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Thursday’s Market Themes
The European session started off with a sideways channel, extended from the late U.S. sessions.
The sentiment appears to be somehow neutral right now, but the price action of the major pairs suggests that an upside break is likely to follow. The euro, the pound and the aussie are trading near the resistance area of the overnight channels, while the cad and the swissy are trading near the support area of the same channels. Further bullishness comes from the S&P futures, where a test below the 1020 area – the support of the last few days of trading – had been rejected.
However, not everything is pink in the financial market. Overnight, China announced that it plans to curb demand, due to a huge rise in economic slack. This has added some weight onto crude oil’s (weak) knees, forcing it to test the $71 area. A potential break below this level may strengthen the dollar, but this is not likely to happen as long as S&P futures are holding in the green. Moreover, even if it breaks lower, crude oil will soon hit a support trend-line that holds the pair since July 13 09.
Looking ahead, the economic calendar is loaded with important news reports coming from both sides of the Atlantic, but by a huge margin, the U.S. GDP numbers will be today’s main focus point. On an average day, a better than expected report would trigger dollar selling across the market. However the pattern of trading had been pretty strange lately, with the market spiking during the news report, and then a sell-off ensuing, even though the numbers may have beaten estimates. As a general rule, tenured forex traders will be looking for the momentum of the GDP report, rather than trading the moment of the release.
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