After the report the S&P 500 cash market traded significantly into the green, pushing up to test resistance at 1075, a 1% gain on the day, but was unable to hold steady as the market quickly reversed from its highs and started then to push the Usd values up, in a see-saw period of trade.
At the end of the Wall Street session U.S. stocks closed around 1% below opening prices, revealing once again on FOMC delivery day that finding fair value on risk while coming out of the trough of the global economic business cycle, is a hard thing to do.
The beginning of the bearish pattern of trade on Wall Street was also the reason for the red numbers on the most of Asian stock futures, except the Nikkei which finished the session higher, up 1.67% at 10550, after being as high as 10620 at one stage.
After the Fed decision the gold and oil markets also declined, trading down sharply, searching for support areas and price points that would ignite pockets of buy orders.
On Wednesday oil closed around $68 per barrel, after the break-out through the trend-line support that appeared earlier that day (chart detail).
Gold finished lower for the day, around $7 below the open price, as the traders just cannot as yet break through the 1010-1030 resistance area, shown on the weekly chart (chart detail).
If the bounce lower on the gold and oil market can hold, the U.S. dollar should benefit against the majors in the coming days and weeks, since both gold and oil are holding the negative price action correlation with the dollar.
The spider’s web effect of a pull on one market creating a push on another is always there to some degree, a forex trader’s job includes determining the percentage correlation, so that exposure can be contained and expectancy can be adjusted.
Currency traders may be looking on the short side of the commodity pair Aud/Usd (chart detail) and on the long side of Usd/Cad, but only if the 1010-30 resistance on gold holds, while oil trades below the support line shown in the chart above, and most importantly, as the ultimate gauge of risk tolerance, the S&P futures market breaks 1050 support.
The market can remain overbought for quite a while, and there is still no four hour chart signals to actually liquidate long-risk positions; just warnings to lock in profit and not to add too much to short-dollar, and long stock trades.
There is divergence between the forex pairs, with Jpy gaining hard on the dollar, Gbp losing ground at a fast pace, after a one minute 80 pip candle triggered automated sell orders after the Bank of England Governor stated in a BBC interview that two U.K. banks were on the brink of collapse in October last year (is that really all there were?).
Mr King added to the jawboning in a regional newspaper column that a weaker pound would help stabilize the U.K.'s exporting market. Great hot-air jawboning was applied, to achieve a drop in pound values that quantative easing was struggling to do.
The remaining major are pairs stuck at their opening prices while the market guesses which way the flow of risk tolerance will be today. The signal is that even though risk may be taken off the equity table, it is not yet convincing enough to send the market into Usd dollar bullish mode.
There is still something smelly in market mechanic terms about being seen to favor the dollar, it is struggling to garner good favor, and may signal that the burden of interest rate differentials and forward debt obligations may actually be too much for even the most inspiring dollar optimist.
For latest Elliott wave charts, please visit our public Chart of the Day area.
No Stock Position