Market Behavior

Written by Researc | 06 November 2009

Market Bias on the USD

For the past couple of weeks, the market reports on a fundamental stand point had been mixed from the good numbers of the GDP, a negative report on Consumer Confidence, rate increase from the Reserve Bank of Australia and now the US Jobless rate report at the 10.2% levels compared to the 1983 recession figures didn't help the US Dollar to recover.

Although, the overall Major Trend for the US Dollar is still quite negative; its overwhelming sentiments can be seen in the market from the price behavioral patterns its had shown from the temporary correction gaining back to the previous resistance levels for the USDX at 76.90 and never went beyond its high. No substantial volumes were spotted except the increase and liquidation of certain short positions when it triggered stop loss selling from a slight US Dollar recovery. And the USDX is now back at the 75.85 closing price last Friday.

Weighing the market on a Fundamental as against a Technical perspective can be quite difficult to obtain specially if and when trading positions are made. the only remaining strategy currentl;y applicable is to wait for price parameters to reach their respective resistance and support levels that would coincide with the Fibonacci levels. The relative relationship of the RSi, Stochastic and the MACD may well be understated in its technical analysis whereby certain prices will make its adjustments and corrections to make room for the prices to move further. Thus, giving some false signals as to the directional movement of the trend in a near term outlook for swing traders. Making more harder for traders to pin-point entry and exit strategies as the market shows some reversal patterns or candlestick bar trend corrections.

Chart Comparison
 
The USDX going back to the 75.85 levels may soon attempt its support at the 74.90 by the opening in the Asian session as spill over sentiments take effect by next week.
 
The Strength of the GBP/USD is more of the weakness of the US dollar as the UK economy is still lagging behind in actual figures even if they have been out of the recession period. The USD/CHF has maintained it price movements with the USDX more than that of the USD/JPY which at times may seem to counter act the Yen's strength.

Market Snap-shot As the US dollar Index reacted to the recent report; tested the 75.64 low and may try to attempt the 74.90 support price. However, such attempt may be limited due to the closing of the week's trading and could only spill over to next coming week's trading session in Asia.

This report carries more weight than the previous once but the movement may have already been anticipated by the traders as some have expected the negative outcome earlier during the week prompting the dollar's lower direction since the start of the month.

Moreover, the GBP/USD direction reacted swiftly after the report which was working on the price level of 1.6516 corrective low and is currently back up to 1.6575 as of this writing. It just shows the continued strength of the Pound and the Euro on a vulnerable US Dollar still bias on the negative front as traders are reluctant to build fresh positions on the US dollar only because it is oversold levels.

Meanwhile, the USD/JPY remained lower as the Yen gained strength in value versus the US Dollar. Currently priced at 90.07 from a low of 89.77; although the previous low of 87.10 again maybe attempted in the coming week of the Asian session.

The USD/CHF was still at the 1.0145-50 while it tries to approach the 1.0126 session low in the European session. The Aussie has continued it upward momentum at .9193 which may now surpass the .9329 the week of Oct. 18 2009 if and when the volumes and carry over trades increase as the RBA continues to raise its interest rates till the end of the year to four (4.00%). The Kiwi has followed suit in this relationship but expect some cross hedge between the AUD/NZD and JPY combination. This has been the play for most arbitrary hedgers on the institutional side where they find favorable positions on the trades.

Last but not the least, Gold had made its historical high at the USD 1,100.06 /troy oz. with the strength and capital cash infusion of investors to hedge against the US Dollar which has some how lost its appeal and would rather have the Gold commodity as an alternative form of investment as it tries to make new highs by the following weeks ahead.

Basis of Analysis

The basis of having a balance of both the fundamental reports which may be the gauge of the economic conditions would outweigh and technical outlook on the charts. Although, the technicals as always been proven to be the reference points in pricing the exchange rates as most contributory banks and financial institutions uses these indicative prices to set their goals on what the actual market sentiments would be willing to take and spread the risk against adverse price fluctuations due to these economic numbers.

In Essence, these recent reports will always backup the technical price movements in the market and not the other way around. What moves these prices and price swings are traders and investors who sees the market the way others may see them or not. It is still a decision of the mind and not by a trading system alone.