Forex Market Technical and Fundamental Recap
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Today's Forex Analysis summary
The right combination of fundamental and technical factors helped the U.S. Dollar surge to multi-week highs against most major currencies on Friday.
Fundamentally, the Dollar rally was triggered by a better than expected U.S. jobs report. The U.S. Non-Farm Payroll Report showed a loss of fewer jobs than forecast which brought confidence to traders that the U.S. was leading the world out of the recession.
This reaction was different than previous reactions where the Dollar broke on good news. This may be an indication that global traders feel the U.S. financial administrators finally got it right and have put the U.S. economy in strong position to recover well before the rest of the world.
Investors expressed confidence in the change in sentiment toward the Dollar by turning gains from earlier in the week into a cluster of weekly closing price reversals. All these markets have to do is follow-through next week in the direction of the reversal to ignite more selling pressure next week.
Based on the strength of the reversals, it looks as if the Dollar is poised to start a minimum 50% correction of its last break down.
The selling pressure in the EUR USD did serious damage to the chart and has put this pair in a position to post a weekly reversal down.
The combination of a break below a major 50% price at 1.6085 and last week's close at 1.6188 has put downside pressure on the GBP USD. Political uncertainty also contributed to the break in the Pound.
A big shift in investor sentiment has encouraged Swiss Franc traders to repatriate funds to the U.S. Although there is strong upside action in the USD CHF on the daily chart, it's the weekly chart that is giving the strongest indication of the start of a short-covering rally.
The uptrend in the USD JPY was confirmed today when this pair broke out to the upside over the last main swing top at 97.23. The next objective is 99.75. A move through this level will also penetrate a main trend top on the weekly chart. Given the upside momentum in the market, it looks like it should have no problem challenging the high for the year at 101.44.
A decrease in trader appetite for riskier assets triggered a profit-taking break in the highly speculative Australian and New Zealand Dollars. This week the AUD USD reached a major retracement zone at .7928 to .8382 and stopped cold at a little more than the mid-point. The subsequent sell-off demonstrated how fundamental and technical factors can work together to initiate a top in the market.
After hitting precisely the 50% retracement level of the .8215 to .4892 break at .6599, the NZD USD exhibited a sign of heavy selling pressure by closing lower for the week. This weekly reversal down needs to be confirmed by a follow-through break next week, but all indications are for the start of a 2 to 3 week correction to at least .5741.
Following an almost 90 day break from the high for the year in March, the USD CAD may have finally reached a short-term bottom. A huge downside objective was met this week when this pair tested a major retracement zone at 1.1059 to 1.0586.
By ForexHound.com the portal for Analysis, Education and exclusive timely market Gann Analysis.
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