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Outside of some intra-day moves that are starting to build on very low order flow reads, the market has been contained in a tight range overnight (again). Some majors are trying to push higher, against near-term momentum reads that have the them overbought against the Usd.
This move is the Chicago reversal of European trade, that happens in reaction to the London fixings on oil, gold, and Libor rates. The global drivers (equities and commodities) of Usd values are all showing dollar strength overall, and going into the U.S. session that has only 16% of forex global order flows to back it, these moves may therefore struggle to hold.
If this is the start of a break-out it will need all six majors to get involved. It will also have to generate more volume than is in play right now to easily hold, ahead of a very light economic calendar, and flat global markets. This is about as thin a set of liquidity and volume numbers that we have seen for a while, and low volume creates an environment that reversal more easily happen.
Low volume, low momentum, low price action, all adds up to a global market that has found fair value. Do not get used to it however, because this is the calm before the storm; Earning Season starts tomorrow, and we will get price action.
None of the Trade Plan numbers are in play at the moment. Watch cad for a reaction to the Building, and Ivey PMI numbers at 08:30 EDT. Going into the U.S. session, the near-term reads on momentum are all showing an oversold Usd, hard to understand, but the reads are there, and they are reliable.
This all reveals a market that is buying the Usd as a hedge against dropping equity values, but doing it on very light volume, and in an environment that every pip is hard fought over, in either direction. A reduction in lot size is warranted until market-wide volume increases happen, or until global equity markets find buyers.