The U.S. Dollar is trading better against most major currencies with the exception of the Japanese Yen as investors removed risk from the equation overnight. The Dollar was under pressure on Wednesday as traders reacted to the previous day's FOMC statement. In its statement the Fed said that interest rates would remain low for a prolonged period. This gave traders the green light to buy higher risk assets while selling the Dollar.
Late Wednesday news came out that the political party representing German Chancellor Merkel said that a bailout was unlikely and that Greece may have to seek aid from the International Monetary Fund. This weakened the Euro, forcing a lower close. This news has spilled over into the markets overnight and is putting pressure on higher yielding assets while helping to drive traders into the Dollar for safety.
The EUR USD is trading lower, but remains in an uptrend. The key to sustaining the developing rally will be this market's ability to attract buyers in the retracement zone at 1.3628 to 1.3584.
The British Pound is under pressure overnight after a strong rally on Wednesday. Yesterday's rally was triggered by better than expected U.K. Initial Claims and news that the Bank of England Monetary Policy Committee had voted unanimously at its last meeting to leave its quantitative easing program unchanged. The GBP USD rallied into a retracement zone at 1.5297 to 1.5419. With the main trend down, this market is finding resistance inside this zone. This could set up a break back to 1.5080 to 1.5010.
Trader demand for lower risk assets is helping to pressure the USD JPY. A new swing top has been formed at 91.08. The new main range is 88.14 to 91.08 which means this market may correct back to 89.61 to 89.26. Additional support comes in at an uptrending Gann angle at 89.52.
Despite the stronger demand for lower yielding assets, the USD CAD remains under pressure. Traders believe the Bank of Canada is likely to raise interest rates before the Fed, underpinning the Canadian Dollar. In addition, stronger gold and especially crude oil has been helping to pressure the Dollar/CAD. Although conditions may be oversold, downside momentum continues to indicate that this market could test the July 15, 2008 bottom at 99.74 before finding support.
The USD CHF is trading higher because of the weaker Euro. Another collapse in the Euro increases the likelihood of an intervention by the Swiss National Bank. On Wednesday, this market found support after completing a 50% retracement of the 1.0130 to 1.0897 range. This price level was 1.0513. The market stopped at 1.0506. Although a closing price reversal top was not formed on Wednesday, the chart pattern is still suggesting a possible short-covering rally back to 1.0701 to 1.0750.
Lower demand for higher yielding currencies is helping to weaken the AUD USD and NZD USD. So far the Aussie is trading lower but inside of last night's range. If selling pressure prevails then look for a break back to at least .9100. The New Zealand Dollar is trading higher but inside of a potential resistance zone at .7124 to .7199. Profit-taking could start anytime if sentiment shifts toward risk aversion. The direction of U.S. equity markets should control the direction of these two higher yielding assets.
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