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Wall Street and the global stock futures markets, (especially the S&P Futures market), have dominated forex valuations throughout the credit crisis; risk aversion (the selling of stocks) increases the value of the dollar, and vice versa. We have seen that play out again in May, and all of this week in the major pair's inability to move too far unless each global region (Asia, Europe, and the U.S.) manages to hold a 24 hour period with stocks moving in one direction.
Traders are seeing one session of eight hour trade in the green, followed by the next one reversing stock values, and the last eight hours of each 24 hour period then being a coin flick as to where things go. TheLFB Trade Team members said. An example is the overnight session that saw Japanese markets drop lower, spike higher, and then hold a sideways crawl in response to negative Wall Street trade in the previous session. That was followed by the German Dax that gapped higher, moved lower, traded higher, and collapsed as Wall Street trade started. S&P futures trade pushed higher to hit 902 at the open of the cash market, and then reversed 1% (a full range of daily trade) in a five minute period. That was then addressed by a U.S. stock reversal after the European market close that added the 1% back on to valuations.
The consequences in forex are major pairs that are unable to break and hold anything outside of the 20:00 EDT, 02:00 EDT, and 07:00 EDT global stock futures regional opens. Patience is key here, because the European and Asian markets are both closed by 11:00 EDT, and the afternoon coin-flick is as unreliable a momentum read as we can get. TheLFB Trade Team said.