Friday May 19, 2023 - 14:58:17 GMT
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Why is the Dollar Bid?
Have you noticed the dollar has been firming lately? Have you noticed the outsized reactions to third-tier news that would typically be ignored or have minimal market reactions? Have you paid attention to sudden air pockets where prices suddenly spike up or down?
It is easy to come up with reasons after the fact for dollar strength but to me it feels like trading in a liquidating market. (This is a must-read: Exclusive: How to Trade a Liquidating Market)
This comes in a market where sentiment had turned bearish on the dollar and recent price action suggests a squeeze on short positions.
Looking at the following charts, courtesy of the Amazing Trader, the risk had shifted to the dollar upside, leaving bulls in charge and bears hoping their stops would hold (Note, momentum often builds when you see either 3 blue or 3 red AT ladder lines build in one direction).
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EURUSD 4-hour chart
So, if I am right dollar strength has been driven by a liquidating market, meaning recent (dollar) highs would need to be broken to put a further squeeze on lingering shorts or momentum will slow to the upside. .
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