It’s no surprise: U.S. dollar bounces on “Plan B” rejection

Friday, Dec 21, 2012

The saga continues as we see the fiscal cliff “winners” and “losers” played out from sound bite to press conference to progress to letdown. Thursday night was the latter and the letdown of the rejection of so-called “Plan B” by House Republican leaders caused the market to re-think just how much optimism that had already been baked into the cake. Unwinding the “optimism position” was swift Thursday evening but it seems that as traders re-evaluate the situation on Friday - going into the weekend – optimism that the cliff will be averted is returning as equities pare their gains.

Technically the daily U.S. Dollar Index remains in a downtrend and today’s rally represents nothing but a bounce. From a price-action based perspective, the rally did not have enough bullish momentum to carry higher through the 80.00 major psychological level but did rally from support at the 79.00 level. Frankly however these chart-based levels fall a distant second to the real driver of today’s risk aversion: The news that point to a huge disappointment that the optimism of Plan B has – for now – brought the market now closer to avoiding the cliff.

Without the votes needed, the market sees this as a stalemate and reacted swiftly Thursday evening – selling the Dow futures off sharply over 200 points.

Past performance is not indicative of future results

The wick left behind after the initial sell-off shows that traders are not as negative on the news after an evening to digest the reality of stalemate.

 

Past performance is not indicative of future results

Notice that the U.S. Dollar Index rally is nothing more than a bounce from levels at which the greenback has been previously supported and as much as the buying is based on news, there is some technical merit to this arguably choppy time frame reaching “oversold” and the ceiling at 80.00 that is still untouched. The daily chart is in a volatility market trend because the bearishness that can be seen in the red GRaB candles has not yet dragged the 34EMA Wave lower into a established “four to six” o’clock trend. I still see the 80.00 level being a point at which sellers will view this price as a resistance level to sell into.

 

As an active forex trader and Chief Currency Analyst for IBFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.

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Posted By: 

Raghee Horner

Raghee Horner, chief currency analyst for IBFX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.
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