The 'Stair-Step up in Asian/European trade, and Elevator down as Wall Street opens' pattern is still firmly in place on the days that S&P Futures struggle to find buyers, and as such forex values cannot move too far. The only real break so far in May was in the late afternoon 90 minutes of trade as the U.S. markets closed for the week on the day of Non-farm Payrolls. That move was retraced and the majors pairs are now sitting at the lows of this week, just waiting it seems for the equity market to find buyers.
The really important aspect of this is the fact that dollar buying is on very light volume, and really only getting any momentum in U.S. based trade TeamLFB members said. That tells us that the market is trying to move away from 12 month old long-dollar positions built in the flight to safety to Usd backed Treasury markets. Those market that empowered the dollar have now gone through a seven week run of declines that has not been mirrored in Usd based trade; it seems that it is only a matter of time that the market aligns itself with a dollar index value below 80.00.
The Wall Street markets house the largest equity flow, the largest commodity trade, unmatched option and futures trade volumes, and back the world's global reserve currency trade. All-in-all there are many reasons that the forex flows are disjointed in the U.S. session. It all starts with the 06:00 EDT London fixings on oil and gold, at the same time that LIBOR rates are set, that have the Chicago futures markets have re-align fair value. That starts off the reversal in forex values that seem hard pressed to then stop the initial momentum build into strong order flows when equity markets are in the negative, as we have seen today, again.
We caught the long side of the moves with the Trade Plans, but had to remove the short side of the major Trade Plans ahead of the U.S. Retail Sales, on negative equity futures days there is no point in fighting the order flows in front of a Red Flag calendar release TeamLFB members said. The question now is; do we put them back on ahead of the European market closing? The answer is that the 'Elevator Down' has hit the ground floor, it seems, and nobody wants to buy the low of the day at the same time that the global markets leave the U.S. as the lone ranger. As such we are sitting in cash until we see anything positive from equities. If the stock selling continues we will bide our time, and look to buy the dollar in small quantities, with tight targets, just not in the late U.S. session!
TheLFB Trade Team provides forex trade related market analysis and signals.