Currency Game Of Musical Chairs Heats Up

The European close is once again offering up volatility, as it has done for the last three weeks. The issue is that after the flurry of activity, the U.S. session goes on sound-bite headline watch, where the slightest variation to anything outside of the norm is met by a crescendo of sell-button activity.

Eur is finding buyers, at the same time that Chf is finding sellers, and adding to the strange session mechanics Jpy is getting bought as Chf is being sold, with Cad and Aud following the Equity Down/Usd Up pattern that leaves Gbp not knowing what to do.

Global equity trade has stopped the selling for a while, although the level of support that Nikkei, S/P, and Dax are sitting on looks weak and very likely to break, thus empowering the Usd further, at any given time.

The volatility is hitting in spades, and makes selling the Usd at this point in time a very difficult job to do. The question however, really comes down to how much further an oversold greenback can run this market lower.

Forex charts are still heavily weighted towards a completely overbought Usd and oversold equity markets, and the long-Usd play is as much to do with global reserves held in dollars as it is a desire to buy into the U.S. economic story.

The dollar index (DXY) is moving higher though 87.00, to hit price points not seen since January 2009, that will form a yearly chart triple top that connects trade from 2005. As the global growth story unwinds, the move to Usd based Treasury notes moves on unabated, fuelled by a desire to be long safety, at the cost of yield.

Speculative interest has moved out of equities and oil, and into Bonds and Gold, both of which are allowing the dollar index to easily hold higher, for now.

There are no technical signs of a reversal coming anytime soon.
The ironic thing about the recent equity headline to cross the wires in regard to short-selling is that it is a German-based sound-bite that was issued after the German markets were closed.

The news impacted global equity futures trade but was unable drop German Dax values by more than the average 1.5%, after wiping out 3% of U.S. and Asian futures market valuations ahead of time.

S/P markets are desperately trying to hold 1115 support, which is a huge price point on the daily charts. A move lower from here draws in 1055.

Short-sided speculative interest in West Texas Intermediate has managed to hold price action lower.

The ease in which sentiment changed from bullish outlooks on global growth to a very negative view has empowered those on the short side of oil, and has aided the ease in which the Usd has been bought. However, that fickle markets may just as easily now test bids at $62.50.

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