Forex Market Driver Update

Forex trade has stabilized after the Tuesday trauma caused in the global risk markets by the downgrading of European Union members, and added to by the amount of noise coming from Goldman Sachs, Ben Bernanke, and Timothy Giethner testimony and speeches.

It was Wall Street meeting Main Street, via the Fed and Treasury, with some sovereign debt issues thrown in; all ahead of the 14:15 ET interest rate decision on Wednesday from the FOMC.
The Australian dollar has once again confirmed the fact that, although near-term forex valuations are dominated by the amount of risk in the global market at any one time, interest rate differentials are playing a part in how far automated selling will carry a pair.

The 4% rate differential in Aud/Usd has allowed support to be found in overnight trade, and unlike most other majors, the aussie has regained a lot of the previous session losses.

The hardest hit pairs in the rush to get long the safety of U.S. Treasury debt were Usd/Cad and Gbp/Usd, and both are trading within the 20 and 50-dat Simple Moving Averages that are now locking the 4-Hour charts into well defined ranges. For those looking to buy support or sell resistance, this set-up looks compelling, but only if global equity markets can hold support.

S/P futures will have a big role to play in reflecting where the speculative side of global trade is happy to be, and will signal long-risk/short-Usd if 1195 can be broken going long, from the current support are around 1182. If the 1175 support area gives way ahead of the FOMC rate decision the market will stay firmly on the short-risk/long-Usd side of things.

We will signal as it all unfolds, and will be prepared to cut positions, as well as add to them, as required during what will no doubt be a compelling session of trade on Wednesday.

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