EUR/USD, USD/JPY and AUD/USD Forecast – US Dollar Falls After Downgrade

EUR/USD Technical Analysis

The euro has spiked against the US dollar, gaining about 1 % before the Americans came on board. That being said, the market is reacting, at least in my anticipation, to the downgrade of the US sovereign debt over the weekend by Moody’s. However, keep in mind that they are just simply downgrading to the same level the other two major reporting agencies were at. And if you look at the history of what happens, you saw US dollar strength, you initially saw higher rates and then you saw them drop back down again. So, I wouldn’t get overly excited about this.

You can see that the 1.13 level is offering a bit of resistance. I suspect we’re looking for exhaustion to start selling again because quite frankly, if we do in fact get higher interest rates in the United States, the dollar becomes much more attractive and you have sovereigns front running that situation where they’re buying dollars because of the soon to be rising cost in their local currencies to pay off their bond obligations, et cetera, et cetera. So, there’s a lot going on here, but I think by the end of the day, the downgrade really doesn’t matter.

USD/JPY Technical Analysis

The US dollar has fallen against the Japanese yen. This might be more of a risk appetite trade here, but we are hanging around this crucial 145 yen level. If we can bounce from here, the 50 day EMA is your first major resistance barrier, and then we could go looking towards the 148 yen level. We are still in the middle of a bottoming pattern from what I can see, and this is generally a very messy affair, especially against the Japanese yen. Even if we do break down from here, I’m not really looking to short this pair. I don’t want to pay the interest rate differential at the end of every night. And quite frankly, I suspect this is a short term pullback at best.

AUD/USD Technical Analysis

The Australian dollar has rallied against the dollar basically for the same reasons that the euro has, I suspect. We are sitting right here in the same consolidation. So really not that much has changed. Although as things stand heading into New York trading, it’s a reasonably strong candlestick, but it’s not as strong as one of them that we had last week, for example. So again, I don’t know that anything’s changed quite yet. We’ll have to see. But if we can break above the 0.65 level, then you have to start looking at the Australian dollar as something worth buying.

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