Midday U.S. trade has the dollar back in the driver’s seat following the ebbs and flows of global equity trade. The initial Asian session started with positive stock buying vibes and allowed oil and the major pairs to be easily sold. That pattern lasted through to the open of the European futures market when things suddenly got a little choppy as indecision set in regarding Wall Street’s ability to hold in the green, something that subsequently followed through with the S&P dropping down to test support at the 820 area.
Oil and gold both moved lower and the near-term dollar buying perfect storm was set, something that may now continue as the NYMEX markets close at 14:30 EDT. “Trade desk attention will be firmly on the reaction of equities to hold 815 on the S&P, something that may allow the dollar to gain if the area breaks” said TheLFB-Forex.com Trade Team Members. “We have 817, 801, and then 780 as the areas that volume needs to come in to protect. As each one is taken out we may see the dollar index move up through to test 85.05 as near-term support”.
“Things have been very choppy in the forex arena and momentum has allowed Usd/cad to get up and test the 200 Day SMA at 1.2420, something that if breaks and holds could be support for a test of the top of the 4 hour channel at 1.3000. Ahead of the Australian and Japanese rate decisions, both of which are looking to hold at current rates, we may see some professional alignment that may add to the choppy trading ranges”.
The main driver of Wall Street trade heading lower, and the dollar heading higher, has been the selling of the financial sector; the exchange traded fund, the XLF, is off over 3.5% in trade on Monday, albeit on very low volume. Without buyers coming into that sector the markets are likely to hold in negative territory, unless overseas equity trade can force the issue and move things higher.
Ahead of the Easter weekend there may be a move to hold tight ranges, and if so the opening of each global exchange may be the only chances traders get to ride some momentum. Outside of that the oil, forex, and gold markets look to be quite happy tracking S&P futures momentum.