The U.S. Dollar rose sharply as risk aversion is back on following a surprisingly weak U.S. jobless claims report. Especially hard hit during the Greenback’s rally were the commodity-linked currencies.
The Euro traded lower after a weak attempt to rally failed after the bearish U.S. report and on the heels of a better than expected forecast for German economic growth.
Technically the Euro is still rangebound amid confusion by traders. Buying and selling interest appears to be even as the bulls want to buy Euros on speculation of renewed strength in the Euro Zone economy but the bears feel the need to sell because of a dim outlook for the global economy.
The charts indicate impending volatility but the direction of the next move is not clear. A breakout to the upside is likely to be met with selling pressure at 1.3033 to 1.3104. A breakdown through support could trigger a downside acceleration to 1.2605 to 1.2433.
The British Pound received a boost Thursday morning following a better than expected U.K. retail sales report. This rally died, however, short of a breakout above the recent high at 1.5701 and after sentiment shifted away from risky assets.
Technically, the Sterling is trapped between a pair of 50% levels at 1.5560 and 1.5635. Major support is being provided by an uptrending Gann angle from the 1.4229 bottom at 1.5529 today. A close under this angle could trigger a tremendous downslide.
The USD JPY started the day in a potentially bullish position as it tried to build support inside of a retracement zone at 85.36 to 85.55. At one time today, it looked as if the Dollar/Yen was readying to breakout above the last swing top at 86.37. This move would’ve changed the daily trend to up.
This pair sold off sharply after the U.S. released a surprisingly bad weekly initial claims report. U.S. equities sold off on the news, triggering a flight to safety rally in the Japanese Yen. Unless this market can regain the retracement zone, look for 84.73 to fail. This would put the Dollar/Yen at a new multi-year low.
The resumption of the downtrend in the equities markets triggered a sharp break in the commodity-linked currencies with the New Zealand Dollar leading the way lower. Today’s surprisingly bad U.S. weekly initial claims report renewed fears of a shutdown of the global economy. If investors continue to shy away from risk, then look for further weakness in the Canadian Dollar and Australian Dollar also.
One question traders are asking each other is whether the Dollar is trending or if it is rangebound. On one hand some traders believe in a bullish scenario for the Dollar because of flight to safety buying. Bearish traders believe the U.S. economy will grow at a slower rate than the rest of the world. This clash between the fundamentals could produce sideways action highlighted by periodic exaggerated swings.
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