EUR/USD: Looking for another retest of 1.2950 to sell from.
GPB/USD: Watching the reaction to a test of solid 1.5550 support.
AUD/USD: Off the radar until either 0.9000 or 0.8900 is broken and held on a Daily chart.
USD/CAD: Sideways chop looking for a short break of huge support at 1.0390.
USD/JPY: Stuck in short mode but looking ready to break long with a close above 86.00 a long Daily chart signal.
USD/CGF: Off the radar completely.
It took just one session of trade on Wednesday for the sideways chop across forex trade to break, and for the traded market to reveal that the path of least resistance is building long-USD. The moves are in reaction to weak economic outlooks, slower growth than had been priced in, and the unwinding of short-USD positions that had taken the dollar index from 88.00 to 81.00 in the space of one month.
European traders tested the long side of the major currencies, and had the chance overnight to unleash the algorithms to test USD support. The reaction, that was timed with a Bank of Japan press conference and the ECB monthly bulletin, failed to break, leaving momentum building to the long side of the dollar.
Just like an extended rubber band, the push higher on the major pairs hit resistance and reversed with far more velocity than on the way up, and going into Wall Street trade the short-sided moves may build if equity buyers do not show up in quick time.
Traders have seen a pattern of trade that since December 2009 has held steady; whatever direction has been taken just after each Non-farm Payroll release has been the direction that has held for the month.
Be it 7%-10% gains on the S/P, or 7%-10% losses, it has been unusual to see a month that has not moved the equivalent of a year’s worth of trading range in four weeks, and unusual to see a month that did not react to a better or worse than expected read on NFP.
August is likely to be no different, and forex traders will be watching closely the daily chart closes through until Friday, for confirmation that the computer coding has been able to reverse 4-hour chart trend and momentum reads that since the June/July NFP reports have been dominated by USD selling.
There may be a last exhaustion gap against the USD between now and the Friday closing tick, but history says that short-equity, short-commodity, and long-dollar trade will allow the dollar index (82.90) to make a slow and steady crawl back towards 87.00.
No rush, no panic; global market trade has until September 3rd before the NFP Circus comes back to town, when the Ringmaster pitches the Big Top on Wall Street once more. Hopefully by then the global economic fog may have cleared, because right now the silver lining is covered by some dark clouds that September will need to soon blow away.
Disclosure: None
