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Currency Pair Overview: U.S. Session Logjam
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Overall, the currency market was very active during the overnight trading hours, but things came to a standstill through the U.S. session. Shortly after the U.S. open, the major pairs entered into tight ranges and moved only sideways all day. This was aided by the light U.S. calendar. When judging from a historical perspective the currency market is usually very slow during the U.S. trading session. A change from this pattern occurred during the credit crisis, when most of the trading was concentrated in the U.S. session.
Prices on the dollar index have reversed over the past week around the black resistance line, influenced by a higher stock market. Currently the market is threatening the yearly lows, where a break-out will push prices towards 72.00, and all-time lows. This is shown in the blue wave V), of an extended red wave V leg, of larger C), which may find the lows somewhere around the 74.00 – 74.30 target area.
Eur/Usd is threatening the 1.5062 area after the market was unable to break through the daily support line in the past few weeks, which is connected from the 1.2329 lows. Traders may already be targeting the 1.5200 zone, around the Fibonacci resistance levels shown on the chart below. The wave count is showing an un-finished wave C leg, with an extended structure in the black wave 5. Currently, the blue sub-wave 5) may to be developing, which should break through the 1.5062 highs in the near-term for a move towards the 1.5200 target zone. Once the impulse structure up from the 1.2329 zone is complete, a larger at least corrective pull-back should follow. The cad (Usd/Cad 1.0560) shed about 140 pips, declining for the first time in four days. Moreover, the cad managed to break below the 1.0620 area, where the 20 and the 50-day moving averages formed a strong support area, that has now turned into a resistance area. In order for the cad to continue its downtrend, the commodity market would have to stay in the green. The yen (Usd/Jpy 89.00)’s trading volumes and ATR (average trading range) have fallen to very low levels lately, far below the average of the last few months of trading. This suggests that institutional money is avoiding this pair, while it is floating freely and open to intra-day speculation. The lack of institutional money may be a consequence of the recent rumors that the Bank of Japan is preparing to intervene in the market to devalue to the Japanese yen.
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