Wall Street failed a test on Monday, and showed as clear a technical picture that there are no institutional buyers of note above 1075 on the S/P. In response the algorithms liquidated major currencies and moved into Usd-based Treasury markets. The Asian session was weak and showed no inclination of attracting buyers and forced major pairs into very tight ranges that were struggling from the get-go to test the previous session ranges.
Sandwiched in between the Asian and American equity lethargy was a European move to bounce equities off support that looked sustainable right up until the point that Wall Street dropped the S/P lower from 1080. In the European session traders saw the dollar being sold in a reflection of just how strong right now the percentage inverse Usd/Equity correlation really is.
On the last week of August, with pathetically low participation levels, in an environment that has created record mutual fund redemptions, trading sessions are going to be at the beck and call of equity sentiment, and especially S/P futures direction. The pattern can be traced all the way back to the December Non-farm Payroll report which since then has determined the direction of trade for the subsequent month. August NFP was poor, and the S/P has dropped 6% since then.
There is weak market follow through at the moment with sporadic bursts of energy failing to hold, as the last week in August wraps up one of the lowest-level months of global market volume seen in decades. It is a coin-flick in regard to where the major pairs break and will stay that way until global equity and commodity markets align and signal solidarity in regard to sustainable intra-day price action. 1075 on S/P trade is the inflection point, with a break higher creating a short-Usd bias, and vice versa.
Gbp/Usd has re-cycled higher to test 1.5600, and is now at a pivotal price area that will be closely monitored. Usd/Cad has consolidated the moves higher from Friday. Just like Gbp/Usd, cad is now at a very important area that a move either way could be just as easy to make, with a break of 1.0450 or 1.0550 likely to set the tone for the week.
Usd/Chf and Usd/Jpy are both absorbing recent Treasury market moves, and both look a little lost, yet volatile, in the near term. Eur/Usd has a wall of upside resistance that may contain any bullish moves at least until a Daily chart close above 1.2850 is seen. Once again, the markets are offering about 20 pips of overall movement on the major pairs on Monday.