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Overall, the currency market reversed its direction of trading on Wednesday during the U.S. session, re-entering in a risk aversion mode. This happened only after three of the largest U.S. debt holders, China, Brazil and Russia announced their plans to diversify from the dollar. Despite the short-term reaction, such news has the potential to send the dollar index much lower, as its supply is projected to increase over the coming months because of the huge U.S. deficit, while the dollar demand looks steady (at best). During the Asian session, some of the major pairs recovered part of the declines observed throughout the U.S. trading hours.
The Euro (Eur/Usd) saw modest gains during the first part of the day on Wednesday, but plunged some 200 pips during the U.S. session as the market re-entered risk aversion mode. For now, the euro trades barely above the 20-day moving average, the support area of the last three days of trading. In the Asian session, the euro gained 50 pips.
The Pound (Gbp/Usd) tested TheLFB R1 (1.6455) area during the overnight session on Wednesday, but soon after the market reversed and sent the pound 220 pips lower than the high set during the U.S. open. During the Asian session, the pair moved very little, similar to what happened in the previous day of trading. On the daily chart, the pound seems to have formed a doji-star pattern.
The Aussie (Aud/Usd) formed a pattern that looks like a pin-bar on the daily chart. The aussie advanced relatively strongly throughout the overnight session on Wednesday, but these declines were completely erased during the U.S. trading hours. During the Asian session, the aussie rose 40 pips as the central bank of New Zeeland maintained the monetary policy at 2.50%.
The Cad (Usd/Cad) formed a doji-star pattern on the daily chart, as the pair moved indecisively in the market. During the first part of the day, the cad headed lower, but in the second part of the day, mainly during the U.S. session, the cad headed only higher to reach TheLFB R1 (1.1160). During the Asian session, the cad appeared reluctant to move lower, even though crude oil re-tested the high created on Wednesday.
The Swissy (Usd/Chf) tried during the European session to break lower, but its downtrend soon met the intra-day trend-line that connects the 06.05 and the 06.05 lows. This has caused the pair to jump higher, and reverse every pip gained until then throughout the U.S. trading hours. In the Asian session, the swissy declined 20 pips.
The Yen (Usd/Yen) finished Wednesday’s trading session gaining 85 pips, even though it headed higher most of the time. In its uptrend, the yen broke above the 50-day moving average and above the resistance trend-line that connects the 04.06 and the 05.07 highs. During the Asian session, the yen fell 20 pips.
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