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Housing Report Weakens USD JPY

James Hyerczyk from ForexHound.com at 01/05/10


The USD JPY broke sharply this morning following the release of a housing report which showed the number of contracts to buy previously owned U.S. homes fell in November more than analysts had estimated.

Overnight weakness set the table for today’s opening weakness, following Monday’s closing price reversal top. Last night’s follow-through to the downside was confirmed which could mean the start of a correction all the way back to 88.57. The first downside objective today is 91.08 which is an uptrending Gann angle from the 84.83 bottom.

At the mid-session, the Dollar index is mounting a strong comeback because of oversold conditions. Don’t be surprised if this index closes higher for the day. A short-term retracement to 77.77 - 77.93 is likely.

Overnight, the U.S. Dollar continued its slide as investors sought higher risk assets. Overnight an index representing a trade weighted basket of currencies turned its main trend down on the daily chart on a trade through 77.32. The chart pattern now suggests a correction to 76.31 to 75.80 is imminent. This move would represent a normal retracement of the entire 74.17 to 78.45 rally. Traders are citing the stronger global economy and low interest rates in the U.S as two reasons for the renewed interest in higher yielding assets.

The EUR USD is weakening at the mid-session after showing early morning strength. The bigger picture suggests a move to 1.4680 is likely. Minor resistance at 1.4503 could slow down the current upside momentum. The weakening Euro is setting up for a pull-back to 1.4350 - 1.4319.

The main trend remains down in the GBP USD. Buyers tried to, but failed to hold the British Pound in the retracement zone at 1.6036 to 1.5988. Concerns about the U.K. economy and the upcoming election are putting pressure on the Cable.

The USD CHF showed overnight weakness, but is now in a position to mount a closing price reversal bottom after an eleven day break. Based on the short-term range, watch for a retracement to 1.0379 to 1.0409. The bigger picture suggests a break to 1.0212 - 1.0143 is possible following this short-term correction.

Rising gold and crude oil prices as well as firm equity market helped to pressure the USD CAD. The main trend is down with 1.0265 the next downside objective. A key retracement level at 1.0459 is the new resistance. A firming Dollar is helping to trigger intra-day profit-taking.

Strong demand for higher yields helped rally the AUD USD overnight. This morning’s strength helped drive the Aussie over a key retracement zone at .9144 to .9066. The intra-day strength in the Dollar has brought the Aussie back inside of this range and has put the market in a position to post a closing price reversal top.
The NZD USD is now in an uptrend, but finding resistance at a pair of down trending angles at .7353 and .7375. A close over these angles will be a sign of strength. Falling back below these angles will indicate a profit-taking break is imminent. This could set up a substantial correction to the downside.

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