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In early European trade, Wednesday was setting up to be the day that could have seen a technical and fundamental move on the major pairs that defined where fair value on the dollar went this summer. The 4 hour charts started their pull-back through RSI reads that were dramatically oversold on the dollar, and now the daily charts have confirmed that it would not take too much Usd buying to initiate a move that sends another wave of automated orders to the market that banks recent profit taken made by the major pairs.
The overnight pull-back by the major may just be the start of a near-term period of dollar buying, and ahead of the ECB and BOE rate decisions on Thursday, and after a period of trade that has shown a raft of economic releases that have been better than expected, it may be time to reverse the recent dollar selling, and align for the reality of the European based rate decisions and verbiage.
The first day of increasing volume of note sent the dollar higher, in a play that reduced the value of oil and gold, as well as decreased global equity market values TheLFB Trade Team said. Ahead of the rate decision we may now see consolidation at these levels, unless Asian stock markets move hard into the red by more than 1%; in that case we will be looking for further dollar buying.
Cable looks to be the most vulnerable pair right now, given that the British government is absorbing a political situation that may not easily be resolved; the market likes nothing less than political instability, especially ahead of a major economic release, the Trade Team said.