US Dollar got a boost as traders weighed the better-than expected earnings by Wells Fargo, higher inflation numbers and a slide in crude prices. At 11:40 PM EDT Asian markets are following the US equities market lead and are sharply higher. Yet, underlying uncertainty about the direction of the US economy as expressed in the FOMC minutes suggests that the growth and inflation picture is difficult at best as Bernanke and company all but reversed their assessment of inflation risks. On the surface, the dollar strength appears to be more a retracement than reversal, and only time will tell. According to reports published on ForexTV.com by Brewer Investment Group Euro will lead the retracement. “Although the shift in sentiment attracted traders to the Dollar, this still only has the appearance of a retracement as no major bottoms in the EUR/USD appear to be threatened at this time. Until the Euro starts making lower tops and lower bottoms can one call the trend down. Based on the current chart pattern, look for this break to continue to at least 1.5825 to 1.5774 before stopping. The key to this market turning bearish is going to be the secondary rally to test the 1.6038 all-time high. If the market is topping, it will fail on this test.”(http://www.forextv.com/Forex/Commentary/ShowStory.jsp?id=15043&category=1) .
The bottom line here as I have stated previously in this segment is that we are in the midst of a secular shift in the global economy. Traditional mechanisms of evaluating markets are confounding traders now on an intraday basis as they grasp for any semblance of the old world order. Yet, strong oil and gold still results in lower dollar. That has not changed. Commodities prices will be the best barometer of long term forex price action. In the mid-range horizon look at the options action. Speaking to Bloomberg News, Kathy Lien of DailyFX.com said, “The risk reversal levels are very significant…It tells us that the selling in the U.S. dollar is getting overdone. Based upon the last few times that they have gotten toward these levels it tells us that we should have a reversal downward in the euro.''
Short-term the technicals are proving to yield the best indication of price movement. Unfortunately, the gyrations in prices are so extreme and frequent that it is becoming no better than a gamble most days as traders wait for patterns to develop and then get confirmation. Patience in this environment is a virtue. Following is the ProSticks forex video report.
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