Trade Desk Thoughts: Dollar Index Chart Below
The equity bear was knocking at the door last week, and it looks as though oil and gold trade desks have unbolted the locks, and are about to open up to have a better look at what is outside. In the face of sideways channels in most global markets, where resistance is sold, and support is bought, and anything inside of the previous trading session is widely ignored, oil has held ground well. However, that all looks to be changing.
We are seeing the European market close with a fanfare of Usd selling on euro, cable, and swissy, and yet equity, oil, and gold trade is flat to negative. We have to let that European move go; the U.S. session is alone in the global market at this time of day, and of the 16% of forex trade that flows through the U.S., a large percentage will have already been processed.
There is no point in buying into the high of the day, just as the volume dries up. Instead we will let it cycle, plan out the high/low of the session, wait for a pull-back, and then get involved when market momentum hits. Unless, that is, that the close of the NYMEX markets light a fire under equities.
The forex speration is a variable that may just be a Thursday market mechanic move, but we are looking at it as a signal that the next period of equity buying, (because equity buying will happen at some stage in the midst of earnings season), the Usd is going to go the way that the Treasury, the Federal Reserve, and the administration need it to go; lower, if a sustainable period of economic growth is to come in 2010.
We can forget a 'strong dollar policy' spouted at each turn; the U.S. needs a weak dollar, and that is something that has been hard to achieve while in the middle of a printing press frenzy of new I.O.U's flowing like a river of debt through the market from the U.S. Treasury.
It is only the Europeans that are moving, as would be expected; the commodity pairs, aussie and cad, are bogged down in oil droplets, and the yen pair is following the sideways moves in Wall Street stock trade. This sets up a perfect view to work from, because the 4 hour charts just moved back and reversed the support-turned-resistance plays from Tuesday and Wednesday.
Things look to maybe have put a floor in is as support that we can use to visit the long side of the major currency 4 hour charts, some 300-400 pips away. The doom and gloom of that equity bear knocking has not be felt in the European pairs, and therefore the slightest glimmer of a silver lining, that turns a glass that is half empty into one that quickly becomes half full, could instigate an oil reversal, and a dollar index drop.
The global market near-term momentum reads have gone from oversold to neutral, and are now setting themselves up to be bought it seems, and that also is a near-term Usd technical negative. All that is required is a screaming headline that things are not as bad as had been expected, and by that time we will have been placed in some of these intra-day moves that we can hold for a while.
Wait for the pull-back, look to get it timed as one of the global markets opens and frees up momentum, plan to move up to the high of the day, or a break of it, but not to trade through it, and add to the position on pull-backs if regional equity markets are showing green. Look for oil to break and hold $60, and the dollar index may offer a trip to the other end of the 4 hour channel:
Member's Daily Dollar Index
4 Hour Chart trend: Mixed. Main price points: 79.36, and 81.36. Looking for: Wave IV pattern
On the four hour dollar index chart we notice a trend-line resistance area connected from wave A) and C) highs, where a recent turning point appeared. This may be an important bearish dollar signal, which will lead the major pairs if it holds. In this scenario the triangle pattern, shown on the chart below, is completed, especially if the 79.36 support gets broken before than 81.36 resistance.