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Wall Street reversed earlier losses and moved close to the break-even line in late U.S. trade, and that allowed the major pairs to move back to their opening prices. The hard part about taking anything intra-day, that is not cleanly breaking the previous session high or low, is that the moves are taking four or five attempts in most cases to generate enough momentum to break.
The real issue is then how far the initial breaks that pick price points up, are reversing before making another attempt to move. The size of most 30 minute chart candles is extreme, and the fact that they are staying that large throughout the whole trading session reflects the amount of intra-day volatility in the markets.
There is less volatility on positive equity days, and that signals to us that long-dollar positions are near-term hedges, rather than long-term plays. The fact that a currency cannot make a break on the dollar that holds unless equity markets are trading in the green reveals a fear of loss syndrome at the moment.
Making a clean break has been hard for the market to do for six weeks now, as we can see from the channeling 4 hour charts. The target areas cannot be too far away; global equity trade is finding it hard to hold intra-day direction from one region to another, thereby allowing the bigger reversals from tests of support and resistance, to take place. One or two 30 minute candles that then re-test hard are all that is available at the moment, which is fine, they just need to be placed with larger stops than would be ideal due to the global equity reversals.
Making use of momentum at 20:00 EDT, 02:00 EDT, and 07:00 EDT is key to getting a clean break, and subsequent price action. The key to an improved forex order flow of momentum and volume to smooth out the heavy reversals will come with a market that starts to buy equities. Until then, the battle each day to buy dollars and Treasuries as an equity hedge will take place.
The Reserve Bank of Australia's interest rate decision is posted at 00:30 EDT, and the effect on the aussie will ripple through the other major pairs at that time. We will monitor the Asian market reaction to Wall Street reversing direction in afternoon trade, and post Signals once we see momentum and sentiment pick up.