Overall: The dollar traded mixed for most of the day on Wednesday, but found strength in late U.S. trading and closed higher against most of the other major currencies. Recent economic news continues to support the theory that the global economy is close to finding a bottom and promote a brighter outlook. That has spurred traders to become more risk tolerant lately and sell the dollar in favor of higher yielding, riskier assets. However, traders are quick to put the brakes on selling the greenback any time negative news hits the wires. That was the case today with continued worries about the possible bankruptcy of General Motors (GM). With two ‘forces’ pulling against each other, traders focused on technicals and today’s trading became more of a regional story.
U.S. existing home sales rose in April as foreclosure auctions and cheaper prices spurred bargain hunters. Sales increased 2.9% to an annual rate of 4.68 million, slightly higher than the market had anticipated, from 4.55 million in March according to the National Association of Realtors (NAR). Single family home sales rose 2.5% to a seasonally adjusted annual rate of 4.18 million in April from a level of 4.08 million in March, but are 2.8% below the 4.30 million unit pace in March 2008.
The Euro (Eur/Usd) The euro moved lower on Wednesday, with a good portion of the move coming after the U.S. government auction of $35 billion in five year securities drew strong demand from foreign central banks. The dollar was also helped after Moody’s said the government’s credit rating has a stable outlook. The pair dropped 70 pips on the day and closed just above the 1.3900 level.
The Pound (Gbp/Usd) The pound continued its assault on the greenback on Wednesday, gaining another 90 pips and closing above the 1.6000 level. The pair reached 1.6085 intra-day before retreating. Speculation that the worst of the financial crisis is over has increased demand for sterling. The pound has gained against the dollar for seven of the last eight trading days.
The Aussie (Aud/Usd) The aussie moved lower on Wednesday as traders bought the dollar in response to equity markets moving much lower. Traders became defensive as concerns over the possible GM bankruptcy forced traders to sell equities. Traders sold the higher yielding currencies for the relative safety of the greenback.
The Cad (Usd/Cad) The Canadian dollar weakened slightly against the dollar as U.S. equity markets tumbled. The pair gained 30 pips on the day after trading in a range of 110 pips. The pair continues to trade below all of the major daily simple moving averages. Canadian corporate profits came in better than expected this morning with a read of -11.8%
The Swissy (Usd/Chf) The swissy moved higher on Wednesday as the dollar strengthened during the afternoon trading of the U.S. session as equity markets faltered. The pair gained 50 pips on the day, closing just below the 1.0900 level. There were no Swiss economic releases this morning. Trade balance figures will be released tomorrow morning.
The Yen (Usd/Jpy) The yen closed slightly higher on Wednesday despite U.S. equity markets closing much lower. The pair gained 20 pips on the day, closing above the 95.00 level after trading in a range of 85 pips. The pair tested the 100 day simple moving average but was unable to hold above the resistance level.