The U.S. Dollar closed mixed on Thursday against most major currencies on light volume as traders fled shortly after the U.S. initial claims number and ahead of tomorrow’s Non-Farm Payrolls report. Trading was so thin that even a late session sell-off in U.S. stock indices could not fuel a robust close in the Dollar index.
The U.S. Dollar Index withstood another test of the low for the week early in the trading session at 74.31 and last week’s low at 74.27. The higher close is impressive, but this market is still lower for the week. Start to consider the long side of this market if last week’s close at 75.04 can be regained.
The EUR USD rallied early in the session following the announcement from the European Central Bank that it would begin withdrawing its stimulus money from the Euro Zone economy, but backed-off last week’s high at 1.5144 when ECB President Trichet called for a stronger Dollar.
Worries over a weakening economy helped to pressure the GBP USD, but there is still not enough evidence to say that a secondary lower top has been formed. Today’s lower close produces a closing price reversal top, but a follow-through break through 1.6530 is needed to confirm the pattern. The first downside target is 1.6495 to 1.6442.
The Japanese Yen traded lower for a third straight day. Earlier in the week, the Bank of Japan announced another stimulus plan designed to promote economic growth. Pressure could be on this currency until December 17th when the BoJ holds its formal meeting. Traders are nervous about holding long positions because of the possibility of an intervention. The USD JPY chart pattern suggests a test of 88.57 is likely before a short-term correction takes place.
Trichet’s call for a stronger Dollar helped pressure the December Canadian Dollar, but the most bearish influence came from lower equities and flat crude oil. Technically, although this currency pair is trading above a retracement zone at 1.0459 to 1.0537, I would consider this market rangebound. Traders still fear a possible intervention by the Bank of Canada if the Canadian Dollar appreciates too much, too fast.
Greater demand for higher yielding assets helped boost the AUD USD early in the trading session, but the hard sell-off in U.S. equities late in the trading session reversed the Aussie to down for the day. The old top at .9322 held up as resistance on Thursday. Today’s reversal top indicates that a correction to .9133 to .9089 is likely.
The key retracement zone at .7272 to .7332 stopped the NZD USD rally for the third day in a row. Thursday’s higher-high, lower-close indicates further weakness with a minimum retracement to .7160 to .7128. Up trending Gann angle support comes in at .7222. This angle could provide early support, but a break of this angle could trigger a further decline to .7102. Aversion to risky assets will be the catalyst driving this market lower.
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