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Market Wire Update:
The major pairs are at a Usd swing point, as covered in the Intra-day Trade Plan Update area below, at the same time that global equity and commodity markets look to be set to test support, from the recent break-out points. Forex valuations lagged the global market moves, and may now get caught in the down-draft of any equity or commodity reversal that looks to be needed before the next leg higher can be made in those markets.
We are looking at a aussie and cad straddle to catch the moves; long Aud/Usd off positive equity trade, and long Usd/Cad off weaker commodity trade. We will update as things get underway and the Asian markets get the Hong Kong momentum flow that tends to hit around 20:00 EDT.
4 Hour Chart Forex Trend and Momentum Updates:
Dollar Swing Point: The major pairs have got aligned with a short-dollar 4 hour chart trend, with the exception of cable, and have done so at a time that they have hit the outer ranges of the same 4 hour chart price channels. The currency price action has not been in-line, overall, with what has been seen in the global equity and commodity markets, and leaves two questions to ask. Can the forex trend hold long, and break-out on a momentum play that follows equity and commodity trade higher. Or, will the trend get tested with a near-term reversal of support, that the market sells currencies into, against the Usd?
The technical stage is set, we have a major swing point, and now it is down to the fundamentals to play their part, one way or the other. We will monitor and update as it all unfolds, and will look at a straddle either side of the moves, with long aussie, and long cad plays
4 Hour Chart Used Trend and Momentum Updates:
Mixed Trend, Long Momentum: The global drivers of the Usd are building into a solid long mode that will soon have the Usd under extreme pressure to drop in value if it can just draw in an extra flow of volume. Being at overbought conditions on the first trading day of the week could allow enough time for each to pull back a little, find support, and then move again during this week, if equity earnings reports can hold in the positive.
These reads on the global markets are Usd negative at the moment, but have not transposed themselves as yet into overall Usd weakness to the same degree that other markets have moved.
Daily note from the Desk:
The potential offered by the currency market has not been in-line with the bullish moves made in equity and commodity trade; not as yet, anyway. Fair value has been found on the Usd in the near-term, and that is at a time that the major pair's 4 hour chart channel ranges are being tested. The last time the major pairs were at this level the Usd pushed back, and sent the major currency values lower. That may easily happen again right now because of two things.
The first is that the global equity and commodity prices are at main resistance and look to require a pull-back to support before being able to move much higher. The second is the televised PBS television series that covers Federal Reserve Chairman, Mr. Bernanke, thoughts on the economy, and the economic valuations, that starts on Sunday, and rolls through until Tuesday/Wednesday.
A fundamental spark like this, when timed with a technical price range that major pairs reacted to previously, could easily set the ground for a reversal, or break-out. We will cover either with a straddle that can play out this week, and we will use Aud/Usd long, and Usd/Cad long, as the pairs that are likely to offer the best potential.