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Overall, the forex market exploded into life on the back of comments from the Reserve Bank of Australia, setting a fire under the short side of the Usd. The positive from the message, and the global recovery signs, creates a view that currencies may be able to be valued on more than the risk-tolerant or risk-averse plays that have been the norm as the credit markets were re-built, and that S&P futures market dominance would maybe now be questioned a little harder each day.
The euro (Eur/Usd -0.1%) made a move from the opening price of 1.4230 to test TheLFB pivot point 1 at 1.4300, and in a pattern of trade seen recently, reversed off that test, straight back to the opening price area. The 1.4200 to 1.4300 near-term channel has locked the pair in, during recent trade, and oil markets being unable to move higher will not be helping euro in its attempts to break long.
The pound (Gbp/Usd +0.1%) opened at 1.6490, and after a test of TheLFB pivot point 1 area, reversed straight back down again, to trade ahead of the U.S. session at the opening Asian price. The pair is in a tight horizontal trading range that reflects the weaker sentiment shown towards U.K. economics at the moment. That range has good support around 1.6350, and strong resistance around 1.6650.
The aussie (Aud/Usd +1.1%) saw weak momentum during the early Asian session, but soon after started a rally that added 100 pips as Governor Glenn Stevens spoke about the state of the Australian economy. On the daily chart, the aussie has already managed to break above the range of the prior week, something that the pound and the euro are still trying to achieve.
The cad (Usd/Cad -0.1%) continues to trade near the 1.0800 area, after a test of strong support at the 1.0750 range, and the lowest value the pair has touched in more than a year. As a note, the cad was the only major pair that was able to develop and sustain a trend over the last few weeks of trading, while the other major pairs had traded side-ways.
The swissy (Usd/Chf 0.1%) moved very little during the Asian session, inline with overall early moves by most majors, but sprang to life in a game of catch-up when aussie made a big move on the Usd. On the daily chart, the pair is trading near to the 1.0700 swing point low area, and desperately now trying to find momentum to break lower.
The yen (Usd/Jpy -0.8%) bounced off the 200-day moving average again as resistance and set up a reversal that turned into a rout in European trade. The pair dropped from 95.25 to 94.35 in quick time as two market related issues unfolded. The test of the 200 SMA has been a long-standing price area to fail at, and overnight was no exception as the equity markets ran out of momentum as that price point was hit. The second point to note was the way that the Usd had been dismantled by the major pairs in European trade left it vulnerable to an over-shoot on any subsequent reversal that may happen; put the two together and a 100 pip reversal takes place.
There are still many answers to be provided, including the global equity market’s ability to hold near record near-term moves, and also the oil markets ability to fill the gap between supply and demand figures with the build up of contrarian long futures positions that seem to be leading that market. If it all holds as currently shown, and equity and commodity markets provide nothing other than a controlled pull-back to support, rather than an collapse that changes trend and momentum, the Usd will remain under selling pressure.