It finally looks like a major inflection point is getting very close to resolving itself in many different areas of the markets. The US dollar is the key driver of this inflection point which is starting to breakout from a nearly eight month bullish falling wedge consolidation pattern. This afternoon the US dollar began a strong rally that is somewhat unusual during the afternoon hours unless it is Fed Day  where anything goes . The daily chart below now shows today’s bar clearly above the top rail of the bullish falling wedge. It’s still possible that we could see a backtest to the top rail at 97.12 before the next impulse move up begins in earnest.

There are some positive developments in regards to the US dollar on the daily chart below. First there are four completed reversal points in the blue bullish falling wedge. This eight month consolidation pattern corrected 38% of the first big impulse leg up as shown by the red arrows. The 20 day ema has just recently crossed above the 50 day ema giving a buy signal. The US dollar is now trading well above its 200 dma which shows the long term nature of this bull market.

…..click HERE or the chart below for much bigger charts and a comprehensive analysis – Editor Money Talks

…..click HERE or the chart above for much bigger charts and a comprehensive analysis – Editor Money Talks

USDCAD Overnight Range 1.3220-1.3277      

The Federal Open Market Committee will release their interest rate decision and statement at 2:00 pm. The prevailing wisdom is that the lack of a press conference makes it extremely unlikely that they will raise rates.  Many are hoping that the statement omits references to recent “global economic and financial developments”. If so, the statement will be viewed as hawkish and as a signal that December is a go for lift-off.  Other’s just hope for a degree of clarity in the statement.  One thing is for sure and that is that someone will be disappointed with the statement.

The FOMC statement worries took a back seat to data in Asia. Sharply weaker than expected Australian CPI data knocked the Aussie for a loop and opened the door for a rate cut next week. Japanese Retail Sales data did not have the same effect on USDJPY. It was weaker than expected but no one cared and USDJPY hovered around the New York closing levels. The European session saw a quiet morning with EURUSD and GBPUSD fairly quiet within narrow ranges.

USDCAD hugged the 1.3260-70 level throughout the Asian session but drifted lower in Europe when oil prices moved higher. WTI rose from a low of $43.06 to $43.67 and that was all the Loonie needed. That trend has continued during so far, during the New York session as oil is back at its overnight highs.  Unfortunately, today’s move is just noise until the FOMC statement.

USDCAD traders will be keeping their eye on the Energy Information Administration (EIA) crude Oil stocks change report which is out just before the FOMC statement.

USDCAD technical outlook

The intraday technicals are bearish following the rejection above resistance at 1.3280 and the break below 1.3230.  The move below 1.3230 will target the 1.3160 uptrend from October 15. For today, support is at 1.3210, 1.3190 and 1.3160.  Resistance is at 1.3270 and 1.3340.

Today’s forecast range is 1.3180-1.3270

Chart USDCAD 30 minute                                  Larger Chart

The strong rally in the USD dollar is not done. This wont be good news for USA exporters, Grinch is taking revenue away!

Looks like the DXY/UUP will have one last push higher. After all ECB, PBOC and BOJ are all talking easing in their zones while the US FED talks interest rate hikes in Dec 2015.

Close up chart

Longer term chart:

NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net

Investing Quote.

“[Point and] figure charts are more valuable than vertical [bar] charts.” ~ Richard D Wyckoff

“The minute you get away from the fundamentals – whether it’s proper technique, work ethic, or mental preparation – the bottom can fall out of your game.” ~ Basketball Legend Michael Jordan.

“The stock market is filled with individuals who know the price of everything, but the value of nothing.” ~ Philip Fisher

“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” ~ Warren Buffett

“It’s easier to fool people, than to convince them they have been fooled.” ~ Mark Twain

So how does it fell Mr. Euro to get smacked upside the head by your supposed caretaker?

Mario Draghi must be taking lessons from the Bank of Japan because this is one of the best verbal whoopin’s I have seen put on a currency.

Mario yanked the rug out hard; so hard, that the basement is now evident.

I do not wish to get too dramatic here but the truth is that the Europeans simply do not want the Euro above 1.140 and they did their best to take it down. Traders can take away from his comments today that they will have the ECB at their back if the Euro starts getting too goofy to the upside. that will enable to sell rather comfortably up there should the Euro revisit that level. It would take some sort of huge sea change in sentiment tied to a fundamental development for the ECB to tolerate the Euro above 1.14-1.15 based on what Mr. Draghi said today.

Larger Image

On the technical charts, it collapsed through the 50 day moving average in the process triggering a fresh sell signal in the process. The question is will the bears be able to take it down to 1.100 or will the Fed get geared up and start their version of Dollar verbal intervention?

I have made no secret of my view that the last FOMC statement, and the previous one for that matter, were designed to SPECIFICALLY TAKE THE DOLLAR DOWN and prevent it from strengthening further.

That strengthening Dollar has proved to be a bane for US multinationals and no doubt there is plenty of grumbling that has reached the ears of the Fed. Also, generally speaking, the stronger the US Dollar is, the more selling pressure has tended to hit the commodity sector. My big question now is, will the Fed be as concerned about the level of the Dollar IF THE COMMODITY SECTOR continues to have the REFLATION EFFECT taking place like it is seeing today.

In other words, the Fed has been targeting the US Dollar because it has led to falling commodity prices, something the Fed does not want to see continuing once they fall to a level low enough where the low prices work to seriously impact those sectors of the economy that deal with the production/manufacturing/distribution of said commodities. The Fed simply does not want to see the job losses mount as a result as it works to short circuit their goal of achieving an annual inflation rate of 2%.

Now along comes the ECB and with it, at least for today, the REFLATION TRADE in the base metals. If commodity prices can stop falling into an abyss, even with the Dollar rising, the concerns of the Fed over the level of the US Dollar will be ameliorated.

What none of us know for certain is whether this will be the case or not. We are back into uncharted territory since none of us have ever lived through a situation like this in which so many Central Banks are reflating by shoving interest rates into the toilet. 

For all we know, the base metals rally of today could be gone tomorrow. Either way, the Fed is going to be keenly watching the performance of the US Dollar and the price movement in the overall commodity sector as a result of today’s action by the ECB. If the Dollar rally does not apply further downward pressure on the commodity sector overall, then my thinking is that they might be a bit more inclined to pull the trigger on the first rate hike IF THEY EVER GET A DECENT JOBS number. On the flip side – if commodity prices start sinking again, especially the metals, then they will bring out their version of dovish Fed speak once more.

Funny isn’t it how we have seen our entire global financial system reduced to a barrage of words coming out of the mouths of Central Bankers. “Funny” is a poor choice of a word, “PATHETIC” is more like it.