The U.S. Dollar rallied as statements from Luxembourg Finance Minister Jean-Claude Juncker rattled long EURUSD traders leading to a nervous sell-off. Juncker said that financial markets have misunderstood the Group of Seven's position on currency volatility. He also stated that the Euro's recent advance against the Dollar is not desirable. While not totally dismissing his statements, traders did not read it as a serious threat to the trend, only as a reason to lighten up positions at current levels.
The market largely ignored the G-7 statement released on April 11. The lack of substance was the main reason for this line of thinking. Traders felt that the statement did not reveal enough of the intentions of the G-7. Expressing concerns about volatility without mentioning price levels was not going to be enough to turn the trend down in the Euro. Juncker's comments, however, have shed more light on what may be happening. His statement regarding the Euro's undesirable advance against the Dollar borders on a price level comment. This is key because it gives a trader something to lean on. With the comments coming so close to a 1.60 EURUSD trade, this level should no longer be treated as just a psychological level, but also a possible intervention level.
The trend is the most important factor, however. Until the strong bulls give up their longs and trigger a change in trend, it is hard to say whether Juncker's statement had any effect on the market. Based on the current chart pattern, trade the long side cautiously near 1.60, but buy aggressively near 1.56.
Technically, the daily reversal down is indicating some downside pressure to follow on Friday. The rate of ascent of this recent rally is suspect as it indicates a slowdown of momentum at current levels.
The USDCHF continues to trade in a tight range. The stock market's direction is the driving force in this pair. Technically a move through .9887 turns the main trend down. A rally through 1.0216 changes the trend to up. Watch the stock market for direction and go the way of the move on the breakout.
The outside force of the U.S. stock markets and the developing bullish chart pattern is driving the USDJPY. Although the main trend is up, it is going to take a brea out over102.95 to reaffirm the trend. This would set up a further rally to the next level at 103.67, then 105.18. The developing bullish pattern crumbles if 100.02 fails to hold as support. This may lead to a sharp break back to 99.33.
Despite a new high in the crude oil market and general firmness in commodity markets, Canadian Dollar traders returned their focus to the Canadian economy for direction. On Thursday, a report showed that inflation was the lowest last month since January 2007. This report caused traders to refocus their attention on the possibility of a 50 basis point cut by the Bank of Canada on April 22. The BoC feels that this may be enough to stimulate growth, but the low inflation level gives them room to cut even further throughout the year. Technically, the USDCAD main trend is down with a trade through 1.027 needed to turn the trend to up. The first downside objective of 1.0017 was met with some strong profit taking. The next upside target sets up at 1.015 to 1.019. Continue to look for choppy two-sided trading on both sides of par.
The GBPUSD main trend turned up on the daily chart on news that the Bank of England will announce a plan next week to help end the stagnant trade in the credit market. The plan is for the banks to exchange troubled mortgages for government debt. While not necessarily a long-term solution, the move meant enough to cause profit taking in an extremely oversold market. This move by the BoE is designed to free up credit so that the banks can once again begin lending amongst themselves. The exchange of mortgage debt targets the stimulus on the depressed housing trade. Technically, the first objective is 1.9997 with 2.0091 next. A new main bottom has been formed at 1.9599. Trade the long side until the objectives are reached. Look to sell the next retracement for a retest of the lows.
The AUDUSD has been firm all week. The market continues to trend higher, and is now in a position to challenge the March 13 top at .9470 and the February 28 all-time high at .9496. Comments from the Royal Bank of Australia ignited this leg of the rally as talk of high inflation fanned rumors of a future interest rate hike. The strong global risk appetite for higher yielding assets nudged the rally along further. Gains in the stock market, higher gold prices and an expected increase in demand from China for exportable commodities all factored in this rally. Continue to look for the market to challenge the two tops. Expect selling on the initial test, but a sell-off would be a buying opportunity as long as the bottom at .9206 holds.
The fundamentals remain weak in the New Zealand economy putting pressure on the NZDUSD and limiting its upside potential. Consumer confidence is down and reports that the Bank of New Zealand will cut rates over the next three months are keeping a lid on the pair. The main trend is down technically. It is going to take a drive through .8024 to turn the main trend to up. Until then look for the trend to remain down with the market trading inside of a retracement zone at .7799 to .7700.
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