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U.S. Dollar Rises as China GDP Falls Short of Estimates

James Hyerczyk from ForexHound.com at 10/22/09


The U.S. Dollar could rally today following news that China’s GDP missed analyst estimates.  Although Chinese GDP rose at a faster pace than a year ago, it was still not on target with pre-report estimates.  This news is helping to increase demand for the lower yielding U.S. Dollar.


Traders are also supporting the Dollar on speculation that China will cut its stimulus spending due to the fear of inflation. 


Both the AUD USD and NZD USD are feeling selling pressure on speculation that China will put limits on its stimulus spending.  Earlier in the week the Aussie felt pressure because of overbought conditions and news from the Reserve Bank of Australia that a 50 basis point rate hike was not in the offing.  Look for the start of a short-term break but not necessarily a change in trend.


The NZD USD is also under pressure this morning.  A cutback in spending by China could hurt the New Zealand export market.  Like the Aussie, this news is likely to trigger a break but not necessarily change the trend to down.  Yesterday the Reserve Bank of New Zealand issued a statement that seemed to indicate interest rates may rise sooner than expected.  This news is helping to limit losses today.


The EUR USD is once again trading below $1.50.  Traders were tentative when the market went through this level yesterday.  Investors fear the European Central Bank may start a round of “verbal interventions” which could drive aggressive bullish traders away from the long side of this currency.


The stronger Dollar is putting some pressure on the GBP USD overnight.  Following an initial rally last night, the British Pound is feeling some downside pressure.  This could be because of overbought conditions.  Currently this market is in a position to post a daily reversal top.  The charts indicate substantial room to the downside. 


Weaker crude oil and equities this morning are helping the USD CAD rally overnight.  Earlier in the weak, the Bank of Canada expressed concerns about the value of the Canadian Dollar and its negative effect on the economy.  The main trend is up on the daily chart.  The current chart pattern suggests a move to 1.0598 to 1.0691 is likely over the short-run.


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