There is usually some volatility at month end as big money needs to “get things done” , often at any cost. If traders can determine these moves, in real time, as the London fix approaches at the end of each month, there could be opportunities to take advantage of these large flows. These big money players include Central Banks, pension funds, and mutual funds that need to rebalance their books. They need to buy and sell different market instruments so that they have the correction proportion of assets on their books based on each individual’s mandate.
Today, the last day in April, was no different as the US Dollar was sold into the London fix at 4:00pm BST. The US Dollar actually began selling off at the US stock market opening and accelerated as time moved closer to the fix. Price moved from 99.72 down to 98.81.
On a daily timeframe, the move pushed the US Dollar Index down through the upward sloping trendline of the symmetrical triangle. Price held next support level at the 50% retracement of the lows on March 6th to the highs on March 20th near 98.82.
After the ECB statement today, EUR/USD initially moved lower as Christine LaGarde signaled doom and gloom for the Eurozone economy this year. However, as the DXY sold off, EUR/USD went bid. Price moved from 1.0833 to 1.0972!
On a daily timeframe, the move pushed EUR/USD above the downward sloping trendline it had been holding since March 27th and through the 50% retracement level from the highs on March 27th to the lows on April 24th. There is horizontal resistance and the 61.8% Fibonacci retracement level from the same time period near 1.0980. Above there price can run to previous highs at 1.1138. First support is at the recent trendline near 1.0850 and then recent lows near 1.0800.
On a short term 60-minute timeframe, the move higher in the EUR/USD broke above the neckline of an inverse head and shoulders pattern. The target for the pattern is near 1.1050.
If one can recognize that there are some peculiar moves into the London fix on the last day of the month, there may be an opportunity to take advantage of it. This is especially true if price crosses key trendlines or breaks out of a pattern, as the DXY and EUR/USD did today!