A New Pattern of Currency Trading?

Overall, the market has developed a trading pattern lately. A wave of orders hit the currency market soon after the Asian session opened, testing and eventually breaking important price points. Last night was the third night in a row that this happened. After two days of dollar buying, the market now sold the dollar.

The Euro (EUR/USD) fell more than 100 pips in the last day of trading, as business conditions in Germany, Europe’s powerhouse, deteriorated. The pair was down 180 pips at one-point, near TheLFB S3, but during the U.S. session, the pair regained some ground. The euro continued to strengthen in the Asian session, gaining 60 pips.

The Pound (GBP/USD) declined 200 pips yesterday, falling down to a 2-year bottom. The move came because the U.K. economy is deteriorating and the market is already pricing in a number of rate cuts coming from the Bank of England. However, the pound managed to gain 60 pips in the Asian session, reversing some of the losses from the last day of trading.

The Aussie (AUD/USD) is finally posting gains in the Asian session, advancing from an 11-month low. Furthermore, the pair had managed to break a trend-line that acted as a resistance for more than 5 days.

The Cad (USD/CAD) was able to strengthen against the dollar yesterday, backed by the gains in the crude oil market. The move was very interesting, since oil strengthened at the same time the dollar posted gains, breaking the negative correlation between the two assets. The Asia session brought some more dollar selling/Canadian dollar buying since the pair fell 40 pips and is now preparing to test the TheLFB S1.

The Swissy (USD/CHF) saw a lot of volatility lately as trade desks move in and out of bonds. In the last day of trading, the swissy gained 130 pips at one point, but at the end of the session the pair gained only 50 pips. Since the Asian session started, the pair declined an additional 50 pips and is now testing the upward trend-line that has held the price action since late July.

The Yen (USD/YEN) fell in the Asian session closed to 40 pips, testing TheLFB S1, and at the same time, the lows of the previous sessions. Investors tend to reverse carry trading in times when uncertainty hit the market and this is what is happening to the yen right now. Until equities find a solid base, the yen will continue to move sideways.

Comments

[Kelly Liebe...:]

Currency market jitters....which paper will survive as all heck breaks loose? I am betting on Gold, as I am sure very quickly one of these other nations will very quickly...
I would just hate to be second or third in that race....

2008 Aug 27 02:42 PM

[Tick Talk:]

Boring. What is communicated slowly in hundreds of words can be conveyed almost instantly in a handful of charts. Please add efficiency, clarity and value to this recap by embedding charts.

2008 Aug 27 04:37 PM