Forex: Price Benchmarks:

Critical Levels:

Reiterating this case scenario can be defined as an equalizing factor between an over-valued Stock market adjusting itself with the fundamentals comparing with the mixed economic data coming from the different sectors.

While the US Dollar price recovery have been slow inspite of being able to gather some earlier momentum. Relatively, the USDx price behavior has bestowed some lingering doubts amongst analyst and traders where the recent declines were attributed to negative reports from another increase in Jobless claims and a lower housing starts that pushed some corrective declines for the USDx @83.44 during the midweek trading session.

Apparently, such behavior can been seen as price action of opening high with a daily price gap against the previous closing and driven down in between trading sessions. This typical price action amongst traders have been a market squeeze and/or sometimes referred by major bull participants as a bull-trap. And a market recovery happens before New York closing hours.The daily candle-bar would reflect a negative signal since most smaller day-trade speculators would unwind some intra-day positions. A true example is the daily candlestick bar on May 16 - Thursday closing @83.75 with a subsequent opening price gap @83.90. Pay particular attention with these bar formations, chart set-up and price action which will dictate the next directional price movement before it happens. There would be some instance that the closing prices may eventually close higher /lower than the opening price gaps at the end of the trading sessions.

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Midweek Price Reaction

USDx Breaks Primary R1

Earlier reports for the week with a positive US Retail Sales sustained the USD while adding fuel from the negative data coming from the Euro zone has fueled the rise for the USD to continue reaching relatively a high for the USDx @84.09 basis point. Bullish sentiments still prevail the market while the Dow and SP500 has continued to make newer highs registering the strength of market activity with investors looking for mild setbacks within a bullish trend.

The start of the week's trading have provided a softer yet gradual decline for the EURUSD before the German GDP data came out and currently working @1.2972 from a registered low @1.2942 to this writing. However, as most analyst have been watching price action across the board touching their respective support levels while waiting for a technical break lower for most majors. While maintaining a watchful eye on the USDJPY nearing its resistance level of around the 103.30; most traders were reluctant to establish any fresh new positions as probable risk on exist as prices continue to move higher.

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A Constructive Approach

Forex Trading: The USD is the best trade even before & after the fact.

The responsibility of a currency strategist through the course of trading the currency market is to establish a well constructive analysis to overcome a certain degree of trading difficulty during market uncertainty. In addition, coming up with a rational and conclusive market outlook to spot a high probability trade potential or where a price range breakout could possibly occur before the fact.

The latest scheduled economic reports ending the weeks of the 3rd & 10th of May can be considered as a classic example. Where market conditions have squeezed price action between currency pairs contrary to market sentiments that have caused a mix price reaction before and after the reports. A string of data followed during the release of a negative Chicago PMI figure have initially drove the USD lower, which in turn then was contradicted by a more positive Non-Farms Payroll followed by the 5-1/2 year low for the Jobless claims report that fueled a price reversal for the USD to move higher. The sequence of reports have kept most analyst at bay and tried to dissect the full effects of these reports while monitoring price action.

However, with the USDx retesting its primary resistance @83.50; the threat for higher risk aversion comes into play whenever trades made after the event of a price breakout and a subsequent follow-through has been made.

Therefore, a constructive approach can be followed in the event that such trade set-ups could be identified not only on a fundamental or technical stand point, but by comparing price activity among majors and crosses with actual market sentiments before and after a major event.

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Confirms: USD into Positive Territory

Contrary to JPY, CHF, EURO & CABLE

The remarkable price performance of the USD supported by the 5-1/2 lowest Jobless claim report is currently above the 82.10/20 basis point resistance level. This fresh catalyst have finally reinforced the USD market into the bull territory after gaining back its previous decline. 

After digesting mixed reports for the past couple of weeks, the market's price reaction effectively reflects a positive USD rally in continuation focused mainly on the USDJPY finally breaching the 100.00 levels made mention in our market view report dated the 6th of May, 2013. It obviously didn't take the market that long to actually penetrate this price level moving forward especially in the Asian trading session where the traders have aggressively maintained their objectives alongside with the BOJ stance of attaining a 2% inflation target. USDJPY is currently @101.00 as of this writing; likewise influencing the GBPJPY & EURJPY crosses higher with prices @155.98 & @131.72 respectively. 

Although, there were typical price moves and set-ups contrary to the prevailing market sentiments with the USD pullbacks while testing its lows several times. But these set-ups simply were just waiting for some fresh incentives to generate a follow-through. Easily said after the fact, however these price action now confirms our mid-term outlook for a positive USD while the USD-Index maintains above its higher secondary support. Click here to continue.

Market SRO Perspective:

USDx-EURO-CHF-GBP & EURGBP cross

Renewed confidence for bullish players after the fact, seemed to ignite the market today with some limited traction for the USD as it moves slightly higher to its current levels @82.50 high in the early trading session.

The limited trading time that occurred last Friday after the jobs report have left the USD market players in a wait and see attitude for a follow-through, while the Dow and SP500 continues to make remarkable price records inspite of the continued uncertainty where traders are still expecting a valid correction for the stocks to move lower as a healthy sign for a bullish market.

However, the psychology behind the market that this is a clear and typical example where price action is squeezed between economic indicators versus market sentiments that may limit market movements as each and every trader tries to feel through what the market would actually do. Where investors shift real money flows between markets would provide some indication for the prices directional move for the week. This now considered the real activity monitor as price action swings to where a more probable trade could be spotted. Spread betting between currency pairs with stocks would be a bit complicated for some as other traders would not to spread their wings so thinly that results to over-leveraging their trading accounts. Click here to continue.

Bottomline: NFP & Unemployment Rallies USD & Stocks

Economic Indicators vs. Market Sentiment & Activity indicators: Summary

On the back of shockingly weak Chicago PMI numbers have led the Euro to initially move higher during the earlier trading week above the 1.3150 and pushed the USDx towards the low nearest to the 81.30 basis point levels. Although, consumer confidence rose rose to 68.1 from an upwardly revised 61.9 in March. Economists had expected a reading of 60.8, according to a Reuters poll.

The market is generally convinced that the European Central Bank (ECB) will lower the benchmark rate by 25 basis points, which it did alongside the remarks by Mario Draghi on negative rates which analyst have stated that it was premature to talk about. And the market on the EURUSD have initially stalled as it has been widely expected and even yet have been built-in to the market prices for several days.

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Market Analysis: Majors & Crosses

The price swing seen in the Forex market reflects the continued investors uncertainty and vulnerability to shift trade positions at a short span of time. Market exposure on trade positions across the majors has been cut short as reflected with the latest COT report with major participants still in dominating market sentiments contrary to data coming from both sides of the continent.

This week's barrage of economic reports with a special attention on the coming EU Zone unemployment data followed by the US Consumer confidence and the FOMC overlapping with the new trading month would provide market volatility and price swings in both directions. However, specific price range trading within their respective parameters have been defined awaiting some fresh incentives this week.

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