Most Major Forex Markets End Lower After Stock Market Sell-Off

Most major Forex markets finished lower after a late session sell-off in the U.S. equity markets. Shortly after the mid-session in New York a strong surge in stock market sent shorts scrambling and helped break the U.S. Dollar to the low of the day, but losses were quickly erased when the stock market couldn’t hold on to gains after the bonds closed at 2:00 pm CDT.

Most major Forex markets finished lower after a late session sell-off in the U.S. equity markets. Shortly after the mid-session in New York a strong surge in stock market sent shorts scrambling and helped break the U.S. Dollar to the low of the day, but losses were quickly erased when the stock market couldn’t hold on to gains after the bonds closed at 2:00 pm CDT.
The EUR USD continued its march toward the June top at 1.4337 earlier in the day, but failed to hold on to gains into the close. There was no particular reason for the weakness other than demand for higher risk assets declined when equity markets reached an overbought level.

The GBP USD sold off late in the session as another attempt to break out to the upside failed. This market appears to be trying to form a secondary lower top but has not attracted enough selling pressure yet to complete the move. A weak stock market tomorrow could put downside pressure on this pair. Traders may also start to shy away from the long side ahead of the release of the U.K. Preliminary GDP Report on Friday.

The main trend is still down in the USD JPY. Crossing 94.78 will turn the trend to up. At this time the market is finding short-term support at 93.00. A stronger stock market is needed to propel this market higher. The late session weakness in the U.S. equity markets could lead to selling pressure tomorrow. This may encourage Japanese investors to repatriate their funds and further weaken the Dollar versus the Yen.

Despite a weak close in the stock market, the USD CAD was unable to make up early session losses. The weak close has put this market in a position to challenge the June low at 1.0783. Regaining a retracement level at 1.1142 will indicate that a short-term bottom is being formed.
The early session rally in the stock market drove traders to buy higher yielding assets like the Australian Dollar but the poor close encouraged AUD USD bulls to take profits. The current rally put this market in a position to challenge the high for the year at .8263 but the subsequent sell-off has created the appearance of a possible double-top. A break through .8099 will be a sign that a short-term top is forming. This is likely to take place if the stock market weakens tomorrow.

The NZD USD surged to a new high for the year today but sold off near the close as demand for higher risk assets diminished after a late session sell-off in the U.S. equity markets. This market will move higher as long as there is demand for higher risk assets. If U.S. equity markets begin to weaken then look for profit-takers to break the New Zealand Dollar over the near-term.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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