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.
Other Technical Tidbits...
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.
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