FOREX TRADING

It Is The Treasury Market Now

Forex Trader Note: The global equity markets have moved higher in recent trade and have been backed by strong oil ($79) and hard commodity moves. The ‘Long Equity-and-Oil/Short Usd’ correlation is not in play due to the fact that U.S. Treasury yields (dollar denominated) are paying close to 4% per year interest, and looking to increase that return in advance of any overnight or discount interest rate increases from the Federal Reserve.

The imbalance between the Fed’s 0.25% overnight rate, and the 4% 10 year Treasury note yield is creating a unique near-term situation that will have the dollar pulled around a little, until fair value is ultimately found against the major pairs.

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Dollar Index Swing Point

The initial long-Usd moves in European trade were reversed as the U.S. GDP numbers printed at 2.2%, lower than expected, but were then added to again as Existing Home Sales came in at 6.5M units, which was above the expected 6.3M read. The last leg of Tuesday trade has then been to once again add to long-Usd positions as European markets close.

The pattern for currency markets is to go sideways in afternoon Wall Street trade, but there are signals in the way that forex pairs have split, that today could be different. Long equities, Long dollar, and Short gold and oil, are not things that pm U.S. trade has dealt with too often, and it will be interesting to see this unfold as the dollar takes another wipe out of the euro, cable, and aussie.

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Thin Trading In The Currency Market

The major pairs saw some action during the European session, after a flat Asian session, but little of it looked sustainable. As seen in the equity and in the commodity markets, the trading volume remained thin throughout the Asian and the European sessions, most likely due to upcoming Christmas and New Year Holidays. One exception proved to be the cad, which dropped 80 pips ahead of the retail sales report, expected at 08:30 EST

Dollar Index Technical View: TheLFB Member Charts

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Usd Held At Resistance On Triple Witching Friday

The major currencies were helped by S&P futures and by the cash equity market in gaining a few pips during the overnight session. However, compared to the sell-off seen over the last two weeks of trading, this intra-day uptrend is very small. Unless the cash and equity markets continue to stay into the green during the day, another round of Usd buyers might join the market during the upcoming U.S. session.

The one thing that may hold fair value on most markets is the expiry of December, quarterly, and yearly U.S. option contracts today.

Dollar Index Technical View: TheLFB Member Charts

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Dollar Index At Resistance

4 Hour Chart Flows: Long Price Points: 75.00-75.40, and 77.00 Looking for: A Short wave ii pull-back towards 75.50

Momentum: The dollar index went into Neutral mode on 26th Oct and has held that trend since. The near-term path of least resistance is consolidation around new lows, with long-bounces on weak equity trading days. The weekly close above 76.00 (a signal that buyers are dominating), is bullish and signals a potential momentum reversal.

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Dollar Index Drops as Shares Advance

Positive equity and commodity markets had a strong influence in the foreign exchange arena on Monday, sending the dollar index down to the 75.00 support area once again during the overnight session. The major currencies posted some small declines around the Sunday open, but soon afterwards the market reversed tack and since then the majors have moved almost exclusively higher. The only exception is the yen, which attempted to break below a 6-week old support area, but failed to find momentum to hold below 88.50.

Dollar Index Technical View: TheLFB Member Charts

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U.S. Midday Currency Market Hit By Risk Aversion

The dollar index strengthened across the board in Thursday trade, as the market traded in a classic risk-aversion phase that mirrored a drop in global equity trade. The major pairs headed lower from the start of the Asian session, and continued to so during the following sessions.

The sell-off on the major currencies against the Usd was driven by equity and commodity market trade, which also posted substantial declines. In the current economic climate of questionable global growth, risk aversion means lower stocks, higher bonds, and stronger Usd as Treasury notes are bought.

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Dollar Index Finds Buyers

Overall, the dollar index started slowly to add points during the Asian session and continued doing so throughout the first part of the European session. Right now, every major currency is trading below Tuesday’s opening price against the dollar, even thought the U.K. sterling and Japanese yen currencies showed some resilience. The dollar’s uptrend seen overnight reflects the selling from the equity markets, and echoes Mr. Bernanke’s latest comments, which called for a stronger dollar.

Dollar Index Technical View: TheLFB Member Charts

4 Hour Chart: Mixed. Main price points: 74.70, and 75.77. Looking for: Wave V)

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