Dollar Requires Short Selling, Not Profit Taking
S&P futures: Weekly, Daily, and 4 Hour Chart Reviews
The Asian shares were lower in the first session of the week, which drove the U.S. dollar higher against the major pairs. A similar pattern was also shown at the start of European trade when the German Dax fell from the 5698 open, which was also a daily high, down to 5617 support.
During that combined period of trade the Eur/Usd was flat, going on to the 1.4609 daily lows just before Wall Street opened. U.S. stocks gaped lower on the start of the session, but they quickly reversed in lock-step combination with the European markets, when the German Dax climbed from the 5617 low, back up to the 5668 close, finishing with an increase in intra-day volume as the bid orders hit the wires.
This was the reason for higher major pair valuations at that same time, when the dollar lost almost all of it gains made during the Asian, and the first part of, the European sessions.
“S&P futures are trading below last week highs, and so long as it stays this way, the major currency pairs will not so easily break through their highs of the past week against the dollar”, said Grega Horvat, Snr Currency Strategist at TheLFB.
“The 1070 high on S&P futures needs to be taken out, before the majors can continue to rise against the Us dollar. However, it seems that this may not so easily happen, at least not before the huge economic reporting day that Wednesday houses” Horvat added.
Considering the recent reactions to, and continued impact of Fed jawboning, some increased equity profit taking could happen in front of the FOMC statement. That scenario may not empower the dollar however; it seems that only new sell positions in equities, rather than just liquidation of some long profit, will be what instigates the next phase of any greenback strength.
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