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Trade Desk Thoughts:
Where To This Week
In recent trade the global forex market moved up, down, and ultimately sideways against the Usd, following the expectancy and concern over three interest rate decisions from major central banks. Add to that earning season getting underway in the equity market, supply and demand ratios questioned in the crude oil market as global growth forecasts once again came under the macroeconomic microscope, gold bugs doing the jive over inflation hedge possibilities, and traders can get to see why the currency markets are divided.
The European pairs finished the week where they had started, as did the yen (USD/JPY), with the two commodity based pairs, cad and aussie finding bids quite easily. Cable (GBP/USD) looks completely oversold, and may get a bout of bids ahead of Tuesday’s Inflation Letter from the Bank of England, as well as CPI reads looking to hit at 1.3%, down from the previous 1.6%.
On Tuesday the market also gets to see the Euro-zone ZEW reads on the economic outlook, with reports that have a history of moving prices. A straddle on the euro (USD/EUR) may be in order on Tuesday. The long side would be favored if global equity markets can hold support on S&P Futures trade around 1050. However the pair is at a huge swing point area right now, and will need a lot of things to align to break 1.4850 and easily hold, as was seen in last week’s trade.
The 4 hour trend and momentum charts are very mixed right now, across all global markets, with the regional strength and weakness story nor allowing fair value on risk to be easily found.
The trade team will be issuing a straddle play on both cable, and on the yen as soon as the market open is seen on Monday. There are Bank Holiday’s in Japan, Canada, and the U.S. on Monday, and as such liquidity may be thin, but that does allow for break to easily happen. Whether they hold is another matter, and there is nothing to intimate that this coming week will be able to break and hold any easier than last week.
Get in, get some banked at 30-40 pips, and get the Stop moved up. That will be the mantra to follow on Monday. There is something in the air, and with the Usd at massive dollar index support it may be that we easily see more divergence between the major pairs, and the major commodity markets. A move that goes long gold while oil speculators sell, or an equity break that does not drag the Usd in the opposite direction may be the norm for a while.
There is a new post-credit crisis rule book getting written, and it has smudge on it from the constant challenge of laying new foundations to work from in regard to the acceptance of risk, exposure to liquidity, and availability of margin and leverage to hold long-term positions ahead of the Mutual Fund year-end on October 31st.
The easiest way to read the market will be with 4 hour chart momentum and trend reads that react to Asian (20:00 EDT), European (02:00 EDT), and Chicago (07:00 EDT) futures market order flows. TheLFB Market Overview page has that covered, as well as providing new Price Action swing points on the major pairs, as well as the global commodity markets.