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Currency Pair Overview:
Dollar Finds Strength Overnight
Overall, the major pairs fell against the dollar during the overnight sessions, after four consecutive days in which the dollar index set periodically new lows for the current year. Moreover, the major currencies were trading in a deeply overbought state against the dollar before the Sunday open, making these declines look like they were much needed. As such, the dollar started strengthened across the board immediately after the Sunday open, it took a short break during the London open, but now the it appears that the major pair’s selling wave wants to continue straight through the late European and U.S. sessions.
The euro (EUR/USD 1.4535) lost approximately 60 pips during the overnight session, after two days in which the pair hesitated to move anywhere decisively. For now, the euro is trading up and down TheLFB R1 (1.4535), but a break below this level and negative S&P futures would extend the current downtrend.
The pound (GBP/USD 1.6535) declined at a very strong pace during the overnight session, breaching the 1.6600 area, which has been an important swing point over the last three months of trading. Moreover, the pound broke below a two week old support trend-line, in the 1.6560 area.
The aussie (AUD/USD 0.8560) lost about 80 pips during the Asian trading hours, but spent the European hours moving up and down in a 30-pip channel. If the selling wave continues during the U.S. session, a possible target to the downside would be the 0.8450 area, which has acted as an important swing point in the past.
The cad (USD/CAD 1.0890) is trading just below the 20-day moving average, after it surged 120 pips during the Asian and European sessions. A break above this level would signal again that the cad is in long mode, targeting the 1.1000 area. Moreover, this is the first pair to break above TheLFB R3 (1.0880) so far, but probably not the last one if S&P futures continue to decline.
The swissy (USD/CHF 1.0405) gained only 30 pips during the Asian and the European sessions, even though the rest of the major currencies declined at a strong pace. On Friday, the market expects the interest rate decision from the Swiss National Bank, which might add some weight on the pair.
The yen (USD/JPY 90.80) opened the day with a bearish gap, but then started slowly to move higher. For now, the yen is trading slightly below the neutral pivot point (90.90), posting the smallest percentage decline compared to the dollar; this denotes the strength of the Japanese yen in the run-up to the Bank of Japan rate decision, and the Japanese fiscal half year in September.