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TheLFB Alerts
Aug 14 08
Hello Traders!
Overnight the global markets revealed just how much technology has changed the way that trends are formed, and how much more reactive the markets have become to changing sentiment. It may be that a trend will soon be defined as a period of trade that lasts no more than three days, rather than the accepted norm of three weeks being a good trend for a trader, or three months as a good trend for an investor. There can be no doubting that the reactive nature of automated trading that accounts for over 90% of all order tickets is also creating a very volatile day-to-day environment to set trends from. Add to that the sound-bite world that we live in that has to account for every tick, pip and point that crosses the wires and we suddenly have a volatile, noisy, and paranoid workplace in times of a quick trend change.
The forex moves in August have set many records including; the speed of price destruction each day, the accumulative amount of dollar appreciation against the basket of currencies that make up the dollar index, the technical depths that price action has moved indicators to, and the speed of reversal in sentiment. The dollar has gone from being the whipping boy of the majors for the last twelve months to now being the dominant global currency this month. However strong this month's moves have been they will now be tested for a few reasons: the weekly trends are not supporting too much more dollar appreciation, and that these moves have come on nothing more than average volume. Once the markets get out of "Vacation volume" mode these recent dollar price points may come under major strains.
The recent moves to buy the dollar at all costs have re-balanced the moves on the euro that now has the pair at the same value that it started the year at. The pound has no commodity link and as such has taken the brunt of the dollar buying by dropping to 2006 valuations, but still (in the old fashion way of looking at a trend) is in a long trend on the weekly and monthly charts. The aussie weekly chart is still maintaining an incredible long trend that runs from 2001, and the swissy looks to have done nothing more than re-traced a very small amount of the price decimation that has been inflicted on the pair in the last five years. The cad is doing nothing more than retrace a tiny fraction of a huge move lower that started at 1.6000 over five thousand pips away. The dollar is actually going nowhere fast when a weekly chart of Usd/Jpy is reviewed.
Dollar buying looks to be made up recently of the automatic reaction to the speculative interest being warned out of long oil positions at $150, as well as panic short covering of twelve month old short-dollar positions being liquidated. The key may be that although the liquidation of short dollar positions has increased the dollar values, the volume reads may reveal the fact that new long-dollar positions are not as numerous. This may be an automatic switch from short-dollars to neutral. All will be revealed in September when the institutional volume historically arrives.
TheLFB Trade Team
Ignored
September is Nearing !!!
Bruce