Safe Haven | U.S. Dollar Posts Weekly Closing Price Reversal Bottom

"No warning can save a people determined
to grow suddenly rich." - Lord Overstone

HOME

ARCHIVES

FORUMS

SITE MAP

ABOUT US

Home -> Archives -> Brewer Futures Group -> U.S. Dollar Posts Weekly Closing Price Reversal Bottom

Printer Friendly

eMail Article

September 27, 2009

U.S. Dollar Posts Weekly Closing Price Reversal Bottom
by Brewer Futures Group

The U.S. Dollar overcame early weakness to post a weekly closing price reversal bottom. This move doesn't turn the trend to up, but is a strong indication that the Dollar will rally for 2 to 3 weeks. A follow-through rally through .7734 next week is needed to confirm the reversal bottom. The main trend will turn up following a breakout over .7997.

To recap the market moving events this week, the Fed FOMC left interest rates at near historically low levels while deciding it was too early to pull out of is current stimulus plans. The Fed also said that the economy was improving especially in the housing and financial markets. The FOMC also decided to slow down its debt buying plan by extending its program to purchase mortgage-backed securities into the first quarter of 2010.

Traders at first drove the Dollar to new lows for the week on the news, but quickly reversed themselves to the upside before the close on Wednesday. Thursday's action showed more strength in the Dollar as Wednesday's daily chart reversal was confirmed. Friday, U.S. Durable Goods were reported weaker than expected. The Dollar gave back some of its gains on the news as this report indicated that the U.S. economic recovery would be slow and labored.

The EUR USD is in a position to form a weekly closing price reversal top following a close under 1.4710. The main trend on the daily chart is also set to reverse to the down side on a trade through 1.4611. Based on the current chart pattern, look for the start of a 2 to 3 week break with 1.4425 the next downside objective. Investors cite sluggishness in the U.S. economy as the main reason why demand for higher risk assets is set to decline.

The GBP USD is expected to finish near its weekly low. With the main trend down and downside momentum building, traders should start to anticipate further weakness to at least 1.5271 over the near term. Most of this week's break was triggered by bearish comments from Bank of England Governor Mervyn King who stated in an interview that he favored a weaker currency.

The weekly USD CAD chart indicates that a double-bottom may be forming at 1.6305 and 1.0589. This formation will be confirmed when the market trades through 1.1124. The main trend on the weekly chart will also turn up on this move. Based on the main range of 1.1124 to 1.1723, look for a retracement to 1.1156 to 1.1290. Fundamentally, weaker equity and crude oil prices should keep the pressure on the Canadian Dollar. The Canadian economy is likely to take a big hit if crude oil prices continue to weaken.

The USD CHF reached a new low for the year earlier this week on hopes of a stronger economic recovery in Switzerland. Late in the week, the Dollar began to rally versus the Swiss Franc. The current chart formation indicates the possibility of a weekly closing price reversal bottom. A close over 1.2092 will create the bottom but a follow-through rally will be needed next week to confirm it. The first upside objective is 1.0603 to 1.0702 if this reversal bottom is confirmed.

The USD JPY is expected to close near the low for the week. This week's strong Yen negated last week's closing price reversal bottom in the USD JPY. The charts now indicate the possibility of a break to the low for the year at .8711. Repatriation by Japanese exporters triggered the start of the weakness in the USD JPY, but it was bullish comments by the Japanese Finance Minister that fueled Friday's acceleration to the downside. Look for the Yen to continue to rally next week as the Japanese government seems to have no intention of intervening.

Demand for higher yielding assets dropped after the Fed FOMC meeting on September 23rd. The selling pressure hit the AUD USD harder than the NZD USD and now has the Aussie in a position to post a weekly closing price reversal top. A close under .8673 forms a weekly reversal. Based on the current weekly range of .8156 to .8788, look for a correction to .8472 to .8397 over the next 2 to 3 weeks. The New Zealand Dollar broke from the high for the week, but remained in a position to close higher.

www.BrewerFuturesGroup.com
Info@BrewerFuturesGroup.com

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.