US Dollar fast approaching significant resistance
Hello all.
with the fast approaching US Fiscal Year End (Oct. 31st) it is clear to me that we are seeing significant short covering into the event. Considering the rather sizable 'carry trade' that must be covered into every fiscal year end (balance sheet issues) it is understandable why we are seeing such a dramatic rally. Additionally, the US Federal Reserve Board has hinted that they may indeed start raising US short term interest rates adding further fuel to the short covering US dollar rally.
Having said all that, it is interesting to see that the rally in itself has taken price into very interesting territory. Since the market 'gapped' lower back in June, 2010 one had to expect the market to at some point trade back to that level (and fill in the gap). That appears to be exactly what the market is doing at the moment. As price approaches this important level notice too our simple overbought/oversold indicator (Willy) is suggesting we are extremely overbought ('stupid' reference) and our raw momentum indicator (MACD Histogram) is not moving to new highs even though price is (bear momentum divergence).
Put all this together and it seems to me the market is coming to some sort of short term climax here. Since today is October 31st (and the aforementioned US Fiscal Year End) that should not surprise us. The question is, what's a prudent investor to do at this point. I for one shall be hunting for a top here on the US Dollar in the coming sessions and more importantly, bottoms on its trading pairs, commodities in general and esoteric investments like Bitcoin.
Cheers all and I hope my analysis is of help on your personal trading journey.
Brian
aka The Rational Investor
with the fast approaching US Fiscal Year End (Oct. 31st) it is clear to me that we are seeing significant short covering into the event. Considering the rather sizable 'carry trade' that must be covered into every fiscal year end (balance sheet issues) it is understandable why we are seeing such a dramatic rally. Additionally, the US Federal Reserve Board has hinted that they may indeed start raising US short term interest rates adding further fuel to the short covering US dollar rally.
Having said all that, it is interesting to see that the rally in itself has taken price into very interesting territory. Since the market 'gapped' lower back in June, 2010 one had to expect the market to at some point trade back to that level (and fill in the gap). That appears to be exactly what the market is doing at the moment. As price approaches this important level notice too our simple overbought/oversold indicator (Willy) is suggesting we are extremely overbought ('stupid' reference) and our raw momentum indicator (MACD Histogram) is not moving to new highs even though price is (bear momentum divergence).
Put all this together and it seems to me the market is coming to some sort of short term climax here. Since today is October 31st (and the aforementioned US Fiscal Year End) that should not surprise us. The question is, what's a prudent investor to do at this point. I for one shall be hunting for a top here on the US Dollar in the coming sessions and more importantly, bottoms on its trading pairs, commodities in general and esoteric investments like Bitcoin.
Cheers all and I hope my analysis is of help on your personal trading journey.
Brian
aka The Rational Investor