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The U.S. session has been rather painful to watch up to now, but has revealed a lot in regard to price action, order flows and momentum. The dollar had a chance to regain ground stolen by the major pairs recently as global equity and oil markets backed off recent moves, in what normally would have created long Usd buying. However, the major pairs have averaged ten (10) pips each in movement since the open at 17:00 EDT on Wednesday until 12:00 EDT on Thursday.
The take-away from it is quite simple; on days that global equity markets, and specifically the S&P futures market go down, the major currencies have profit taken and are allowed to pull back to test near-term support, but that is it. TeamLFB said. There are no short-major positions being built; we are seeing the distribution phase of twelve months of dollar buying getting taken apart.
Direction: Long = Buy Mode. Short = Sell Mode. Mixed = Reduced Lot Mode.
Strength: Strong = Good. Fair = Average. Mild = Below Average
On the days of Wall Street stocks finding buyers the major pairs are easily able to take the dollar lower, something that the Fed will be happy to see in their quest for a de-valued currency. The main short-dollar moves are happening in Asian and European trade, and then the commercial U.S. based market goes into action buying and selling dollars as part of their daily activities. That creates a stair step up in major pair values, and an elevator down as Chicago (the home of options, futures, and interest rate derivatives) gets to grips with the 06:00 EDT price fixings on gold, oil, and Libor out of London.
The bottom line is that the market is building a massive short-dollar base that will take three months at least to complete. TeamLFB said. In between there will be plenty of long-dollar days, but be aware that they will really only be offering the chance to bank profit and test support. From 12:00 EDT we have the U.S. as the only global market open, and as such will get to see the real Wall Street sentiment. It may be hard to buy into it this late in the day, but once again we are seeing the market thoroughly reject the opportunity to buy dollars.
Testament to the fact that dollars are going out of fashion, as risk acceptance takes the stage in the next phase of the global economic economic business cycles, is the fact that the U.K. economy was put on a downgrade watch by the S&P rating agency at 04:27 EDT on Thursday, something that caused a three hundred pip drop lower in cable valuations. By 12:00 EDT however Gbp/Usd had regained every one of those pips, and did it in what for the last twelve months of trade would have been a dominant fundamental Long-Dollar trading environment.
We have Trade Plan numbers that will soon be getting hit, but history tells us that late U.S. orders suffer the fate of getting caught in a void that offers little in the way of momentum, and that anything taken will be at the mercy of waiting for S&P the direction that follows the 14:30 EDT closing of the NYMEX markets. the Trade Team said.