The U.S. Dollar finished higher on Tuesday against most majors as traders once again curtailed demand for higher risk assets because of a weaker than expected U.S. Consumer Confidence Report and another break in the equity markets. Investors are shying away from risky asset trades because of perceptions that the global economic recovery may not be as robust as previously estimated.
The EUR USD lost ground today because of falling demand for higher risk assets. Comments from European Central Bank President Trichet expressed his concerns about central banks ending their stimulus plans too prematurely. The main trend turned down late last week and traders seem content with pushing this market down to a key retracement zone at 1.4444.
The GBP USD gained ground today on the heels of two friendly U.K. economic reports. Today it was reported that U.K. Retail Sales increased to its highest level in five months. Another report showed a better than previously estimated second quarter U.K. GDP Report. Shorts covered on the news and drove the British Pound higher. The rally, however, is expected to be short-lived since these two reports are not enough to turn the trend around in the Pound. Longer-term traders believe that the Bank of England will have to reduce its stimulus program before this market can mount a strong rally.
Oversold conditions and the possible end to this month’s repatriation by Japanese companies helped support the USD JPY today. Technically this currency pair formed a closing price reversal bottom on Monday that was confirmed by today’s early sell-off. Last week the Japanese Finance Minister announced that it would do nothing to curtail the appreciation in the Yen. Today, however, it clarified its position by stating that will stand aside as long as trading conditions remain normal. Abnormal trading conditions could force the BoJ to take action to curtail volatility.
The sell-off in the equity markets and lower energy prices put pressure on the Canadian Dollar. Upside momentum is building in the USD CAD which could help launch a strong rally to 1.1124 over the near term. Traders expect the Canadian economy to show weakness because of the recent drop in crude oil prices. Crude oil makes up a large portion of the Canadian economy.
The USD CHF posted a gain on Tuesday. Traders are anticipating a possible intervention by the Swiss National Bank. The recent rise in the Swiss Franc versus the Euro could be raising some concerns with the SNB. They want to prevent a rapid rise in the Swiss Franc because of the possibility of deflation.
The AUD USD and NZD USD traded in a tight range under choppy conditions. Less demand for higher yielding assets is putting downside pressure on both of these markets while talk of possible interest rate hikes is providing the support. The weakest market is the Aussie because of technical factors.
Toll Free: 800-971-2440
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 ma
rket 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.