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Currency Pair Overview: Central Banks Dominate The Dollar

|Includes: SPY, UDN, PowerShares DB USD Bull ETF (UUP) A Forex Trader Portal

Currency Pair Overview: 

Central Banks Dominate The Dollar

The dollar index strengthened throughout the late Asian trading hours, but the European open has helped the major pairs return to Thursday’s opening prices. The only exception was the aussie, which was pulled higher by excellent labor market data, released during Asian session. Throughout the European trading hours, the market respected the fact the SNB and the BoE monetary policy decisions were on their way. Even though this was not reflected in the market’s volatility, the two meetings are likely to be reflected in the trend over the next few days of trading.

TheLFB Charting LinkDollar Index Technical View: TheLFB Member Charts
Overall View: Bullish bias so long as the 74.27 support holds

4 Hour Chart Flows: Mixed Price Points: 74.27,  75.00-75.40, and 76.31 Looking for: A Short wave ii pull-back towards 75.40

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 reversed recently at the 76.31 resistance area, where we believe the impulse wave, a Long black i is completed. As such, traders should look for a near-term push lower on the dollar index, which will drive the majors higher, and probably support near-term Long equity and commodity plays. With this being said, it is not the time to be holding many long dollar positions, as a corrective pull-back in wave ii looks to be on the way to test the 75.00-75.40 region; in the area where an up-trend may continue.

The wave count remains valid as long as the market trades above the 74.27 support level.

The euro (Eur/Usd 1.4735) tested the 1.4680 area for a third consecutive day during the late Asian session, but once again, this support area managed to hold. The price action of the last few trading sessions shows that the euro’s trading direction is shifting to long once again, something that might allow the pair to re-test the 1.4830 swing area. A break above this price point can only come on positive equity markets.

The pound (Gbp/Usd 1.6300) traded under the influence of the Bank of England monetary policy decision, scheduled at 07:00 EST. The market has flat expectations, meaning no change in either the interest rate or the size of the asset buying program, but the central bank has surprised the market a couple of times over the last few meetings. Similar to the other pairs, the pound has managed to set a base around the 1.6150-1.6200 area, but the direction of trading from here will depend on the outcome of the monetary policy meeting.

The aussie (Aud/Usd 0.9170) was the most active pair over the last two sessions, aided by the positive labor market data released throughout the Asian session. This has helped the aussie jump nearly 150 pips since the late U.S. session, at a time when the other major pairs traded in tight ranges. The labor market report adds to the excellent macroeconomic data that was released lately from Australia. However, in the short term, the aussie still has to break above the 0.9170 area, where the market has formed an important swing point area.

The cad (Usd/Cad 1.0515) traded flat for most of the overnight session, despite the fact that the other major pairs advanced against the dollar. The cad’s resilience to move came as the pair traded in the 1.0550 area, the place where the 20 and the 50-day moving averages meet. However, the cad started declining slowly as the U.S. open approached, breaking free from the 1.0550 support area. The next important target to the downside is in the 1.0420 area.

TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index. 

The swissy (Usd/Chf 1.0250) had a range of only 50 pips, even thought the market expected the Swiss National Bank to present the latest developments regarding its monetary policy. Within the its assessment, the SNB removed the phrases that complained about the strength of the Swiss franc, which is a major breakthrough for the currency. This might help the Usd/Chf to reach new lows in the medium term, if the dollar sell-off continues.

The yen
(Usd/Jpy 88.30) is currently consolidating in the 88.00 area, after three days in which the pair has moved almost exclusively lower. This might represent a turning point for the yen, both in the short and medium term, something that the BoJ will be looking forward to. To the upside, the next important target lies in the 90.00 area.

Disclosure: Long Aud/Usd