The EUR USD rallied on Thursday as economic woes continued to pressure the U.S. Dollar. Weakness in the stock market triggered by a so-so weekly jobless claims report and only a slightly better than expected durable goods report encouraged traders to pressure the Dollar.
With the outlook for the economy looking bleaker, and the problems in Europe already priced into the market, today’s action is a sign that traders may be willing to shed positions in the Dollar in favor of the Euro at least in the short-run.
Early in the session, the Euro was down against the Dollar after a slump in Greece bond sales overnight raised some concerns about the quality of debt in the Euro Zone. The weak U.S. data, however, allowed the Euro to overcome this weakness and move higher.
Monday’s closing price reversal top in the EUR USD was an indication of selling pressure, but this move ended following an expected 2 day break. The market approached its minimum objective at 1.2172 but never reached it on Wednesday as weak housing data and a gloomy outlook by the Fed for the economy triggered a sell-off in the Dollar.
The current pattern suggests that move upside is possible with 1.2609 the next objective. It is also possible that a secondary higher bottom is forming which will be even more confirmation that the Euro is set up for a rally.
Following two days of strength in celebration of the budget released by the new U.K. government, the GBP USD was unable to hold on to its gains and closed lower. This pattern could be indicating a tired market. With the main trend up however, only a 2 to 3 day break can be expected. A test of 1.48100 is likely during this time period. A close under this price indicates more serious selling pressure is developing.
The strength in the Euro triggered a sell-off in the USD CHF. A new main top was formed at 1.1137. Short-traders will likely trail their stops to slightly above this level. Thursday’s action took out the last main bottom at 1.0995. Downside momentum indicates that a Fib retracement level at 1.0916 is likely. A break through this level should trigger an acceleration to the downside.
The weakening global economy and drop in U.S. equity markets pressured the USD JPY on Thursday. When the outlook for the economy looks bleak, traders have a tendency to seek shelter in lower yielding assets such as the Japanese Yen.
Weaker equity markets and a general dislike for risky assets because of the gloomy outlook for the global economy underpinned the USD CAD on Thursday. Gains may have been limited by the strength in gold. Technically, the market is running into a cluster of resistance at 1.0471 to 1.0481. A break out over this zone should trigger an acceleration to the upside. A break back under the support cluster at 1.0407 to 1.0394 is likely to attract selling pressure.
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