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Today I am watching the euro send the greenback lower and of course this is all continuing the bullish momentum in the EUR/USD. On days like this it’s not uncommon to see traders (who are not already long) fade (short sell) the move.
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The 102.00 level has been broken and while this is certainly a break that could usher in an acceleration to the downside and a more pronounced correction to the 38.2% Fibonacci Retracement level waiting at 101.20, the overall trend is still up but the 240-minute time frame is no longer a time frame I will look for swing buys into. After flirting with 102.80, the bulls could not make a run for the 103.00 handle as it seems the risk ON trade is under pressure. Much of the rationale behind a 102.20 buy was the expectation that the Dow would continue to be supported. The Dow has sunk into an area where I am interested in a buy, however there is too much uncertainty surrounding tomorrow’s NFP. Another good number for jobs does support the greenback but it continues to weaken the Dow as December taper expectations “must” be priced in.
The much better-than-expected ADP number helped the U.S. Dollar rally as once again traders put a more “near-term” taper back on the table. Sure at this point the conversation is going to switch from “will they or won’t they” to “Does Janet Yellen have to mojo to signal to the market clearly that taper is not a straight line to tightening?” Seeing just how much traders are willing to discount beyond blind corners, that’s going to be nearly impossible.
The daily chart of the USD/JPY continues to have all the makings of an uptrend that is still developing. More dollar strength and more Dow strength will allow the 34EMA Wave to follow-through on the USD/JPY’s “twelve to two o’clock” trajectory that it’s currently on.
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