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Currency Pair Overview: Fed Recovery Tone Upsets Dollar Bulls
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Overall, the currency market traded under the influence of the Fed’s interest rate decision on Wednesday. The dollar index saw sell orders most of the day, as traders anticipated a continued bearish statement from the Fed, as they concede that interest rates will remain low for a prolonged period. This is a sign that the spread between the interest rate of the U.S. dollar and the other major pairs could start to widen, thus fueling the carry trade scenario that has the dollar on the short side of the spread bet. Ahead, the market might follow a similar pattern, as investors prepare for the BoE and ECB interest rate meetings.
Daily chart trend: Short. Main price points: 75.00. Looking for: Ending diagonal Prices on the dollar index daily chart were threatening the upper line of an ending diagonal, where a break-out will confirm that the bottom is in place. In this case a retracement into the red wave IV area will be expected, while the current lows around the 75.00 zone must hold. The price action on Wednesday, as stocks moved all over the charts, will only add to the volatility in these moves. The RSI indicator is showing a bullish divergence, which also indicates a change in trend direction. The cad (Usd/Cad 1.0610) showed strong momentum during the overnight session, but since then, the cad has failed to break below the 1.0600 area, where TheLFB S1 can also be found. The cad’s resilience to move lower comes as the BoC complained again about the strength of the Canadian dollar. The yen (Usd/Jpy 90.70) moved only higher during the first part of the day, in which the pair gained 90 pips. Since then, the yen had been struggling to break above the 91.00 area, near TheLFB S2. During the Fed’s interest rate decision, the yen managed to break briefly higher, but the move was completely retraced afterwards. TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index.
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