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Market Wire Update:
In early U.S. futures trade on Wednesday the forex arena has been dominated by two things; the high, and the low, of the previous session's trade. The major pairs let off steam at the end of last week, and broke a three month range that has yet to be tested as support. The inability to get back and see how strong that break-out point now is may impede the next leg higher on the dollar.
The markets have seen the break, they have not however seen the confirmation that it will easily form the base to now move up from. Increasing volume at the point of breaking the previous session high or low will be key to most experienced traders analysis, coupled with the confirmation that comes from all of the major pairs moving at the same time.
There has been a break from cable (Gbp/Usd) that has just broken the high of Tuesday, and taken out 1.7000 again. However, most of the other major pairs, outside of euro, are breaking the previous session ranges, and some are a long way off doing so. As such, the cable move has to do one of two things; either draw in enough momentum that the major pairs all start to follow, or reverse back to the break-out point and garner support from the market, ahead of the next break.
The waves of market momentum flow in and out all day; cable just caught a ride that the other pairs missed. The question now becomes, ahead of the Bank of England and ECB rate decisions, how far back out is the wave going to take cable, before crashing back in again? If the major pairs play catch-up, the pull-back may be short and shallow, if they do not follow, cable may be left stranded out on its own, something that historically will not hold for too long.
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