Cad Sentiment Test. Majors to follow?
Written by A Forex View From Afar on Wednesday, August 20, 2008The assumption that the forex market has found a temporary Usd bottom appeared as possibly true today.
In the U.S. session, the dollar had a very hawkish news report - the PPI read, which rose at the fastest level in the last three decades, indicates that inflation is still knocking at the Fed’s door, and therefore may force a rate hike (Usd positive). However, the greenback could not find the strength to higher lower and hold against the European pairs. The Asian major pairs (aussie and yen) both had confirmation from their central banks that growth may be slow in the coming quarters. As a technical note, there is no point in overacting the PPI read, it just reflects with a lag the strong gains in the commodity market in the last year, but may have surprised some with its lack of impact.
With currency pairs reversing some of the dollar gains, there are what looked like consolidation moves that are looking like long-dollar distribution possibilities happening right now. For example, the Canadian dollar has been trading in a range for a week. The pair just bounced from the resistance level, helped by a much better than expected wholesales report from Canada. The pair may retrace to the range support area, and that is where the next test of dollar buying resolve will take place.
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