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Overall, the market showed a lot of strength during the late Asian/early European session, but as soon as it hit either the first support or resistance area that came into its path, the downtrend came to a halt. For now, each of the major pairs are trading near TheLFB S1 and R1, without any exceptions, looking for further strength that could push the dollar index higher. This may happen during the U.S. open, when an additional number of market participants join the market, but the economic calendar is lighter than usual, which may put some pressure on the forex market.
The euro (EUR/USD) saw some hard selling during the early European session, but soon after, it started trading side-ways, just above an intra-day trend-line that has held the pair for the last few sessions. Moreover, the pair is trading just above the 50-day moving average, which has been holding it since late April. In order to break lower, the market will need strong momentum and negative S&P futures, but once it does, the downtrend is likely to continue for some time.
The pound (GBP/USD) lost as much as 160 pips, just one day the after it formed a big bullish candle on the daily chart, with almost no whips, something that denotes very strong momentum. However, since then things have turned around completely, especially after the BoE minutes have shown that the central bank was planning on an even larger increase in the size of the asset purchase program than the one announced earlier. Moreover, the minutes have shown that Mervin King, the BoE Governor was out voted when this decision was made, something that does not happen too often.
The aussie (AUD/USD) tested TheLFB R1 (0.8290) twice during the first part of the overnight session, but got rejected both times. During the early European session, the pair started to head lower at a very strong pace, causing it to lose as much as 100-pips, and break below the intra-day channel that has held the pair over the last few trading sessions.
The cad (USD/CAD) spent a substantial part of the European session trying to break above TheLFB R1 (1.1080), and at the same time, above an intra-day resistance line. However, the pair will only be able to pull this move off if the S&P futures and crude oil are heading lower at a sustained pace. Unless this happens, the cad is set to move side-ways as it has in the last few trading sessions.
The swissy (USD/CHF) tested TheLFB S1 (1.0730) during the Asian session, but the market reversed quickly sending the pair 40 pips higher. For now, the swissy is struggling to break an intra-day trend-line that connects the highs reached on Monday and Tuesday. On the daily chart, the swissy is trading between the 20 and the 50-day moving averages.
The yen (USD/JPY) struggled to break below the 94.00 area, after the 200-day moving average rejected it in the prior day of trading. If the pair breaks lower, it could reach the lowest value of the last few weeks and it will probably trigger a strong wave of selling orders. However, the yen will require strong negative equity days to break below this support area.
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