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Mixed Currency Market Signals

May 16, 2011 8:05 AM ET
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Latest currency headlines are still monitoring the ‘strong-dollar’ US Administration jawboning, and the inability to back the talk with action. TheLFB client notes have called for consolidation at support above 72.50 on the dollar index (DXY), and to monitor resistance at 76.50 very closely.

The major global currencies are trading in mixed fashion against the US dollar, with all currencies now beholden on a daily basis to whatever energy and momentum hits on global equity and commodity trade.

Any existing Usd-based positions should be closely monitored this week while recent price action is absorbed, as new long-dollar signals were trying to form late on Friday, in reaction to an intra-day collapse in S&P 500 values.

Price Action:
There was strong buying activity previously at 74.50 on DXY, which is a potential price reversal area of note. The upside resistance area at 76.00 will be closely monitored and market alerts sent to subscribers as things unfold.

The daily trading range on DXY is 60 ticks, which is above the historical norm and indicates high speculative interest. The 50-day Simple Moving Average (SMA) on DXY is @ 75.50, with the 20-day SMA at 74.30. DXY price action has a 36-month 75% correlation to crude oil and SPY moves, and an 80% correlation to the euro (Eur/Usd) currency moves.

Long-dollar signals are forming in the near-term, after last week’s burst of dollar buying energy continues to be absorbed. Clients will be notified when price action breaks and holds.

Sentiment towards the Usd remains mixed. Price action favors consolidation of recent moves across all major currencies.

Caution is required by traders who are looking for sustainable price action on either side of the US dollar as there is little expectancy for a sustainable break higher in DXY values above 76.50, or lower below 72.50 in the mid-term.
The detail below forms a part of the in-depth daily analysis provided to subscribers. This helps guide traders with analysis on intra-day price movement, trend, and momentum. Clients will note how regularly the Swing Point and Support or Resistance areas below are used each day.

Content taken from TheLFB Trade Plans

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