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  • Commodities Update: As of 18:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.16% Gold: -0.87% Silver: -1.70% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/2ZM2rM1kJN
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  • Wall Street IG Client Sentiment: Our data shows traders are now net-long Wall Street for the first time since Mar 05, 2021 when Wall Street traded near 31,529.20. A contrarian view of crowd sentiment points to Wall Street weakness. https://www.dailyfx.com/sentiment https://t.co/zeXYkoKVW6
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  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 90.05%, while traders in GBP/USD are at opposite extremes with 67.50%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/dhdLOMU0TX
  • Nasdaq Extends Slide, Bond Yields Spike on Fed Taper Fears -via @DailyFX Link to Analysis: https://www.dailyfx.com/forex/market_alert/2021/05/12/nasdaq-extends-slide-bond-yields-spike-on-fed-taper-fears.html #StockMarket $NDX $QQQ https://t.co/e08fA8Wy73
  • US Treasury Department: - U.S. ran record $1.9 trillion budget deficit in first 7 months of FY2021 - Federal outlays climbed 22% to $4.1 trillion from Oct. through April - Revenues rose 16%, reflecting 2020 tax deferrals
  • Indices Update: As of 18:00, these are your best and worst performers based on the London trading schedule: FTSE 100: -0.28% Germany 30: -0.28% France 40: -0.34% Wall Street: -1.41% US 500: -1.71% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/PfhSpL5XsO
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  • We've taken out short-term support on $SPX. Bigger levels below though. For this index, it is 4,000. For the Nasdaq 100, which has a floor more immediately at hand, it is 13,000 https://t.co/KeHxTw81Ht
Dollar, Risk and 'Other'

Dollar, Risk and 'Other'

John Kicklighter, Chief Strategist

I am separating my trade setups into three major categories: dollar-based setups, risk-based setups, and 'other'.

From the Dollar, we have seen extraordinary volatility this past week following a record-breaking trend. The Fed reinforced a more hawkish time frame than all its counterparts, but the short-term speculative build up may have been too ambitious and thereby opens it up to a possible correction.

For anti-dollar moves, I would consider it a correction - a temporary pullback in a larger trend. I don't like pairs like EURUSD for such a move as its fundamental baggage is too significant. However, NZDUSD's offers a neutral counterpart and a 200-day SMA above at 0.7625. GBPUSD is another one should it break its 50 and 100-day SMAs at 1.5165 and 1.5400 respectively.

Dollar longs have great medium-term potential, but I'll wait until technicals clear up before I look for a setup to ride the continuity of the trend. Meanwhile, the 'risk' theme offers a headwind to a dollar pair. I am short USDJPY on last week's wedge break. The initial drive was based on a dollar drop, but the real momentum would likely have to fall to an unwind in risky positions and thereby carry trades. If risk aversion kicks in, I like USDJPY bearish up to 117.50 (anything below that denotes a more serious change in trend and a separate trade). I also like GBPJPY on the risk front with a break below 177.50 (though a positive risk argument could be made above 181).

And, for the 'other' category, I'm looking for pairs that don't have to rely on the Dollar or risk trends. There are a number, but I am keeping focus on a few that have the biggest fundamental potential or are more immediate technical pictures. I have put back on my AUDNZD long (now in the red) given its proximate fundamentals yet three decade low. I also like GBPCAD as it forms a steep and terminal descending wedge. A break above 1.8900 or below 1.8650 can instigate speculative follow through.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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