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Overall, the dollar index lost 1 full point, or 1.3%, on Tuesday as the euro and the swissy led the major currencies higher. The dollar’s decline started during the European session and continued throughout the U.S. trading hours, even though the S&P futures were unable to trade anywhere decisively. The main driver behind the dollar’s decline is the FOMC meeting scheduled on Wednesday, since most investors expect the Fed to anchor the market’s expectations that the Fed Funds Rate is set to remain at a very low level for a prolonged period.
The Euro (Eur/Usd) posted the strongest gains from the last few months on Tuesday, as investors expect the Fed to keep rates on hold for an extended period. The pair headed only higher during the European and the U.S. sessions, something that helped the euro gain 220 pips. On the daily chart, the euro is trading just below the trend-line that connects the 05.07 and the 06.08 lows.
During the European session, a release showed that the German and Euro-area Manufacturing PMI improved in June, even though the gains were smaller than expected. On the other hand, the Services PMI for the Euro-area and for Germany consolidated near the value reached in May.
The Pound (Gbp/Usd) spent most of the overnight session swinging around the 1.6300 area, even thought the pair traded in a large range. During the second part of the U.S. session, the pound started heading higher in-line with the other major pairs, and gained almost 130 pips on the daily chart.
The number of mortgage approvals in the U.K. improved much more than expected in May. However, analyzing the report from a longer-term perspective, the number of mortgages approved is still hovering near very low historical levels.
The Aussie (Aud/Usd) managed to turn around the weakness seen in the prior day of trading, and advanced 150 pips from the low set during the London open. The aussie lost approximately 70 pips during the Asian session, but headed only higher throughout the rest of the day. For now, the aussie is trading just below the 20-day moving average.
The Cad (Usd/Cad) was unable to sustain a trend during Tuesday’s trading hours, practically being the only pair that did not manage to post strong gains compared to the dollar. On the daily chart, the cad appears to be forming a small doji-star, just below the 50-day moving average.
The Swissy (Usd/Chf) traded in a 25-pip range during the Asian session, but as soon as the London market opened, the swissy begun tumbling at a strong pace. During the European and the U.S. sessions, the swissy lost 230 pips as investors think the Fed is poised to keep rates on hold for a very long period.
A report showed this morning that the Swiss trade balance came in at 2.01B for May, one of the strongest numbers seen over the last few years. To some extent, this may provide strong support for the Swiss franc.
The Yen (Usd/Yen) lost 90 pips during the first part of the overnight session, down to TheLFB S3 (95.05). From there, the yen bounced near Tuesday’s opening price, but then again the pair started heading lower. Right now, the yen is trading near the same TheLFB S3, which appears to be an important intra-day swing point.
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