FOREX TRADING

The most important message I can deliver today is that there is absolutely no point in fighting this market. It doesn’t matter whether you believe in this move or even understand it enough to argue its merits, the fact remains that market and trader positioning at present means that the USD is clearly out of favor and equities continue to scream higher.

As noted in previous days it is strongly recommended to keep eyes glued to the DXY and the developments on that front. I wrote that we will see more downside in this index, before any sign of consolidation and then the obvious retracement. The question, however, remains how much more downside and when does the consolidation actually come? In simple terms with the index currently trading around the 81.20 level, and plenty of wood to chop below, we could still see a grind into 80.50 before this thing settles down. (more…)

Risk sentiment surged on positive economic data as well as beginning of month asset allocation. The positive news stream continued from last night’s release of China’s August manufacturing PMI which surprised to the upside printing 51.7 vs. expected 51.5. The risk rally continued as we received uplifting news from down under on much stronger than anticipated 2Q Australian GDP numbers (+1.2% vs. +0.9% expected). The economic data out of the U.S. showed a disappointing ADP employment change for August dropping to -10K from the prior 37K (cons. 15K). This was the first negative ADP reading since January of this year. The market reaction to the labor data was relatively muted and it was the August ISM manufacturing data which was released at 56.3 well above the anticipated 52.7 and stronger than the prior 55.5. Construction spending came in weaker than forecasted (-1.0% vs. expected -0.5%) but was shrugged off as the market focused on the strong ISM numbers.

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