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The S&P cash market finally breaking 995 support triggered sell orders on oil, gold, and the major pairs against the dollar in Wall Street trade on Thursday, with a move in forex that came after multiple attempts by the major pairs to break the session highs and lows, that just would not follow through until the S&P gave up 995 and oil gave up 72.50.
It now leaves the market at a stage in trade that, ahead of the European close, is hard to expect too much more momentum. We have been calling for the major pairs to let off some steam and reverse the recent dollar losses, and were very much aware that the Bank of England and ECB rate decisions would have to be absorbed before things stood any chance of breaking and holding. It looks as if that is now able to happen, the only issue is the timing of the break.
The 30 minute pivot point charts are running sideways overall, with very little in the way of sustainable breaks outside of seven or eight 30 minute candles over the last seven days of trade, that have put the dollar under pressure. We will be looking for confirmation from the oil markets that 72.50 will be insurmountable resistance from here, and from the S&P to signal that 1000 is a road-block that was hit only on the momentum of earnings reports.
If those two markets refrain from further gains we can start to plot a course that takes 4-5% off the value of the major pairs in the near-term, with the entries very likely to be seen as the NYMEX closes, or the Japanese and Chinese equity markets get started. For now, in the middle of the U.S. session that has little follow through historically, it is a case of waiting and planning the breaks. The rules of the forex games include not opening new positions unless they are backed by regional equity market open and closes, or are lifted and backed by a market-wide momentum wave that carries all forward as one. Right now, we have neither, and as such we will wait, and plot the 14:30 EDT NYMEX oil market close.
We have a scenario in place that will allow a straddle to be placed on either side of the Usd, one major pair to play the long side of the greenback, and one to play the short side. In between we are also developing the numbers for a daily Jpy trade to maximize all that falls in between.