Majors Advance, Yen Falls After Bank of Japan Meeting

|
Includes: FXA, FXB, FXC, FXE, FXF, FXY, UDN, UUP
by: The LFB

Positive equity and commodity markets gave a boost to the major pairs throughout the overnight session, and sent the dollar index down to test the 74.50 area. This is the same point where the market bottomed over the last few days of trading. If the equity markets continue to stay in the green after the U.S. open, the chances are that dollar index will continue to push to the downside, heading towards the 74.00 area or even lower.

TheLFB Charting Link

Dollar Index Technical View: TheLFB Member Charts

4 Hour Chart Flows: Mixed Price Points: 74.19, and 75.58 Looking for: Reaction around the 76.4% support area at 74.50

Momentum: The index moved into Neutral mode on the 26th of October and since then has struggled to find the strength to easily create and hold a Short trend despites some negative price action days. The sentiment is flowing from overbought to oversold in quick time and is following the global market open and close of Asian, European, and U.S. commercial markets. This is a tight trading range that is sitting at yearly lows, yet looks comfortable.

Elliott Wave: The dollar index is very weak at the moment, driven by higher stock and gold price action. The wave count presented yesterday that looked for support to hold is still valid, as the 74.19 low has not been taken out. Some up-side pressure may come back into play in the near-term, if the 76.4% Fibonacci support level of the wave i distance, around 74.50 holds.

If not, the market will look for at least one more push into yearly lows with wave Y an alternative (circled) wave count.

The euro (Eur/Usd 1.5075) was trading in the 1.4970 area during the European open, near the same place where the market bottomed in Monday trade. However, the euro saw strong positive momentum throughout the European open, which drove the pair some 100 pips higher.

TheLFB Charting Link

Euro Technical View: TheLFB Member Charts

4 Hour Chart Flows: Mixed Price Points: 1.5143 Looking for: 76.4% Fibonacci resistance signal at 1.5070

Momentum: The pair moved into Neutral mode on the 26th of October and then struggled to find the momentum in order to create and hold a Long trend until the 19th of Nov when it signaled a Long move that is holding. The sentiment is flowing from overbought to oversold in quick time and is following the global market open and close of Asian, European, and U.S. commercial markets.

Elliott Wave: Eur/Usd is in a very powerful recovery mode after the sell-of shown in the past week, that was initially driven by bad news from Dubai World and their threat of bond defaults.

The wave count shown on the four hour chart below remains valid so long as the market trades below the 1.5143 top. Prices are testing the Long 76.4% retracement area around 1.5070, which is the last Fibonacci resistance level before a possible move short.

Any break of the 1.5143 top will create a new wave count with new up-side targets, somewhere around the 1.5200 – 1.5250 zone. In this case traders should pay attention on the alterative wave count, (boxed) which is showing the possible structure of an ending diagonal.

The pound (Gbp/Usd 1.6575) is currently approaching the 1.6600 area, the main swing point of the last half of year. A break above this price point will shift the pound’s outlook to long, but the pair will need very strong momentum to pull the move off. Additionally, in the 1.6620 area, the 20-day moving average can also be found, providing further resistance.

The aussie (Aud/Usd 0.9230) lost a few points during the early Asian session, after the RBA increased the Cash Rate by 0.25%, as the market expected. From this point, investors started to buy the aussie on dips, something that sent it 130 pips higher. Among the major banks, the Reserve Bank of Australia is the only one that is currently in a rate hiking cycle.

The cad (Usd/Cad 1.0450) headed lower during the European session, falling approximately 100 pips. It is approaching the 1.0420 area, the swing point low of the last four weeks of trading. A break below this level will require strong momentum, but once it clears this area, the road is open towards the 1.0200 level.

The swissy (Usd/Chf 1.0000) is swinging up and down around the parity level, in the 1.0000 region, as in the prior five days of trading. On the daily chart, the swissy is trading near the lowest level since April 2008.

The yen (Usd/Jpy 86.75) surged 130 pips from the Asian session open, far above the yen’s trading range during that time of the day. The surge was caused by the BoJ un-scheduled monetary policy meeting, where the central bank decided to offer a new loan program for the country’s financial system. The main threats to the Japanese economy right now are the strength of the Japanese yen, and deflation.

Disclosure: No positions