Dollar bulls have been squeezed badly over the last 24 hours or so, as a coincidence of several factors brought the pair sharply higher by over 210 pips since Wednesday morning. Especially yesterday’s surprising jump by 100+ pips without much behind it might have been a sign that something weird is going on here. I am terribly glad to be out of the market at the month’s end, and I would advise anyone to do the same. Sometimes the best investment is not to invest at all – this fits great to the present market picture.
A bunch of unimpressive fundamentals from the US, combined with comments from the FOMC member Rosengren, have put the Fed tapering off the table for sime time. While QE tapering had been priced in the dollar strength in the first half of the May, the second half was driven by unwinding of the heated QE reduction talk. Barclays commented recently that the Fed is unlikely to curb its easing program before Q1 of 2014, and current price action behaves accordingly. The 1.2840 live served as a strong support level, after which only 1.2950-60 area acted as a resistance along the surge to as high as 1.3060. The intraday interest rate differentials between the German and US bond markets also contributed to the rally.
For those, however, who aren’ t patient enough to skip trading even during turbulent times, I would recommend buying the dips in the current short-term uprend. Following areas of cummulated orders on the downside may be attractive entry levels – 1.3040, 1.3030, 1.3000, 1.2990, 1.2975 and 1.2955. Long-term bearish bias remains untouched by the current rally.
