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With US stocks up sharply during the month of May despite the current setbacks, theory says there should be dollar selling to rebalance forex hedges. As I explain in this article, this is not an exact science but something to be aware of as we trade for month end tomorrow.
So don’t trade with your head stuck in the sand. Just be aware of month-end rebalancing.
Have you ever heard of the term “month-end rebalancing?”
GBVPUSD 4 HOUR CHART – PAUSE ABOVE KEY SUPPORT
As I pointed out yesterday
Key support levels are below 1.27, most important for me is 1.2674. (I should have said important to The Amazing Trader)
In any case, the low paused just above it at 1.2680.
On the upside, a move back above 1.2725, at a minimum, would be needed to shift the focus from 1.27 and below.
USDX 4 Hour CHART – USING IT AS A EURUSD PROXY
I posted this yesterday and see how the failure to hold above 105.17 gave a clue in EURISD (58.6% of the index)
As I posted yesterday,
Focusing on 105.17 as the move above confirms EURUSD bearish.
Back below it would require EURUSD to move back above 1.0800-05 to confirm.
I post the uSDX even though I do not trade it directly but rather use it to see if it confirms what I am seeing on a EURUSD chart.
EURUSD 4 HOUR CHART – 1.08 REMAINS THE FOCUS
The move below 1.0800-05 did not reach key supports (low 1.0788), leaving 1.08 as the bias-setting level. To shift the risk the other way, however, 1.0859 would need to trade.
Looking ahead, tomorrow is month end and with US stocks having a strong month, the theory says there could be USD selling for rebalancing purposes. We will discuss this later.
For now, technicals are pointed down but neutralized if EURUSD trades above 1.08.
USDJPY 4-HOUR CHART – DID THE BOJ INTERVENE?
The price action suggests there was intervention, presumably to defend the 158 level. So far, the move down paused dead on at 156.52 support. USDJPY would need to establish below 156.90 -00 to give the upside a breather.
As I posted yesterday:
As I noted earlier, 157.50=00 is the BoJ/MoF’a nervous zone with only the 160.16 high left on charts after that level.
With higher US yields driving the dollar higher, all the Japanese officials can do is threaten as any intervention, unless it was massive and sustained, would likely be met with buyers below the market.
In any case, if in fact it was intervention, it has restored a two-way risk to what was becoming a one-way street and confirms the new line in the sand is at 158.00.
Thinking out loud, perhaps they wanted tio restore a two-way risk ahead of inflation data from the US and Japan on Friday.
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