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The Trader Advantage: Early Signs Of An Overbought Reversal
Excerpts taken from The Trader Advantage Program
In recent trade, the currency market had been shedding long-Usd positions, and managed to send the major pairs into heavily overbought read. This coupled with the near-term resistance and support areas hit in late trading, and with equity markets reversing off yearly highs, has allowed the market to form a swing point dollar index low, in a price action move that starts the buying of the Usd again.
The move into U.S. dollars was supported by the equity market, with the S&P futures falling 10 points in after-hours trading. However, commodities were little affected by the current episode of dollar strength, something that might allow the market to easily turn around on the strength of 08:30 ET economic reports.
The U.S. CPI, Unemployment Claims and the Philly Fed Manufacturing Index reports are expected in the next session. Each of these three reports has a special macroeconomic meaning, and can provide important guidelines for what is to come in regard to money market valuation of risk.
A stronger CPI, together with good Philly Fed Manufacturing Index numbers will lift expectations for a Fed rate hike, empowering the U.S. dollar. A miss on both reports will weaken the greenback, albeit with a move that would buy the Usd if the reports are poor enough to send equity futures lower (Stocks Down/Usd Up at the moment), since the Fed is likely to stay on hold for a prolonged period.
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