Dollar Buyers Disappear- Strange Times

After a massive move of 3% in the equities, and a big drop again in the commodity markets on Wednesday we have a signal from the currency pairs that in the near-term the dollar buyers may have run themselves dry. On Wednesday the euro moved 20 pips in total trade, the pound moved 50, swissy 20, yen 20, aussie 40, with the only one that registering triple digit moves being cad with a 100 pip gain. This was a total of 250 pips, (with nearly half of that from one pair), compared to the 1,500 pip combined daily trading range of the major pairs. If there was any day for the Usd to make massive strides against the majors after the European markets had tried to push the dollar lower, this was it.

We are going to take from that Usd bulls may come under pressure as soon as equities and/or oil has a strong day of trade. That may not come overnight, and maybe not this week, but we saw in trade on Wednesday that when the S&P Futures market moved higher in pre-market trade the dollar was easily sold. The longer that the consolidation of Usd continues, and the more time spent around current valuations, the easier the break lower on the dollar index will be.

We can see from the technical set-ups on the majors that we are sitting at very important support and resistance areas, and they will need to now show their strength as the markets absorb the negatives coming from earnings season, and global contraction. It may not be that the dollar loses the ground gained in 2009, but if the market is not buying dollars on such a strong fundamental day that was seen on Wednesday, it has to be asked what now will draw them in big numbers to the greenback. The flight to safety story, and the comfort blanket that the market has when it runs to the dollar in times of equity and commodity selling may turn out to look a little musty, and maybe just a little thread-bear, the moment that global equity markets trade in the green. The liquidity surge from stimulus packages may attract Treasury note related dollar buying, but longer term just may not be enough to easily break the resistance areas sitting just above the current price points on the dollar index.

The Index is trading in a very calm bull channel on the 4 hour chart, from the 77.50 lows. The market may be currently trading in the first five wave move of extended blue wave I. The maximum target of this wave would be around the 85.80 resistance zone, but there are also some chances that the top of wave I is already here, especially if equities and the euro find a near-term base of sorts, and the markets ignore what historically would have been a strong dollar buying day.