The EUR/USD confirmed Tuesday's closing price reversal top with the break on Wednesday. The charts indicate a move to 1.5550 is likely before new buyers step in.
Wednesday’s Durable Goods number was better than expected putting more pressure on the Euro as traders perceive this as a sign that the U.S. economy is slowly recovering.
Interest rates rose in the U.S. as the Treasury auction went poorly. With so much supply available and another auction tomorrow, continue to expect rates to rise. This action is tightening the spread between the Bond and the ECB's Bund, which is making the Dollar attractive.
USD/JPY Gains on Strong Stock Market
Traders satisfied their appetite for risk by going long the USD/JPY. The better than expected Durable Goods report helped boost the Dollar as traders see this as another sign that the U.S. economy is pulling out of its slowdown.
Technically, the USD/JPY remains range bound. This signals the start of a rally. Look for the market to test the two tops at 105.44 and 105.71. A break through these two levels reaffirms the up trend and could launch a rally to 106.80.
Bank of England May Leave Key Rate Unchanged at 5%
Despite the mixed fundamentals, traders are beginning to see signs that the Bank of England may leave rates alone at its next meeting on June 5.
U.K. housing numbers are bad, which is weighing on Consumer Confidence, however, stronger spending by consumers has been supportive to the Pound.
The trend could not turn higher on the recent rally, but the lack of follow through to the downside indicates that the buying may not be over. The strong close has the market in a position to challenge the recent minor top at 1.9852 and breakout to 2.0027.
On the downside, if the rally fails at 1.9852 to 1.9858, then look for the start of a retracement to 1.9607.
USD/CHF Rallies on Stronger than Expected Economic Report
A stronger than expected Durable Goods number and a late session buying spree in the stock market helped rally the USD/CHF. Traders abandoned the safety of the Swiss Franc to take on more risk and the potential of more reward in the U.S. stock market.
The main trend is still down, but Wednesday's action puts the market on the bull side of two down trend lines. In addition, the market is poised to break out over a key 50% price at 1.0420. Closing above the downtrend lines and over the 50% price put the USD/CHF in a position to rally further. If momentum can be sustained, then look for a test of the two main tops at 1.0601 and 1.0625.
USD/CAD Traders Face Choppy Action
The USD/CAD is facing a few days of sideways-to-choppy action as traders try to decide which fundamental factor to watch. The strongest influence on this pair has been the crude oil market. Wednesday’s sharply higher rally in crude oil helped rally the Canadian Dollar late in the session.
Talk circulating that the Bank of Canada may have to cut interest rates for the fifth time since December has been encouraging long positions in the USD/CAD. Economic growth is down with inflation below target. These two factors are going to be considered when the BOC meets on June 10.
A sharp break in crude oil may lead to a rally back to 1.0030. A break through .9818 could trigger a sharp break to the cluster of support at .9796 to .9709.
High Price Keeps New Longs on Sidelines in AUD/USD
Traders have been unwilling to buy the Aussie at current levels. Once again, the AUD/USD could not take out the nearly 25-year high posted last week at .9655 and backed-off on profit taking.
The inability to break through .9542 is supportive to the pair. If this price is broken, then heavy sellers may come. The current chart pattern suggests the possibility of a break back to .9472.
The lack of fresh news and high prices are causing buyers to hold on to orders for a break into a value zone. Stalling at the current level is a sign that the market is due for a correction. This forecasted break would not be due to new selling, but a lack of buyers. This move would set up another round of buying.
NZD/USD Could Correct to .7729
The NZD/USD stopped short of breaking out to the upside through .7937. A trade through this price will turn the main trend up for the first time in weeks.
Increased liquidity in the economy due to an expected tax cut has been providing support for this rally. Traders have been reluctant to buy strength at current levels because of other lingering bearish fundamentals such as weak housing and high unemployment.
Technically, the NZD/USD broke key support at .7896 and attracted some selling pressure. The chart pattern suggests a break to .7729 is likely before new counter-trend buyers step in.
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