .618 retracement price at 1.6694. The actual high before the sell-off was 1.6743.

It may be premature to call a top in the British Pound, but the trading action is indicating that the selling is greater than the buying at current levels. A close under 1.6522 on Friday will put this market lower for the week and could signal the start of a major correction.

Lack of Follow-Through to Upside Could Be Signaling EUR USD Top

2009-06-30T22:06:00Z

Once again sellers repelled the EUR USD as it attempted to run stops over the last main swing top at 1.4177. The subsequent closing price reversal top and close under a key retracement zone at 1.4042 to 1.4112 are indications that this break may have attracted some real selling pressure.

A follow-through to the down side tomorrow is needed to confirm the reversal top. If this pattern is verified, then look for a minimum retracement to 1.3950 to 1.3903.

The only indication that this market may be starting another leg down is the closing price reversal top. Traders may have been hesitant to buy strength today because of the European Central Bank meeting on July 2. Furthermore, news that Euro Zone prices fell, could be indicating the start of a deflationary cycle kept pressure on the EUR USD most of the day.

The ECB has room to cut interest rates but a few days before the scheduled meeting traders were content that they would leave interest rates unchanged. Now that the thought that the ECB may lower its benchmark rate has been tossed out there, sellers are showing up. News that prices dropped may also force the ECB to consider another stimulus plan to revive the economy.

Downward Reversal in Crude Rallies USD CAD

2009-06-30T22:04:00Z

The main trend remained up in the USD CAD as a downward reversal in crude oil prices weakened the Canadian Dollar. Weak Canadian economic news combined with a drop in U.S. Consumer Confidence also helped pressure the Canadian Dollar.

Technically, this pair is poised to continue to rally with a Main Top at 1.1813 the first upside target followed by a major 50% retracement level at 1.1922. On the downside, trailing retracement support comes in at 1.1289 to 1.1207. A test of these levels would not turn the main trend to down, but would instead set up a buying zone.

USD CAD Posts Modest Gain

2009-06-29T22:06:00Z

Despite higher crude oil, the USD CAD was able to post a modest gain. The Main Trend is up. At this time the trend is not being threatened.

Clearing the minor retracement zone at 1.1298 to 1.1419 has this market in a position to rally to a major retracement zone at 1.1922 to 1.2191.

If this market does start to form a short-term top then look for a short-term correction to 1.2289 to 1.1207 before new buyers step up.

Like the Euro, traders are concerned that the rapid rise in the Canadian Dollar may hurt Canadian exports. Traders fear the Bank of Canada may take action to limit the upside of the Canadian Dollar if prices get too lofty.

Key Reports Limit Forex Volume

2009-06-29T22:06:00Z

Forex trading was extremely light on Monday as traders seem to already be waiting for the U.S. Non-Farm Payroll Report on July 2nd or have taken an early holiday ahead of the U.S. market holiday on July 3rd.

In addition to the U.S. economic report on July 2nd, the European Central Bank also has a meeting scheduled. Traders are not sure what the ECB will do on the 2nd. It has room to cut rates but many traders feel that it will leave rates unchanged. Traders also expect the ECB members to remain a little dovish on the economy because of low inflation. Do not expect any surprises by the ECB because like other central banks, it does not want to interfere with the global economic bottoming process.

If it does comment on anything, it may be about concerns that a rapid rise in the Euro will hurt export demand. This "verbal intervention" may be enough to keep downside pressure on the EUR USD.

At this time, the line in the sand seems to have been drawn at 1.41. Watch this area to see if traders try to trigger a short-covering rally while trading activity remains light.

GBP USD Traders Have to Avoid Getting Trapped

2009-06-29T22:05:00Z

British Pound traders did not have much to go on today. Trading was thin and volume extremely light. Traders have either taken an early holiday or are waiting for the U.S. Unemployment report on July 2nd.

With July 3rd a U.S. holiday, my feeling is that trading conditions will worsen as the week moves on. It is hard to believe that traders will take the early part of the week off and expect to pick it up on Non-Farm Payroll Day with a market holiday one day later.

Two main tops at 1.6621 to 1.6663 are holding the market back at this time. These two tops were made earlier in the month. Traders seem reluctant to buy strength as a major Fibonacci retracement price at 1.6944 can repel any attempt to break out.

The last key swing is 1.5801 to 1.6621. This range has formed a retracement zone at 1.6211 to 1.611. This area is providing the support at this time.

If this pair is topping, then this area will have to fail first in order to force the weaker longs out of the market.

The key to trading these thin conditions is not to chase the markets. Traders can easily get caught in breakout traps. Be patient and pick your spots preferably in value areas.

Week Ends with China Calling for Super World Currency

2009-06-26T22:07:00Z

The U.S. Dollar ended a choppy week on a weak note as China renewed talk of a super world currency to replace the Dollar as the world's reserve currency. They also called for the IMF to manage the funds.

This is a proposal that has been brought up at least twice before by the Chinese and Russians and does not seem to want to go away. Friday's reaction was subdued compared to previous announcements which may be an indication that traders want to see more "meat" to the proposal before committing in a big way.

The Forex markets took precautions on the news by selling Dollars, but the subsequent rallies were capped by previous tops. The main issue that has to be considered is whether the People's Bank of China is in favor of this major change or does the Chinese government want to make the move.

If you pay close attention to the news story, you will notice that it is the People's Bank calling for the change, not the government. Like everything in China, the government eventually gets its way so I would not worry too much about the Dollar losing its value as the world's reserve currency for a long-time.

Earlier in the week the FOMC had its monthly meeting. It left interest rates at historically low levels as expected. The big change was the phasing out of the quantitative easing plan. By making this move the Fed is telling the world that it is not too worried about a rise in interest rates at this time.

This move by the Fed could eventually help firm interest rates which should keep upside pressure on the Dollar.

EUR USD Nearing Area European Central Bank Will Not Tolerate

2009-06-26T22:06:00Z

The strong close in the EUR USD has this pair in a position to change the trend back to up on the daily on a trader through 1.4177. This move would put this market in a position to challenge the recent major top at 1.4337. Although the charts will indicate strength, traders should watch the order flow as these areas are approached. Some traders believe that the European Central Bank will not tolerate prices at these levels for a prolonged period of time because of the damage high price can do to European exports. Watch for negative comments from the ECB if the Euro gets too hot.

Bank of Canada Still Influencing USD CAD

2009-06-26T22:05:00Z

Several weeks ago the Canadian Dollar was rallying out of control, but has since then corrected substantially. The main cause of the break was a comment from the Bank of Canada regarding the rapid appreciation of the Canadian Dollar. Traders feared that the BoC would intervene to drive the Canadian Dollar lower. I don't know for sure what the European Central Bank has up its sleeve to prevent a rapid appreciation in the Euro, but I am fairly certain that they will do something to prevent a high-priced Euro from hurting Euro Zone exports.

U.S. Dollar Falls as Central Bank Stimulus Plans May Be Working

2009-06-25T22:07:00Z

The U.S. Dollar weakened on Thursday against some of the major Forex markets. Traders attributed the cause of the weakness to the thought that U.S., European and Chinese central bank stimulus plans may finally be working to turn the global economy around.

Thoughts of a global economic recovery helped increase demand for higher yielding assets on Thursday. Other than the action in the Australian and New Zealand Dollars however, today"s up move does not look like it is a threat to the U.S. Dollar"s uptrend.

Despite talk that traders were buying because of a possible recovery in the global economy, today"s action did not look like it represented a change in trend, but rather just a knee jerk reaction following yesterday"s rally in the Dollar. The charts indicate it is going to take a few more days of lower-highs and lower-lows to turn the Dollar down.

Today"s U.S. Treasury auction drew greater demand than expected. This helped push yields down which weakened the Dollar. Yesterday the European Central Bank lent about $621 billion for the next 12 months to help improve the economy. This action was perceived as a positive attempt to stimulate the economy and strengthen the Euro. The People"s Bank of China agreed to maintain a "moderately loose" monetary policy in an effort to support a global recovery. These three factors contributed to the weakness in the Dollar today. Whether today"s move represents a change in trend will be determined by the trade the next few days.

NZD USD, AUD USD Making Distributive Pattern

2009-06-25T22:06:00Z

The desire for higher yielding assets drove the Australian and New Zealand Dollars higher on Thursday. Both of these markets are in a position to challenge their highs for the year. It is going to take a follow-through rally on Friday to trigger a breakout. Lately these two markets have not been able to sustain their rallies, which are giving these markets a distributive pattern. If these two pairs cannot follow-through tomorrow and close sharply lower then consider the attempted rally a failure and look for the start of a break. Fundamentally, without help from higher equity and commodity markets then look for the start of a substantial decline.

Forex Chart Pattern Indicate Stronger Dollar

2009-06-25T22:05:00Z

The Euro is still in a lower-top, lower-bottom formation. The GBP USD is having trouble with the 1.6600 area. The USD CHF is strengthening along with the USD CAD. All of these chart patterns are suggesting the Dollar is poised to move higher.

Fed Says Contraction Slowing; Refrains from Additional Asset Purchases

2009-06-24T22:07:00Z

The Fed ended much of the uncertainty in the Forex markets today when it announced that its key lending rate would stay between 0 - .25%, and there would be no additional expansion of its balance sheet through the purchases of government assets and mortgages.

Although it did not set a hard calendar date for a hike in interest rates, refraining from additional purchases of assets sent a signal to the markets that it would allow yields to rise. This scenario created the bullishness in the Dollar after the FOMC meeting.

Traders were expressing their desire for an improvement in the interest rate differential which countered any buying from traders seeking more risky assets.

The Fed also commented that the contraction in the economy was slowing. This provided additional support. Gains may have been limited as the Fed reported that inflation was expected to remain low.

EUR USD Action Indicates Selling Greater Than Buying Over 1.4100

2009-06-24T22:06:00Z

The EUR USD failed in its attempt to break out over 1.4177. This move would have turned the main trend to up. Instead, the daily closing price reversal top indicates that the selling is greater than the buying over 1.4100.

If downside momentum can build, then look for this market to attack the last main bottom at 1.3748 over the near term, on its way to the first major objective at 1.3610.

The current lower-top, lower-bottom formation is still the best indication that the EUR USD wants to move lower.

Down side pressure may also build because some traders feel that the European Central Bank would rather not see prices above 1.4100. At this level, some trades feel that the high price will have a negative impact on Euro Zone exports.

Continue to look for downside pressure as long as 1.4177 holds as resistance. This scenario will not last long, however, if this currency pair fails to break through the last main bottom at 1.3748.

Multitude of Issues Weaken Dollar Ahead of FOMC Meeting

2009-06-23T22:07:00Z

Trader uncertainty over tomorrow"s Fed statement and concern over rising Treasury yields and the government"s ability to cover its debt obligations contributed to the weakness in the U.S. Dollar on Tuesday.

The uncertainty is coming from one group of traders that wants the Fed to announce an exit strategy while another group is hoping the Fed steps up its Treasury purchases.

The start of a record Treasury auction today raised concerns that the government debt was growing too large to finance. Some traders fear that a debt rating service would eventually have to flag the U.S. as a credit risk.

EUR USD Betting Fed Leaves Rate Unchanged

2009-06-23T22:06:00Z

The EUR USD traded sharply higher as traders bet the Fed would leave interest rates at current levels and announce tomorrow that they would most likely hold off increasing rates until early next year. The Euro got an additional boost on the thought that the European Central Bank would also leave interest rates unchanged even though it has room to cut.

The key area to watch for resistance is 1.4100. Traders get nervous when the Euro is trading in this area out of fear the European Central Bank would try to talk it down. Some traders fear that Euro Zone exports would slow down if the price of the Euro were allowed to rise. The main trend is down, but a trade through 1.4177 will turn the main trend up and indicate a test of 1.4337 is likely.

GBP USD Still Strong; Support is Rock Solid

2009-06-23T22:05:00Z

The GBP USD continued to maintain its bullish status on Tuesday. For the second time in a week, traders could not break the support at 1.6211. The strong close indicates that the buying may continue tomorrow as this market is within striking distance of a pair of main tops at 1.6621 and 1.6663. Based on the current chart pattern, strength is likely to develop on a breakout over 1.6694. The first sign of weakness will be a failure to hold 1.6211. If downside momentum builds then the break may accelerate to 1.6114.

Rebound in Commodities Helps Pressure USD CAD

2009-06-23T22:04:00Z

A rebound in commodity prices helped the Canadian Dollar gain ground against the U.S. Dollar. Technically, the main trend is up in the USD CAD, but today"s closing price reversal top indicates the possible start of a correction of the 1.0941 to 1.1583 range. This would set up a retracement zone at 1.1262 to 1.1186.

Weak Equity Markets Pressure USD JPY

2009-06-23T22:03:00Z

Weakness in the equity markets contributed to the sell-off in the USD JPY. Japanese investors are selling Dollars during this week phase in the stock market in order to preserve capital. The lack of trader demand for risky assets is also putting downside pressure on the market. A key retracement level at 95.77 was broken with conviction. This price is now resistance. Based on the weak close, a further decline to 94.28 is possible.

USD CHF Trades Give Up on Short Side

2009-06-23T22:02:00Z

The inability of the USD CHF to break through the pair of main tops at 1.0955 and 1.0986 and the major retracement price at 1.0980 finally convinced traders to give up and try the short side of this market. The break through the minor retracement range at 1.0788 and 1.0741 indicates that a test of the two main bottoms at 1.0649 to 1.0590 is likely.

AUD USD Traders Reluctant to Sell

2009-06-23T22:01:00Z

The AUD USD chart pattern is a tough one to decipher. The series of lower tops and lower bottoms is indicative of topping action; however traders seem reluctant to sell weakness. Last night the Aussie showed signs of weakness by breaking through a main bottom at .7849 but ran into support slightly above a retracement price at .7761. Today"s action indicates uncertainty and position evening ahead of tomorrow"s FOMC statement.

NZD USD Dominated by Short-Covering

2009-06-23T22:00:00Z

Today's action in the NZD USD indicates short-covering since this pair was unable to break through any significant tops. A pair of tops at .6467 and .6483 is providing resistance at this time. Even if these prices were violated, the market still has to deal with the high for the year at .6590. On the downside, support is an old bottom at .6236 and a retracement price at .6211.

The best way to describe the NZD USD is range bound, however, the longer this market stays in a range, the more you can could on volatility returning.

U.S. Dollar Up as Traders Look for Slow Economic Recovery

2009-06-22T22:00:00Z

The fear of higher interest rates triggered adjustments in the markets overnight. This week the Treasury will auction a record $104 billion in notes. This huge amount of supply hitting the market is expected to help push yields higher.

Foreign currency traders bought the Dollar because of expectations of higher interest rates. This is basically a case of traders seeking a higher yield and not based on any economic news or expectation. Some traders are dumping more risky assets and buying the Dollar for safety. Others are position-evening ahead of the FOMC meeting on June 24th.

Traders also bought the Dollar on the thought that the global economic recovery would occur at a much slower pace than originally anticipated. Because of this change in sentiment, some investors found it easier to liquidate positions in the foreign currency markets rather than wait until actual reports confirm this conclusion.

The weakness in the Euro is an indication that this market may be getting ready to break further. Last week"s rally could not take out a swing top at 1.4177 and even failed to reach a key 50% level at 1.4013. Look for lower markets to push this currency to 1.3610 over the near term.

The inside range in the British Pound is an indication of impending volatility. Based on the developing lower top formation, this market seems poised to challenge the last main bottom at 1.5810 over the near term. Losses will be limited, however, until this market fails to hold at a retracement zone at 1.6211 and 1.6114.

Weaker commodity and equity prices drove the USD CAD sharply higher. The higher-top, higher-bottom formation indicates more strength to follow. Breaking through a minor retracement level at 1.1419 helped accelerate this market higher and put it in a position to challenge the next key retracement level at 1.1922 to 1.2191.

The USD JPY fell as weak equity markets encouraged Japanese investors to repatriate funds out of fear of losing on their investments. Currently, the main trend is up, but the charts indicate no threat to the main trend unless 94.47 is violated. Currently, this market is trapped inside of a retracement range at .96.36 to 95.77. The longer this market stays inside of this range the greater the move.

The USD CHF closed higher on Monday. Today"s positive performance has put this market in a position to challenge the last Main Top at 1.0955. A retracement zone at 1.0788 to 1.0741 is also holding up this contract. The lower-top, higher-bottom formation indicates impending volatility as this market is spiraling to a point where the trade can get explosive.

Forex Markets Finish Week in Holding Pattern

2009-06-19T22:00:00Z

Despite a bearish trend in the U.S. Dollar to end the week, Forex markets for the most part finished the week in a holding pattern.

The stronger British Pound, Australian Dollar and New Zealand Dollar held on to recent swing bottoms and closed in positions to test their recent highs.

The weaker Euro, Yen and Canadian Dollars remained in down trends on the daily chart, but were able to recapture some of their losses over the past two weeks.

The Dollar started the week on a strong note as equities declined triggering less demand for higher yielding assets. Following a series of better than expected U.S. reports late in the week and a recovery in equity markets, Forex prices stabilized as traders became less averse to risk.

The U.S. Consumer Price Index seems to have had the biggest influence on the Dollar. Once this number came out weaker than expected, investors began to lighten up on the long side as they began to realize the economy cannot support a Fed rate hike in the near future.

According to some, the Fed was scheduled to start gradually raising rates by late September, but the sluggish economy may curtail these plans. Some traders are saying the Fed will refrain from hiking rates until early next year.

The Fed meets on June 24th. At this time it is not expected to change rates nor increase quantitative easing. Traders will be paying close attention to the commentary after the FOMC decision. In this announcement, the Fed is expected to use strong language to describe the state of the economy and how it plans to attack the slow growth.

Since the Fed will not meet next until August, this FOMC statement is expected to carry substantial weight. Do not look for anything too volatile leading up to the FOMC meeting. Trading is expected to remain in a range as major players opt to stand on the sidelines until the Fed gives the market a reason to move in a particular direction.

Once the meeting is concluded and traders have had a chance to decipher the Fed’s comments, volatility will pick up substantially. If the Fed hints at no rate hike until early 2010 then look for the Dollar to get hit hard.

Two-Sided Trade Dominates Forex Markets

2009-06-18T22:07:00Z

The U.S. Dollar strengthened late Thursday follows better than expected U.S. economic reports which showed the economy was stabilizing and beginning to show signs of bottoming.

The lackluster trade in the Forex markets continued throughout the day with no real movement in either direction. Today's action is best described as two-sided. This is most likely because of the mix of the news recently. Most major Forex pairs for the most part have reached short-term retracement areas which have more or less neutralized them.

Overnight a pair of central banks announced no changes in their interest rate policies. The Bank of England left rates alone while calling for the economy to be sluggish while it attempts to recover.

The Swiss National Bank also left interest rates alone but reemphasized that it will take "firm action" if the Swiss Franc appreciates too much against the Euro. The SNB's biggest fear is deflation.

With nowhere to go with interest rates and quantitative easing and additional stimulus on hold while the global economies begin to recover from the recession, what central banks say is going to take on more weight than actual action. Take, for example, the Bank of England's comment that the U.K. economy will be sluggish. This comment put downside pressure on the GBP USD this morning which carried over into the New York session.

The SNB comment that it will take "firm action" is likely to encourage upside pressure on the USD CHF over the near term. Traders could push the Dollar higher versus the Swiss Franc on the threat of an intervention.

Recently the Bank of Canada commented that the high price of the Canadian Dollar may have a negative effect on exports at some time in the future. Although they expressed no critical concern at this time, just to mention that they were monitoring the price level has been enough to drive the Canadian Dollar down over the short run. A drop in crude oil or equities may trigger an even deeper slide.

The easiest market to break is the Japanese Yen. If a U.S. Dollar rally sparks another leg up in the stock market then the Yen is likely to collapse further. The toughest markets to break at this time are the NZD USD and AUD USD. Both are at major retracement points but still holding on to support. Both pairs will continue to rally as their respective economies improve and there is still demand for higher yielding assets.

This week has been highlighted by low volatility and sideways trading. I suspect the primary cause of this type of action is a fear to take a side in a major position ahead of the Fed meeting on June 24th. Like the other central banks, the Fed is not expected to do anything with interest rates or announce additional quantitative easing plans. It will, however, provide an official statement to investors around the world on what it intends to do during the second half of the year. With no meeting scheduled until August, this meeting"s comments will take on additional significance.

Following May's lower than expected Consumer Price number announced earlier in the week, many investors are now calling for the Fed to break from its plan to raise rates by the end of September to perhaps stall the rate hike until early next year. Whatever it decides will have a major impact on the long-term structure of the markets for the next 6 to 9 months. This is why I feel that this FOMC meeting will be the most important for the year.

Continue to expect lackluster trading until the Fed news is released. This may mean more sideways and choppy action until June 24th while traders and investors reevaluate long-term positions. After this FOMC meeting, traders will have more direction as to how to approach the market. Enjoy the low volatility this week, but be prepared for next week.

Lower CPI Means Fed Will Not Hike in September

2009-06-17T22:00:00Z

This morning's CPI Report indicated a lower than expected rise in the inflation rate. This sent a signal to traders that the Fed will probably announce that they will not raise interest rates in September as some have speculated. This announcement is likely to be contained in next week's FOMC statement.

Traders originally were buying Dollars around midnight (CDT) when the stock market started to break. Traders were shying away from risky assets in anticipation of a sharp break in the equity markets. Shortly before the CPI report was released, the Dollar topped almost as if the number had been leaked. By the time the government reported that U.S. consumer prices edged up to 0.1% in May, the break in the Dollar had started.

The CPI report indicates that inflation is not yet the issue that traders speculated it would be following months of Treasury debt auctions. Based on the results of this report, it looks as if the debate will rage on as to when high inflation will return.

This report also confirms what the Fed has been saying and that is, inflation will not be an issue this year.

Now that this CPI Report is out of the way, traders have one week to wait for the Fed's announcement. This will be an important FOMC meeting since the Fed will skip July and meet again in August. The Fed will most likely draft a comprehensive statement in order to cover the sixty-day gap between meetings. This means Forex traders may overreact to its statement.

Although this week has been highlighted by slow, directionless trading, next week is likely to be highly volatile. At this time it is best to follow the short-term trend and to pay close attention to the retracements. Currently the technical patterns are showing a stronger Dollar as long as the highs from two weeks ago continue to hold.

If you look at the charts you will see a broad range from the March/April bottom to the June high. Expectations are for the Dollar to remain strong until the Dollar makes a minimum 50% retracement of this range.

Canadian Dollar, Australian Dollar and New Zealand Dollar traders should watch the commodity markets especially crude oil and gold. If these two markets drop further then they will likely drive the commodity-linked currencies lower.

Trade only if you have to this week because the volatility is coming.

Traders Nervous Holding Dollar While BRIC Nations Meet

2009-06-16T22:07:00Z

After a one-day reprieve, the U.S. Dollar traded under pressure once again throughout the day. Yesterday's upside action was a reaction to positive comments from Russia regarding the status of the Dollar as the world"s reserve currency. Nonetheless, traders appeared to be a little nervous today about holding Dollars while the BRIC nations met to discuss the status of the Dollar as the world"s greatest currency.

Brazil, Russia, India and China will be meeting to discuss the status of the Dollar as a reserve currency. Traders took precautions ahead of this event just in case something negative comes out of the meeting.

Despite what these nations say about the Dollar this week, the real evidence of how they feel about the Dollar will come out at next week's Treasury auction. If Russia decides to back away from the auction and buy less than expected then look for weakness to develop in the Dollar.

Two reports today helped keep the pressure on the Dollar after the lower opening. Today it was reported that U.S. inflation was under control and that housing may be posting a turnaround. Both of these reports were indications that the U.S. economy was beginning its recovery.

Last week the Dollar rallied as traders started to buy the greenback in anticipation of a stronger economy. Today's reports indicated that traders may be a little more reluctant to commit to the long side in the Dollar until more solid evidence is presented.

EUR USD Turns Trend Down

2009-06-16T22:06:00Z

The EUR USD turned its trend down on Monday when the market crossed 1.3804. The trend will turn up on a trade through 1.4177.

British Pound Remains Strongest Forex Market

2009-06-16T22:05:00Z

The trend is still up in the GBP USD. The Main Trend turns down on a trade through 1.5801. The uptrend will resume if 1.6663 is violated. Based on the current formation, one can see that the British Pound is the strongest currency at this time.

USD JPY Goes Through Corrective Phase

2009-06-16T22:04:00Z

The USD JPY is in an uptrend, but going through a corrective phase. The next upside objective is the swing top at 99.75. At this time the trend is in no danger of changing to down. The closest swing bottom is at 99.45.

USD CAD Struggles at Short-Term Retracement Zone

2009-06-16T22:03:00Z

The main trend has turned to up in the USD CAD but the market is struggling at a short-term retracement zone. The charts indicate there is still more room to the upside, but the Dollar is going to have to get support from weaker commodities.

USD CHF Ready to Turn Main Trend Higher

2009-06-16T22:02:00Z

The higher bottom at 1.0649 in the USD CHF is an indication that this market is getting ready to turn the main trend to up. All this market has to do is produce a higher top with a move through 1.0986.

Less Demand for Risky Assets May Weaken AUD USD

2009-06-16T22:01:00Z

If trader appetite for riskier assets continues to fall, then look for the AUD USD to challenge the last swing bottom at .7828. A trade through this level will turn the main trend to down and trigger the start of a substantial retracement.

NZD USD Forms New Lower Top

2009-06-16T22:00:00Z

Today's trading action in the NZD USD has produced a lower top at .6467. This is an indication that the trend is getting ready to turn lower. A trade through .6151 will turn the main trend down. Lower equity markets and commodity prices are likely to trigger an acceleration to the downside.

Long NZD USD Getting Ready to Take Profits

2009-06-15T21:43:00Z

With demand for higher risk assets declining, look for the break in NZD USD to begin to accelerate to the down side. This pair has had a spectacular run on very poor fundamentals. Longs may begin to sell out and take profits as many feel this market is way overbought.

Look for the bears to have a challenge between .6211 and .6122. The Main Trend turns down on a trade through .6151. This is the acceleration point where sell stops are likely to be hidden. Changing the trend to down will set up a further decline to the next major percentage retracement zone at .5741 to .5541.

Australian Dollar Set-Up to Test .7828

2009-06-15T21:41:00Z

The strong Dollar and less demand for higher-yielding assets have put the Australian Dollar in a position to challenge the last Main Bottom at .7828. A trade through this price will turn the Main Trend to down and could encourage more selling pressure. The first down side target is .7274.

Strong Dolllar, Weak Crude Sends Canadian Dollar Higher

2009-06-15T21:36:00Z

As mentioned earlier, commodity markets were hit hard on Monday as the Dollar strengthened. The Australian Dollar and New Zealand Dollar broke on the news, but the Canadian Dollar suffered the most damage.

Lower crude oil and industrials metals had the biggest effect on the USD CAD. Once these commodity markets broke, traders covered shorts and may have entered the long side when this pair crossed 1.1290. Upside momentum may stall at 1.1419, but the charts are indicating that a rally back to 1.1922 is possible.

Many traders feel the USD CAD has dropped too far, too fast. In fact the Bank of Canada expressed its concerns about an expensive Canadian Dollar last week. It feels that a further rally will snuff out the current economic recovery by squelching demand for Canadian exports.

Look for the USD CAD to rally especially if speculators begin to side with the BoC .

Downside Momentum Could Send EUR USD to 1.3602

2009-06-15T21:33:00Z

The Euro turned its trend to down on a break through the last swing bottom at 1.3804. The charts are now indicating that 1.3610 to 1.3439 is the next downside target zone.

Lower commodity prices had a large effect on the Euro today. Weaker crude oil which had been bought as a hedge against inflation fell as the Dollar strengthened. Gold was also down. With the Euro, crude oil and gold all posting lower closes, traders sent a clear message that they wanted to be in the Dollar. This may be an indication that this current down move is going to be more than a short-term correction.

Although most of today’s weakness in the Euro has been attributed to a stronger Dollar, some feel that the Euro can break even further if speculators stop buying it. In other words, there are rallies in the Dollar when traders increase demand for it or when traders sell the Euro against it.

The European Central Bank hasn’t really come out and said it, but it is becoming concerned about the sharp rise in the Euro over a short-period of time. This is because one of its biggest fears is that Euros will get too expensive. This would hurt exports which is a major part of the Euro Zone economy.

There may be a retracement of today’s break over the next few days, but now that the trend has turned down, traders should wait until it reaches its minimum downside objective at 1.3602 before considering the long side.

Dollar Bulls Resurface as Russia Makes Nice

2009-06-15T21:31:00Z

Two overnight events sent the U.S. Dollar sharply higher on Monday. Firstly, the Group of Eight finance ministers hinted at an economic stimulus exit strategy and the Russians expressed confidence in the U.S. Dollar.

The Group of Eight finance ministers signaling an end to the economic stimulus plans was eventually going to happen. Signs of an economic recovery have been building for a couple of months. The ministers haven’t decided anything concrete at this time. This news is expected to serve as a message to others that exit strategies are being considered. They feel it is much better to announce an orderly exit rather than act haphazardly.

Russian Finance Minister Alexei Kudrin expressed confidence in the U.S. Dollar last night. This came after Russia and China had questioned the U.S. Dollar as the world’s currency. These comments reassured investors that it is too early to think of the Dollar as dead.

Forex traders responded to these news events by jumping into the Dollar. This put downside pressure on all of the currencies.

U.S. Dollar Set Up for Corrective Rally; USD CAD Ready to Launch Through 1.1290

2009-06-12T22:00:00Z

The U.S. Dollar finished Friday’s trading session higher in lack luster trading. Last week several Forex markets posted closing price reversals. The GBP USD and EUR USD posted closing price reversal tops while the USD CAD and USD CHF formed closing price reversal bottoms.

All of these patterns followed through to confirm the reversals but did not have the accelerations like the patterns suggested. On the other hand, this pattern usually indicates a 2 – 3 week counter-trend trade so there is still time to make full corrections. Another sign that the correction will follow-through to completion is the fact that none of the closing price reversal tops or bottoms were negated.

There are several issues causing confusion among traders at this time. The main issues dictating the direction of the Dollar are interest rates and inflation. This week’s auction drew higher yields which put down side pressure on the U.S. Dollar. Traders were driving the yields up because of the huge amount of Treasury supply hitting the market and over concerns the U.S. would not be able to finance its growing deficit.

Here is where the confusion comes in. At one time during the week, the Dollar actually rose on rumors the Fed would raise rates by the end of September. The thinking at that time was that higher yields would attract foreign buying. So what we saw this week was the Dollar falling because of higher yields and the Dollar rallying because of the threat of higher interest rates. This clearly indicates that investors are not certain which condition they prefer.

An announcement by Russia that it would cut its holdings of U.S. Treasury instruments triggered a flight-to-safety rally in the Dollar. This in a way was related to interest rates because less demand from Russia along with more supply from the Treasury would spike interest rates. By the end of the week, this event was hardly mentioned in the news. Based on the strength in the Dollar on Friday, however, it is possible that traders could be making an adjustment to reflect this action taking place in the future.

Higher crude oil prices had traders talking about inflation again. This news combined with additional debt issued by the Treasury raised trader confidence that inflation would surely show up at some time in the future. The gold market on the other hand did not reflect this scenario occurring at all. If selling pressure continues in the gold market next week, the U.S. Dollar is likely to surge. Depending on what the crude oil market does, the Dollar could have a spectacular week.

Euro and Canadian Dollar traders are facing other issues besides U.S. interest rates and inflation. The concern for investors regarding these two markets has to do with their rapid rise and its effect on exports. Both German and Canadian economies rely heavily on exporting goods and services to other countries.

Although it has not been specifically addressed by the European Central Bank and only in a statement by the Bank of Canada, the strong rise in these two markets could choke off demand for exports.

The strength in the USD CAD the past two days could be reflecting the fact that this may become an issue over the next few months if the Canadian Dollar is allowed to rally. A breakout to the upside through 1.1290 will change the Main Trend to up and would indicate the strong possibility of a rally to 1.1922.

The Euro Zone economy is in the same position as Canada. A break could be coming in the Euro because of the treat that a high price Euro could damage exports at a time when the economy needs growth to get out of the recession.

In summary, both technical and fundamental factors are indicating the Dollar could rally next week. Last week’s closing price reversals and subsequent confirmations are indicating that the Dollar has room to rally. Weakness in the gold market and the lack of inflation should also help the Dollar. In addition, the highly priced Euro and Canadian Dollar could feel pressure if traders decide these two prices are trading at levels which could hurt German and Canadian exports. If these markets do not break on their own then look for the central banks attempt to talk these two markets lower.

Euro Still Toying With Key Retracement Resistance

2009-06-11T22:07:00Z

The desire for higher yielding assets led traders to buy the EUR USD on Thursday. Positive economic data and signs that the U.S. economy improved helped drive investors out of the safety of the Dollar.

Better U.S. economic data and the steady rise in crude oil prices should continue to encourage selling pressure against the Dollar. The only strength in the Dollar we saw this week was following the announcement that Russia would cut its purchases of U.S. Treasuries. Barring any surprises tomorrow, look for the uptrend to continue.

On the technical side, despite yesterday's weakness, the Euro could not follow-through to the downside and challenge the two Main Bottoms at 1.3804 and 1.3791. A trade through these two prices would have turned the Main Trend down.

The Main Trend remains up and by regaining the retracement zone at 1.4070 and 1.4133; this market is now in a bullish position to test the recent high at 1.4337.

Bearish traders will have to wait until this pair starts to show weakness again. Falling back below 1.4133 will be the first sign of weakness, followed by 1.4070. As long as this market remains inside of this retracement zone, it is still vulnerable to short-term corrections. The key to sustaining the rally will be regaining and holding above this zone.

Bank of Canada Concerned About Rise in Canadian Dollar

2009-06-11T22:03:00Z

Firmness in the metals complex and the strong uptrend in crude oil helped pressure the USD CAD on Thursday. Despite the strong influence from outside markets, comments from Bank of Canada Governor Mark Carney kept a floor on losses.

His primary concern is with the sharp rise in the Canadian Dollar over the past three months. The BoC is beginning to become concerned that the currency's rapid appreciation would "fully offset" any gains the Canadian economy has been experiencing.

Since the Canadian economy relies so heavily on exports, a strong Canadian Dollar may cause buyers to shy away from Canadian goods and seek cheaper prices elsewhere. This would affect the trade surplus, and hurt the economy's chances of pulling out of the current slowdown.

Looking at the charts, last week's closing price reversal bottom in the USD CAD remains intact and the possibility of a rally still exists as long as this market can hold the retracement zone at 1.1039 to 1.0980.

This zone represents the key retracement zone of the 1.0783 to 1.1290 range.

A failure to hold this zone as support should trigger a retest of the Main Bottom at 1.0783. If this market can gain support in this zone then look for the market to challenge the Main Top at 1.1290. A breakout through this level will turn the Main Trend to up for the first time since April 13.

Central Bank Vote of Confidence Supports New Zealand Dollar

2009-06-11T22:00:00Z

The weaker Dollar and the strong demand for commodity-based currencies helped trigger rallies in the AUD USD and NZD USD. Additional support for the New Zealand Dollar came following the announcement by the Reserve Bank of New Zealand that interest rates would stay at 2.5%. This represented confidence by the RBNZ that the economy was in a position to recover from its current recession.

Fundamentally, news that Australia lost fewer jobs than forecast helped drive the Aussie higher in addition to the increase in trader appetite for risk.

Technically, the AUD USD is currently in a position to challenge the last Main Top at .8264 and the major Fibonacci retracement level at .8382. A trade through the Main Top will negate last week's closing price reversal top.

The current rally has helped form a new Main Trend Bottom at .7828. A trade through this level will turn the Main Trend to down.

Regaining a major 50% level at .7983 is helping to support this market. A close back under this level will indicate that the selling is greater than the buying at current levels.

Based on the daily swing chart, this market could trade as high as .8642 within the next 12 days.

Russian Treasury Market Threat Sends Investors to the U.S. Dollar

2009-06-10T22:07:00Z

Following a two-day setback, the U.S. Dollar regained strength as an announcement by Russia to cut its holdings of U.S. Treasuries spooked investors into the safe-haven Dollar.

The same announcement helped put in an early top in the equity markets and chased traders into lower risk assets.

The Treasury Bond market also fell hard as yields shot up as traders braced themselves for more supply and less demand for Treasuries in the future.

It may take a few days for the Forex markets to adjust to the Russian threat. In the meantime, volatility could pick up as a rally in the Dollar may catch many traders by surprise. After the huge drop in the Dollar, short positions have to be large. Today's trading action in the major currencies indicates that Dollar buyers may have already stepped in. A rally by the Dollar through Monday"s high may ignite the start of a massive short-covering rally.

Technical Picture Reveals Euro Downside Targets

2009-06-10T22:06:00Z

Now that the near-term fundamental picture seems to be developing, the technicals are starting to show where the Euro can go. The sharp sell-off in the EUR USD has this market in a position to challenge a pair of main bottoms at 1.3804 and 1.3791. A break through these two bottoms will change the trend to down and fuel further weakness to the 50% retracement price at 1.3611.

Up trending Gann Angles from previous bottoms at 1.3422 and 1.2884 indicate that June 11th and 12th are the best dates for the market to reach its downside target.

GBP USD Forms New Main Bottom at 1.5801

2009-06-10T22:05:00Z

If the Dollar begins to rally, commodity related currencies should suffer the most. This explains why the British Pound did not break as much as other currency pairs.

The GBP USD produced two consecutive days of higher tops and higher bottoms and formed a new Main Bottom at 1.5801. This action caused the trend line indicator to move up from 1.4397. A move through 1.5801 will turn the Main Trend to down.

On Monday the GBP USD confirmed last week's closing price reversal top. The first leg down was 1.6663 to 1.5801. Currently this pair is retracing this range. The first upside objective at 1.6232 to 1.6334 has been reached. There was not much of a technical bounce to the downside following a test of this level which means the buying is still strong.

A close over the .618 number at 1.6334 indicates that there is room to rally to the multi-month high at 1.6663. A close under the 50% level at 1.6232 will indicate weakness and could trigger a test of the swing bottom at 1.5801.

If this pair gets weak and the trend turns to down then look for an acceleration to the downside with a test of 1.5530 likely.

Russian Threat Could Encourage Traders to Dump Canadian Dollars

2009-06-10T22:03:00Z

A stronger Dollar should mean a decline in commodity prices. This translates into lower gold and crude oil prices. If the trend begins to turn down in these two markets then look for downside pressure on the Canadian Dollar.

The USD CAD Main Trend on the daily chart is down, but today's action indicates that it is setting up for a test and possible breakout through the last Main Top at 1.1290. A move through this price will turn the Main Trend up.

Earlier this week the rally confirmed last week's closing price reversal bottom. The first leg up from the bottom was 1.0783 to 1.1290. This range created a retracement zone at 1.1040 to 1.098.

Following two days of lower-lows, the USD CAD tested this retracement zone and stopped at 1.0940. The subsequent reversal to the upside regained both 1.0980 and 1.1040 on a closing basis. This action indicates that the market may be setting up for a test of the Main Top at 1.1290.

A breakout through this price will turn the Main Trend to up and indicate a possible longer-term rally to 1.1922.

The swing chart is indicating the possibility of a short-term rally to 1.1448 by June 16th.

This entire bullish set-up will be negated by a close under1.0980.

Traders should watch to see if Russia follows through on its threat to cut its interest in U.S. Treasuries. If they are serious then the Dollar is in for a heck of a run to the upside. This would put tremendous pressure on commodity based currencies such as the Canadian Dollar, Australian Dollar and New Zealand Dollar.

Treasury Auction and Technical Factors Drive U.S. Dollar Lower

2009-06-09T22:07:00Z

With no major economic data to drive the Forex markets in any particular direction, some investors used today's Treasury auction and technical factors to drive the U.S. Dollar lower. Others were more sensitive to the rise in the commodity markets.

Euro Up Despite Ireland Debt Rate Reduction

2009-06-09T22:06:00Z

The Euro closed up against the Dollar today. Despite news that Ireland's debt rating was reduced because of credit and banking issues, this market remained firm throughout the day.

Fundamentally, traders were leveling off recent short positions because of the U.S. Treasury auctions. Investors were concerned that yields would rise which would increase the debt burden on the U.S. economy.

Last week a shift in sentiment took place which made the U.S. Dollar a more attractive investment. The change in sentiment occurred following the release of the better than expected U.S. Non-Farm Payroll report. This could mean that investors may begin to buy the Dollar and sell the Euro on the perception that the U.S. economy will recover from the recession first. Recently traders had been selling the Dollar on good news.

Technically, last week's reversal top was confirmed by follow through selling on Monday. Now it appears that this market will have to retrace the first leg down. If sellers come in at 1.4070 to 1.4133 then take this as a sign that this market is ready to roll over to the downside.

If a top is in then expectations are for a corrective move down to 1.3610. If the market takes out 1.4337 then 1.3804 will become a new higher bottom and the uptrend will resume.

Commodity Rally Helps Aussie and Kiwi; Pound Up as Political Tensions Ease

2009-06-09T22:05:00Z

In other Forex markets, the easing of political tensions helped revive the rally in the GBP USD. Better economic numbers are needed however to take this market to the 1.6663 top.

Increased trader appetite for higher yielding assets helped support the rise in the AUD USD and NZD USD. Both of these markets are coming off weekly closing price reversal tops which have been confirmed. The current retracement must fail or these pairs may start to decline.

The next two days will be critical to the U.S. Dollar. Traders will be watching to see if yields remain reasonable during the next two auctions. Any substantial spike in yields may put pressure on the Dollar as traders will question whether the U.S. can pay its debt. Although the financial markets are indicating that the Fed is not likely to raise rates soon, this rumor may not go away as it still may prove to be true if another economic report shows the U.S. economy is beginning to recover.

USD CAD Falters After Five-Day Rally

2009-06-09T22:03:00Z

The USD CAD broke on Tuesday as traders took profits following a five-day rally. The recent strength has been triggered by chatter that the Fed may have to raise rates as the economy begins to heat up. Today's weakness was triggered by speculation that the talk of a rate hike may have been premature. In addition, traders were hesitant to add on to positions in the face of another round of Treasury auctions.

Strength in the oil complex also drove the USD CAD lower. Global investors are betting on inflation and buying commodities to protect themselves. Heavy speculation by funds is helping to support the rise in crude oil. Traders will be watching inventory supply numbers for any sign of a drawdown. This would also be a signal that demand is increasing as the economy recovers.

Technically, last week's closing price reversal bottom was confirmed on Monday by the follow-through buying. The weak close led to another sell-off on Tuesday. The main trend remains down but holding a correction back to 1.1040 to 1.0980 will be a sign that the buying is greater than the selling at current levels.

Tuesday trading action took the market into this range, now it is up to the buyers to step up and start another up move. If buyers step in, then look for a rally to drive this market to at least 1.1413.

If this market fails to hold 1.0980 then look for a break to the low at 1.0783. A failure to hold this test would resume the downtrend and make 1.1290 a new main bottom.

U.S. Dollar Rallies On Rumors of Fed Rate Hike

2009-06-08T22:07:00Z

The lack of major economic reports encouraged Forex investors to take a look at the technical factors and a few of the news stories on Monday.

Last week the EUR USD, GBP USD, USD CHF, NZD USD, USD CAD and AUD USD all posted weekly closing price reversals. In the cases of the Euro, Pound, Australian and New Zealand Dollar, the chart pattern was a reversal top. The Canadian Dollar and Swiss Franc produced closing price reversal bottoms.

For the most part, the strength in the U.S. Dollar last week and most of Monday was related to investor perceptions that the U.S. economy was going to be the first economy to work out of the recession. Investors also kept upside pressure on the Dollar as rumors swirled that the Federal Reserve was contemplating raising its benchmark interest rate by the end of this year.

The Fed is expected to keep silent on this matter until at least June 24th when it convenes at its next FOMC meeting. In this meeting it may offer suggestions as to how it plans to exit this current round of easing.

Euro Zone Still Faces Exposure to Toxic Debt

2009-06-08T22:06:00Z

The Euro felt early pressure from a credit rating downgrade of Ireland. This could be the tip of the iceberg as more downgrades could come later this month for other countries in the European Union. Exposure to toxic debt or other issues regarding Central and Eastern European banks may also contribute to the weakness.

Technically, the EUR USD is still in a downtrend, but poised to continue lower as the initial retracement target of the 1.2884 to 1.4337 range indicates that this market may drop to 1.311.

Mixed Fundamentals Leads U.S. Dollar Higher

2009-06-08T22:00:00Z

A growing political crisis in the U.K. contributed to weakness in the Pound. In Japan, news that the current-account surplus was below analyst estimates triggered weakness in the Yen. The Canadian Dollar traded nearly flat after stock and crude oil rallied near the close. The Australian and New Zealand Dollars felt pressure as strength in the Dollar led traders to take protection in higher risk assets.

The GBP USD is showing signs of building selling pressure. Based on the short-term range of 1.6662 to 1.3653, traders should look for a possible test of 1.5247 to 1.5048.

The USD JPY ran out of buyers near a resistance zone at .9854 to .9764. This forecast is based on the trading activity inside of the retracement zone at .9854 to .9764.

The main range of 1.1741 to 1.0590 creates a retracement zone of 1.1166 to 1.1301 for the USD CHF. The market is eventually expected to reach this zone; the rally could be labored as a downtrending Gann Angle is in the way at 1.1021. This price combined with another 50% price at 1.0973 creates a key price cluster at 1.0973 to 1.1021.

Last week's closing price reversal bottom in the USD CAD was confirmed by the follow-through rally on Monday. The chart pattern suggests that the rally should continue to at least 1.1923 to 1.2192.

Look for the Australian Dollar to feel downside pressure to .7363. The NZD USD could eventually reach .6038 if the downside momentum continues.

Traders should note that the reversals in the Forex markets do not represent a change in trend, but rather signs of profit-taking. Until these pairs cross swing bottoms or tops should anyone consider the trend has turned.

In addition, although there was a confirming move on Monday, these markets do not move in straight lines in one direction. Therefore, traders should not get too excited selling weakness or buying strength until the trend actually turns. Most of the time, these pairs usually test the old top or bottom of the reversals. If the pressure comes in after a test of the tops or bottoms then start to watch for signs that a change in trend may be taking place.

U.S. Dollar Rallies on Expectations of Economic Recovery

2009-06-05T22:07:00Z

The right combination of fundamental and technical factors helped the U.S. Dollar surge to multi-week highs against most major currencies on Friday.

Fundamentally, the Dollar rally was triggered by a better than expected U.S. jobs report. The U.S. Non-Farm Payroll Report showed a loss of fewer jobs than forecast which brought confidence to traders that the U.S. was leading the world out of the recession.

This reaction was different than previous reactions where the Dollar broke on good news. This may be an indication that global traders feel the U.S. financial administrators finally got it right and have put the U.S. economy in strong position to recover well before the rest of the world.

Investors expressed confidence in the change in sentiment toward the Dollar by turning gains from earlier in the week into a cluster of weekly closing price reversals. All these markets have to do is follow-through this week in the direction of the reversal to ignite more selling pressure this week.

Based on the strength of the reversals, it looks as if the Dollar is poised to start a minimum 50% correction of its last break down.

Euro Posts Weekly Reversal Top

2009-06-05T22:06:00Z

The selling pressure in the EUR USD did serious damage to the chart and has put this pair in a position to post a weekly reversal down.

Friday"s trading action took out a major 50% retracement price as well as four up trending Gann Angles, but the worst of the damage is yet to come as this pair is set to make a weekly closing price reversal down on a close under 1.4159.

Based on this developing chart pattern, this market has a chance to break to 1.3608 by June 11 - 12.

Political Uncertainty Contributes to Pound Weakness

2009-06-05T22:05:00Z

The combination of a break below a major 50% price at 1.6085 and last week's close at 1.6188 has put downside pressure on the GBP USD. Political uncertainty also contributed to the break in the Pound.

There was no surprise during the final hours of trading, so the reversal top is valid. Now all this market has to do to attract selling pressure this week to confirm last week's closing price reversal down.

The minimum downside target of this developing break in the British Pound is 1.5530.

USD JPY Breakout Confirms Uptrend

2009-06-05T22:04:00Z

The uptrend in the USD JPY was confirmed Friday when this pair broke out to the upside over the last main swing top at 97.23. The next objective is 99.75. A move through this level will also penetrate a main trend top on the weekly chart. Given the upside momentum in the market, it looks like it should have no problem challenging the high for the year at 101.44.

USD CAD Finally Reaches Major Downside Objective

2009-06-05T22:03:00Z

Following an almost 90 day break from the high for the year in March, the USD CAD may have finally reached a short-term bottom. A huge downside objective was met last week when this pair tested a major retracement zone at 1.1059 to 1.0586. Sellers dried up in this zone triggering a weekly closing price reversal to the upside. Based on the current developing chart pattern, it looks as if this market is poised to retrace to at least 1.1879.

We've seen stops and starts in the Dollar throughout the year, but this time the intense volume supports the notion that the U.S. Dollar is ready for an explosive rally.

Fundamental Shift in Sentiment with Technical Reversal Could Strengthen USD CHF

2009-06-05T22:02:00Z

A big shift in investor sentiment has encouraged Swiss Franc traders to repatriate funds to the U.S. Although there is strong upside action in the USD CHF on the daily chart, it is the weekly chart that is giving the strongest indication of the start of a short-covering rally.

The trend is down on the daily and weekly charts but the impending weekly closing price reversal bottom is indicating that this market has the potential to rally to 1.1165.

A close above 1.0668 will form a reversal bottom but it is going to take a confirmation rally this week to trigger the next rally to a major 50% level at 1.1165.

Decrease in Demand for Riskier Assets Sink AUD USD and NZD USD

2009-06-05T22:00:00Z

A decrease in trader appetite for riskier assets triggered a profit-taking break in the highly speculative Australian and New Zealand Dollars. Last week the AUD USD reached a major retracement zone at .7928 to .8382 and stopped cold at a little more than the mid-point. The subsequent sell-off demonstrated how fundamental and technical factors can work together to initiate a top in the market.

Based on the weekly reversal down, all it is going to take it a follow-through break to the downside this week to confirm the reversal and trigger a hard break to at least .7255 over the next 2 to 3 weeks.

After hitting precisely the 50% retracement level of the .8215 to .4892 break at .6599, the NZD USD exhibited a sign of heavy selling pressure by closing lower for the week. This weekly reversal down needs to be confirmed by a follow-through break this week, but all indications are for the start of a 2 to 3 week correction to at least .5741.

Bank of Canada's Friendly Tone Tanks USD CAD

2009-06-04T22:00:00Z

The USD CAD erased about half of yesterday's gains following the release of the results of the latest Bank of Canada meeting. The BoC as expected left its benchmark interest rate unchanged. At its last meeting it announced its intention to keep interest rates at .25% until the second quarter of 2010. With no where to go but up traders were confident that the BoC would leave the rates alone.

The friendly tone of the BoC following the meeting set the bullish direction of the Canadian Dollar throughout the day. In its post-meeting commentary, the BoC said that financial conditions "improved significantly."

One concern for traders going into the meeting was the feeling of the central bank's members toward the rapid rise in the Canadian Dollar. Some traders chose to lighten up their positions before the meeting on concerns that the BoC would use strong language to try to talk the currency down. Traders are beginning to worry that the stronger Canadian Dollar would hurt exports. The language used by the BoC to discuss this condition was soft. Therefore, it can be interpreted as a sign that the BoC is not too worried about the price of the Canadian Dollar.

The Bank of Canada also noted that the financial condition of the economy improved because of higher commodity prices. Consumer and business confidence was also judged as showing modest improvement. Higher industrial metals and crude oil no doubt helped improve the economic picture. This is significant because these two markets represent real numbers as opposed to investor or consumer sentiment. As long as real numbers are improving, the Canadian economy will continue to show signs of strength. As I said yesterday, a rally built on sentiment is usually doomed to fail but a rally based on facts is usually sustainable.

Another friendly factor addressed today was the need for quantitative easing. Like it did at the last meeting, the BoC decided to refrain from using this strategy.

Despite what the fundamentals did to the market today, traders still have to deal with a potentially negative picture developing on the charts. Tomorrow will be an important day because the USD CAD closed in a position to close higher for the week. This will be an important close because a reversal bottom often leads to the start of a 2 to 3 week counter-trend rally.

Last week's close in the USD CAD was 1.0899. A close over this price will form a daily closing price reversal bottom. Earlier this week, the market made a bottom at 1.0691 and subsequently rallied to a high at 1.6662. Thursday's action put the market in a position to test a retracement of the first leg up. This potential support zone comes in at 1.6377 to 1.6309. If this area attracts buyers and the market closes over last week's close then look for the start of a 2 to 3 week counter-trend rally.

Tomorrow's U.S. Non-Farm Payrolls Report will most likely be the trigger that ignites a big move in this market. A bearish report will indicate a weaker U.S. economy. This would trigger flight-to-safety rally in the Dollar and drive the Canadian Dollar lower.

Wednesday's action caused some safe haven trading toward the Dollar. Any unexpected bearish news from the Unemployment report will be bullish for the Dollar and make investors think that the global economy will have a long, rocky road ahead of it.

The technical set up is there for the start of a change in trend to the upside in the USD CAD. All this market has to do is hold the low for the week at 1.0691. If the report comes out weaker than expected and the buyers show up where they are supposed to, then look for the start of a huge short-covering rally.

U.S. Dollar Rally Puts Commodity-Linked Currencies in Tailspin

2009-06-03T22:07:00Z

A combination of technical and fundamental factors helped contribute to a huge rise in the U.S. Dollar against all major Forex pairs on Wednesday. This action sent commodity-linked currencies like the New Zealand Dollar and the Australian Dollar into a tailspin as longs scrambled to get out of their positions.

The biggest surprise today was how fast the U.S. Dollar gained strength given the recent weakness. Gone was the constant chatter of "green shoots" that had peppered financial market commentaries for the past 90 days. Today's action looks as if fear has returned to the marketplace and that the U.S. Dollar is once again being treated as a much sought after safe haven currency. This goes to show investors that markets driven higher on sentiment rather than real numbers are doomed to fail at some point.

Technically, all of the major Forex pairs had reached 50% retracement levels of their almost yearlong breaks. This is usually an area where sellers feast and today's action was no exception. Looking ahead, the next move up in the U.S. Dollar could be a big one as this market will most likely retrace its entire break. This means huge corrections to the downside for the British Pound, Euro, Australian Dollar and New Zealand Dollar and corrections to the upside in the USD CAD, USD JPY and USD CHF.

Fundamentally speaking, weaker than expected U.S. economic data helped bring back concerns that an economic recovery would be labored and tumultuous. Today's action was a strong demonstration of the fact that rallies based on positive investor sentiment are no reasons to believe that an economy is turning.

Wednesday's rout gained momentum following the release of the monthly ADP report which showed more than half a million U.S. private sector jobs was lost last month. This news raised concerns that Friday"s U.S. Non-Farm Payrolls Report will be worse than estimated. The fear that hit the market today demonstrates how nervous traders have become. Although many traders still believe that the unemployment report is a lagging indicator and that looking forward the economy may be improving, today's sell-off shows that they do not trade their beliefs but rather order flow and market action. Clearly, today's sell-off shows that no one was willing to step in the way of the massive amount of sell orders.

The recent over-exuberant selling against the Dollar was also dealt a blow today when it was reported that Asian central banks have decided to continue to buy U.S. Treasury debt even if the U.S. debt rating gets downgraded. This news gave the U.S. Dollar an additional boost and could have long-term ramifications as it may bring more investors back to the Dollar. Recently selling pressure hit the Dollar after a debt rating service lowered the U.K. rating. Many traders believed that the U.S. Dollar was next in line for a downward adjustment.

Now that doubts have been cast on the view that the global economy has bottomed and started a turnaround, tomorrow"s central bank reports will have added importance.

Speculators Looking for Central Banks to Leave Key Rates Unchanged

2009-06-03T22:00:00Z

At this time the Bank of Canada is expected to leave its benchmark rate at .25% and refrain from any additional quantitative easing or financial stimulus.

The Bank of England is also expected to leave its benchmark rate unchanged but traders are still trying to figure out whether it will announce additional quantitative easing or an end to its aggressive program. Recently, the BoE has received criticism from both sides of the issue.

The most important meeting tomorrow will be the European Central Bank. Recent talk centered on cutting its benchmark rate to below 1%. Cutting this rate will be a market mover with a strong bias to the downside. After last month"s meeting the ECB announced a much awaited plan to apply quantitative easing. The recent failure by the Fed to stimulate any change in long-term interest rates with its QE program is raising concerns at the ECB that this type of action is too inflationary. Look for rates to remain unchanged and for the ECB to curtail or drop its QE plans altogether.

Although the short-term trend is still down in the Dollar, today's aggressive rally has put it in a position to post a weekly reversal up. The trading action over the next two days will decide whether the Dollar has the buying power behind it to start at a minimum a 2 to 3 week rally.

Forex Traders Brace for Three Central Bank Meetings This Week

2009-06-02T22:07:00Z

Talk of creating a new global currency helped weaken the U.S. Dollar on Tuesday. Russia introduced the topic of creating a multi-national currency to take the place of the Dollar as a precaution against growing concerns about the U.S. ability to finance its huge budget deficit. The financial crisis in the U.S. is encouraging emerging market countries like Russia to begin discussions to replace the Dollar as the world's currency in case the global financial crisis flares up.

Although outside influences helped weaken the Dollar on Tuesday, traders should begin to watch the Forex pairs that have central bank meetings this week as speculation regarding central bank activity may have a larger influence on the market over the next two days. These include the USD CAD, EUR USD and the GBP USD. All have reports scheduled for June 4th. Since each market is at an extreme level and by some measures overbought, traders should begin to watch for clues of a top or the start of a trend reversal.

Euro Traders Speculate on New ECB Quantitative Easing Plan

2009-06-02T22:06:00Z

The European Central Bank will meet on June 4th. Last week traders expressed concerns based on a comment from an ECB official that the benchmark interest rate may break the 1% barrier. This comment caused a one-day reaction to the downside which has since been absorbed by traders. The key factor which would lead to another cut in interest rates will be the economy. The Euro Zone is showing some improvement in sentiment but real numbers are still showing a weakening economy.

Although the ECB is likely to keep interest rates at 1% based on pre-report trading action, it may make an announcement regarding additional quantitative easing. This will most likely come in the form of more purchases of government assets. The market will react depending on the size of the quantitative easing if any.

Two other concerns which may be addressed deal with the toxic debt that is still present in Euro Zone banks as well as Eastern and Central European banks. Some traders feel that this toxic debt is a time bomb which may ignite at anytime should credit market problems or another financial crisis quickly surface.

Other traders are expressing concern about the rapid rise in the EUR USD. These traders feel that the ECB is going to have to address the matter of the effects of a higher priced Euro on the export market. Like the Bank of Canada, the European Central Bank may propose limits on the Euro or propose a means of weakening the price of the Euro.

Will Bank of England Halt Quantitative Easing Plan?

2009-06-02T22:05:00Z

The rapid rise in the GBP USD is raising eyebrows but not concerns. The dominant uptrend has been surprising traders because just a few weeks ago, the Bank of England was getting attacked for its actions which have created a huge budget deficit. In addition, the BoE was being criticized for applying too much quantitative easing and for not being aggressive enough. Nonetheless the market may have been ahead of the news as yesterday both manufacturing and housing posted better than expected numbers.

The BoE is expected to leave interest rates unchanged and is likely to comment on the deficit and may even introduce an exit strategy for its plan to buy government assets. Calling an end to its plans to apply quantitative easing could move the markets as some camps will see it as a bullish sign that the economy is on its way to recovery. The bears however will see it as a poor choice which could send the economy into a tailspin once again.

Bank of Canada to Keep Benchmark Rate Steady

2009-06-02T22:03:00Z

The Bank of Canada is expected to keep its benchmark interest rate at .25%. In addition it is expected to reiterate its stance that the rate will stay at the current level until the second quarter of 2010. Most traders are curious as to how much if any quantitative easing the BoC will apply. At its last meeting, it approved the use of quantitative easing but refused to use it, instead seeking to take a "wait and see" attitude toward the economy.

Although the Canadian export market is improving because of higher industrial metal and crude oil prices, some traders are concerned that the price of the Canadian Dollar may be getting to high. Some feel that a high priced currency will curtail demand for Canadian exports. This topic will most likely be addressed by the BoC at the meeting. The USD CAD is likely to react off this news especially if it involves setting an upside price limit for the Canadian Dollar.

U.S. Dollar Breaking on Sentiment Not Economics

2009-06-01T22:07:00Z

The U.S. Dollar finished the day mixed as investors took profits after the recent run-up. The Dollar weakened on the initial news regarding the GM bankruptcy filing but appeared to strengthen as analysts began to decipher the filing. President Obama seemed to calm the market by offering his approval of the plan.

For the most part, this recent surge in the major currency pairs has been sentiment-driven rather than based on solid economic facts. Investors have been searching for good news everywhere and seem to find it in each report that has been released. Traders have been acting as if a bottom is in rather than just beginning. Most of the majors have reached 50% retracement points of their declines from last year's tops to this year's bottoms. These retracements could prove to be important resistance points if the markets do not keep getting good news to feed the rally.

Euro Traders Unsure about European Central Bank's Next Move

2009-06-01T22:06:00Z

Investors sold the EUR USD after this pair failed to hold over a major 50% price at 1.4184. The selling pressure came close to triggering a daily closing price reversal down which would have been a solid signal that this market was ready to break. Despite not making a reversal top, this pair still appears to be weak and could correct back to 1.4019 to 1.3988.

The lack of positive economic news from the Euro Zone is making investors hesitant about buying at current levels. On June 4th the European Central Bank meets to set current economic policy. Traders are nervous that the ECB will take its key interest rate under 1%. Unless there is a positive surprise in the economic reports prior to the meeting, there is a strong possibility of a cut. In addition, traders are nervous that the ECB may up the amount of quantitative analysis it intends to apply to the market. Finally, one other concern among investors is the rapid rise in the Euro. Some feel the ECB will take action to stem the rise. Traders feel that exports may suffer if the value of the Euro gets too high.

U.K. Shows Improvement in Manufacturing and Housing

2009-06-01T22:05:00Z

The GBP USD received good news on Monday as reports showed that U.K. manufacturing and housing sectors showed signs of improvement. Traders seem to be ignoring the huge U.K. deficit as long as economic reports have been rosy. Traders will once again highlight the growing deficit if a negative report surfaces, but for now this pair appears to be safe. Now that this market has regained a major 50% price at 1.6085, the next upside target is 1.6694.

U.S. Dollar Rebounds Against the Yen

2009-06-01T22:04:00Z

The USD JPY rebounded after a couple of days of hard selling pressure. The buying came in strong on Monday in front of the recent main bottom at 93.84. The main trend is up and a move through 97.23 will reaffirm the uptrend. Traders are buying the USD JPY because Japanese investors are seeking higher yields outside of the country.