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U.S. Dollar Picking Up Strength after Trading Mixed Overnight

James Hyerczyk from ForexHound.com at 10/30/09


The U.S. Dollar is rallying after trading mixed most of the night.  Traders are trying to decide if yesterday’ strong rally in the Forex markets was a knee-jerk reaction to the better than expected U.S. GDP Report or if it represents a resumption of the uptrend. 


This morning there are several reports starting with Personal Income and Personal Spending.  Most analysts feel these two reports will be negative as the weak economy and high unemployment weight on consumer income and spending habits.  The Chicago PMI and Michigan Sentiment Reports due at 8:45 CDT and 8:55 CDT respectively are going to be market movers.  Traders will be particularly interested in seeing whether the Chicago PMI number can reach 50 or higher.


The EUR USD is trading lower after a Euro Zone inflation report showed negative growth for the fifth consecutive month.  Unemployment in the EZ continues to rise. Analysts feel the economy may have bottomed but the recovery is going to be labored and rough.  Technically, the Euro is forming a weekly reversal top.  This is a potentially bearish formation.  Last night’s rally failed at the 1.4873 to 1.4918 retracement zone.  This is the new resistance.


The GBP USD has been the strongest currency pair this week.  Last week at this time the British Pound was under pressure because the latest U.K. GDP Report showed a contraction.  This news put in a top at 1.6691.  This week’s rally took the market to the mid-point of the recent break at 1.6522 to 1.6470.  At this time the market is trading inside of this zone which makes it neutral.  A breakout over 1.6691 is bullish.  A trade through 1.6250 will turn the main trend down on the daily chart.  Look for a sideways trade if this market stays between 1.6522 and 1.6470.


The USD JPY is under pressure this morning.  Traders are reacting to the news that the Bank of Japan will stop buying corporate debt.  This is being perceived as a sign it would begin ending its stimulus program.  Technically this market is running into resistance at 91.28 to 91.53.  If downside momentum picks up then look for a break to 90.15.  A trade through 90.08 will turn the main trend down.


The USD CHF is trading sharply higher after a sluggish trade overnight.  The main range is 1.0032 to 1.0285.  This range creates a retracement zone at 1.0158 to 1.0229.  Last night the market traded down to 1.0155 and bottomed. 


Yesterday, higher oil and equity markets helped boost the Canadian Dollar.  Looking at the overnight trade, its looks as if this was only an aberration as the uptrend in the USD CAD has resumed.  Yesterday a closing price reversal top was formed at 1.0820.  A trade through 1.0654 will confirm it.  Gann angle support at 1.0645 is currently providing the support.  Last night’s low held 1.0652.  Watch for a retracement to 1.0736 today.


The AUD USD reversed up yesterday but has not followed through to the upside.  This could be a sign that the rally was short-covering.  The short-term range is .9329 to .8944.  This creates a retracement zone at .9136 to .9182.  Downtrending Gann angle resistance is at .9189.  This makes .9182 to .9189 a key resistance cluster. A weak trade indicates a break to .9062 is likely.


The NZD USD made a reversal bottom yesterday, but could not find buyers to confirm the bottom at .7161.  A trade through .7367 will confirm this bottom.  Based on the short-term range, .7264 is the key support.  Last night this market tested .7257.  Look for a steady market today, but it could accelerate to the downside if .7257 fails.

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