The market might seem irrational, but it´s always safer to go with the flow.

We know that the market always follows its instinct, but very rarely it disregards the fundamentals completely and trades against them. On yesterday´s short market update, I wrote that the US data published was not helping the Buck. Personal spending decreased from the previous month and last month´s personal income and spending numbers were revised down as well. On top of that, the release of ISM manufacturing PMI and manufacturing prices was very early and missed the expectations. But the market didn´t really care and the US Dollar marched higher against all the majors. It closed near the highs against the Euro and the Pound. 

The Canadian Dollar, in particular, was hit the hardest yesterday; it opened at 1.3077 and closed about 100 pips higher. That means USD/CAD finally broke above the seven-year-old resistance, which leaves the door open for 1.40 now. Another example of the market following its own mind is the rally of the Australian Dollar early this morning. The RBA published their monthly statement at 4:30 GMT and comments such as “Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices.” would normally send a currency tumbling lower. Instead, the AUD jumped about 100 pips higher, breaking above 0.74. This makes you think that it´s always better to follow the market sentiment, even when it might seem irrational. So, our forex strategy today is buying the USD dips and staying away from AUD/USD for now. We opened a sell forex signal in EUR/USD because the stochastic and RSI indicators were overbought in the hourly chart. We will open a buy forex signal in USD/CAD since the trend here has been quite strong.