Forex Market: Something Doesn’t Smell Right. Why The US Dollar Trend Should (May?) Continue

How long dollars are the shorter term traders in the market?  And do the longer term dollar seller (or shorts) want to inflict more pain?

The consolidated ranges that prevailed for the summer months were tested on the first day back from Labor Day - traditionally the last day of the summer in the USA (see earlier warning from Tues “Putting the market in perspective. Breakouts today, and Summer is over“).

On that day, the EURUSD broke higher, the GBPUSD broke higher, the USDJPY and USDCHF fell.  The caveat was the GBPUSD -although higher- remained below the 1.6589 key resistance level and the USDJPY remained

Thursday, we are seeing a continuation of the trend with the GBPUSD moving above the 1.6589 level and staying above and the USDJPY now moving below the June 2008 low of 91.72 and threatening to stay below it.

Meanwhile, the EURUSD toys with upside 61.8% Fibonacci resistance at the 1.4621 level after moving and staying above the 1.4447 level - the old high of 2009 - since Tuesday.

Dollar longs have been hurt as the dollar has been sold.  Against the EURUSD, the move above the 100 hour MA started at 1.4273 on September 4th (+327 pips) (see chart above).

The GBPUSD moved above the 100 hour moving average at 1.6241 (+430 pips).

The USDCHF moved below the 100 hour MA at the 1.0619 level +240 pips).

The USDJPY moved below the 100 hour MA at the 92.72 level (+110 pips). (see chart above).

Trends are fueled by shorter term bottom/top pickers who get used to buying bottoms, selling tops- trades that are successful in a non-trend market.  When the market starts to trend, the shorter term traders are often stubborn to change their ways and this can lead to an overleveraging of positions as they buy more $s at progressively lower prices thinking they are “getting them in cheap”.

Moreover, there may be glimmers of hope, where a sharp decline (or rise) gives a sugar rush to these traders.  Thursday morning’s sugar rush was the fall below the trendline in the EURUSD. It caught my attention and seemed to indicate a further move to the downside -which is what temporarily happened.

However, when the price rebounded back above the trendline, the market was suddenly not doing what it was supposed to do.  The EURUSD moved higher again.  See “In a surprise move, the EURUSD moves back above the trendline resistance“.

Which gets back to the initial questions.

How long dollars are the shorter term traders in the market?  And do the longer term dollar seller (or shorts) want to inflict more pain?

The so called “Big Boys” who have “taken the summer off” and are now back in their trading seats control the destiny of the market.  They have the ability to push the dollar lower by not buying and stategically selling when appropriate - on break outs or on dips.

Now I have no proof one way or the other other than the smell and the progressively lower dollar levels.

However, what I do know is when the market doesn’t do what it is supposed to do, something bigger than myself is in charge.  Technical levels, like moving averages and trendlines and Fibonacci levels are all still in play. However, watch the reversals like a hawk and when you see what we saw Thursday morning in the EURUSD, don’t ignore it   The “Sugar highs” can be short lived and cause sharp lulls.

Pick trading levels carefully. Be on alert.

Subscribe by RSS Subscribe by Email