Risk Appetite and Waiting on the FOMC
The U.S. Dollar continues to rest on support around 78.00 and it’s my opinion that today will establish whether the bulls or the bears win the battle for control at this major psychological level support. The move lower on the daily U.S. Dollar comes as the Dow Jones has risen to 12,000. The Dow remains in a mark-up trend while the U.S. Dollar is arguable in still in distribution which explains partly why the 78.00 level is exhaustion support.
However, the way price action has been moving along, 78.00 could be a sign of a future sell-off since there have been lower highs as prices test this support. This often reflects an erosion of buying support by the bears. At this point, I believe a fundamental event is what will reveal the winner here. Cue the FOMC…
What will be the result of the current risk appetite in the market which can be seen with the uptrend in equities and commodities? Even though the crude oil market is pulling back and transitioned out of the uptrend and into distribution, the distribution market trend can still attract buyers as support as the selling pressure exhausts within the range. The 86.00 level will be an important price to watch if crude is to rally once again. Also consider the ramifications of that move on the USD/CAD.
The parity level rejected buyers from pushing the pair higher and as long as the Directional Bias remains down and the 34EMA Wave is moving between “four and six o’clock,” I will look for the loonie to eventually push back against the greenback and move the pair back down. The GRaB candles are showing a neutral to bearish sentiment and momentum with the blue and red candles.
I believe another indication of risk appetite that is more subtle is the bounce from 82.00 on the USD/JPY as the yen is being sold against what has to be considered a near-term flat dollar.
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