Euro and USDCHF

As I wrote yesterday, I had little faith the Euro would continue its little climb. What is wrong with the Euro bulls? Who cares? To be fair it is up over last Friday’s close at 1.4576 but beneath the close two weeks ago at 1.4689. So perhaps a little sideway action until, 1) the Euro bulls get their act together; or, 2) the pair drops of its own weight. My long stopped out just over breakeven. I shorted at 1.4779, a position I prefer at the current time. I’ve lightened that by half at 50 pips profit this morning. If you did the same, set your stop to just over breakeven. It’s now down to support at 1.4720 so it may attempt a bounce from there. We’ll have to see. As I wrote yesterday, should the Euro manage to decisively close above 1.4868 then I’ll start looking for long positions. Until it does there’s no sense throwing up another chart.

The short in USDCHF I wrote about yesterday stopped out at a small profit. I went long and unloaded part of my position this morning at 75 pips. Whatever your opinion of this pair (and I know many think a long position is insane), a buy for fast pips was a low risk trade since it dropped near the bottom again. Since its low in September was 1.0187 and I bought at 1.0241, there’s not a lot of risk. I put my stop below the uptrend line from 1.0187.

Note three things on the drop to 1.0241. First, it hesitated near its prior lows from earlier in the week. Second, the black candle low went to the uptrend line and quickly retreated. Third, there was some divergence between price and RSI for the prior 8 hourly candles. However it is at another resistance level.

After the fact, it’s also significant (to me) that the RSI never went to the oversold line. Momentum is slowing perhaps? Why would that be? Perhaps the dollar bears are just tired. It’s been a busy week for them. The USD has certainly taken a fall lately. As the Wall Street Journal wrote this morning, “There are, as yet, no hints the weakening dollar is ringing alarm bells in Washington—and that’s unlikely to change unless the decline turns into a confidence-shattering crash, a possibility that some analysts have been predicting for years.” Isn’t that a cheery note with which to go into the weekend?

Here’s the USDCHF 1-hour chart:


© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

Euro, Cable, and Swissy

EURUSD and GBPUSD are up; USDCHF is down. With equity futures bidding up so strongly over night as I wrote in my last post, there was little doubt the dollar was in for a drubbing today. I went long both the Euro and Cable and short the Swissy earlier today. They’re all in about 45 to 50 pips profit and all are profit stopped. I had to use both the USDCHF chart to decide to buy the first two and short the Swissy. It was the only definitive chart.

Someone emailed me the other day and asked me to please give signals in advance. First, I’m not a signal service. They don’t usually work, anyway because the market can change in an instant—start contracting whereas before it was expanding and vice versa, etc. Second, I hope that by showing why I did something (and actually showing I’m in the position—let’s lynch all these so-called gurus who only talk and don’t trade but are still out there pushing their signal services) that someone will be able to learn to trade on their own. Besides, often I do give levels I plan on buying or selling. You just have to stay alert and take the trade at those levels. If anyone has a pair they want me to specifically comment on, just post a comment here asking and I will.

Getting back to the Euro, it hasn’t found its way to a definitive close above 1.48. Heaven knows its bulls have pushed and pushed and pushed. As long as that’s the case, I’d prefer to be short, but the buy signals were just too compelling on the shorter term charts this morning. I’m keeping my stop close because I expect to be stopped out on all of these at a small profit. Should the Euro manage to start decisively closing above 1.4868 then I’ll start looking for long positions. Here are the hourly charts for both the USDCHF and EURUSD. The GBPUSD is too boring to throw up at this point: None of the above are trade recommendations. Remember that trading involves substantial risk.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

AUDUSD broke .9000--hip, hip, hip, hooray

AUDUSD finally made it above .9000! Big cheers all around as it reached an overnight high of .9046. I had a tiny long that hit profit at .9004. Given all the huffing and puffing to get to this level, I’d expect it to fall back a bit, perhaps to the .8800 level or just below. At that point, my calculations indicate it could go higher—possibly .9160, up to .9480 then .9520. None of this is guaranteed, of course. It still hasn’t worked out its negative divergence on the daily chart. Divergence is all over the place these days and it’s not a great sign.

Here’s the hourly point and figure (P&F) chart which is remarkable only for the clear patterns it built on the way up—climb, consolidate, climb, consolidate. It needs to fall below at least the internal trend line before anyone gets too bearish.

Equity futures are bidding up this morning as of 7AM EST. Might be a bad day for the buck.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

EURJPY: Back and forth; to and fro

EURJPY has dropped over 90 pips but quite honestly it looks to me as though it wants to claw its way back. Just get your bruising tumble over with is what I want to say to it—actually I did mutter that. I’ve set my stop to make 40 pips profit (back above the purple uptrend line).

There are two, for me, frustrating trading situations. First is when you get no trade signals. While it’s true that you can’t lose money not trading, you can’t make money not trading either. Those days happen, though. Pairs rise; pairs fall. But if I can’t get a good signal (by my definition) then there’s no trade.

The second situation is this one—you believe the signals you’re getting, you buy or sell at what Jessie Livermore called the line of least resistance, but the pair wanders aimlessly: in profit by 50 to 100 pips then stops you out at breakeven or at 20 or 30 pips. You try again. You get the same result.

Whether or not I find this to and fro frustrating is irrelevant. The reason I do find it frustrating is because I’ve formed an expectation that this pair is going to act a certain way, in this case, go down. That’s why I sold. But the market doesn’t care about my expectations. That statement, especially when I say it aloud, is like a plunge into an icy pool. It wakes me up. What I need to do is attend to the market’s clues. Supply and demand are keeping it within a small range. Meanwhile, it’s storing up energy and the move, when it finally does arrive, will be stronger as a result.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

Whippy behavior

EURJPY stopped out at breakeven shortly after my first posting earlier today. Is it really going to be this kind of week? After taking a quick look at the hourly chart, I shorted again at 131 this time. My reason is it again topped at the same level as where prior heavy selling came in. It also shows high wicks on the candles, indicating higher prices are being rejected. A new trend line intersects with resistance. We’ll have to see where it goes. I’m also short GBPJPY with similar behavior.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

EURUSD and EURJPY

EURUSD

My experience this week with the Euro has been decidedly mixed. Monday I was short. That stopped out with a loss of 25 pips. Yesterday I was long. That profit stopped overnight at 40 pips. Now the pair is hanging around its typical resistance level, wondering, I guess, which way to go.

Being whipsawed tells me that the market doesn’t know what to do at the moment. Nor do I. Bowing to Gann’s advice of staying out until I have a better sense of direction, you can bet that I will be tearing up those charts in the next hour or so.

EURJPY

I did short the EURJPY yesterday at 130.83. It’s up 103 pips as of now, 6:20 AM EST. Where might it go? Let’s look at the charts.

On the daily chart there are some interesting patterns. First, is the up channel from early in the year (its lines are drawn in black). When it fell out of that channel it entered some sort of corrective pattern or perhaps a consolidation. That’s confined between the purple lines. While the bottom purple line shows an up trend, the red line indicates a slight down trend since June (the red line). This shows it coiling in a triangle. Going along with the upward trending red line there is also divergence with the RSI.

What to make out of all this? In part it depends upon your personal approach to trading but the most conservative statement is that the market is pausing right now, storing up energy to make another move.

Why am I short? It broke below the triangle once. Now it looks as though it’s doing so again. It’s as thought it’s compelled to at least venture lower. Also, one can make the case for a double top although it’s not perfect. But if it is one, it broke below its neckline and is hanging out there.

Another thing is that divergence. Divergence has been all over the charts lately and it’s troubling. Why? If a price is trending up you expect to see any particular indicator you’re looking at also trending up. That’s known as confirming the price trend. When it doesn’t do so, that’s known as divergence. Divergence can be an early warning of a trend change. Note the words “can be.” It doesn’t mean it is a trend change. It means you have to watch prices more carefully than you might if everything was moving together. Divergence can last a long time. That’s why it’s not tradable in and of itself.

I don’t enter trades based only on one time frame. What really caused me to short was the daily in combination with the signals on the hourly. There it broke a short term uptrend line on both price and RSI and had a bearish candle.

Here’s the daily and hourly:

None of the above are trade recommendations. Remember that trading involves substantial risk.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

Australia

Australia hiked its interest rate last night. AUDUSD and AUDNZD both moved up smartly. I bought AUDNZD based on the chart I posted yesterday. I am now out. Why not stay in since I often do that when I’m in profit and can move my stop to such a point that I keep some of those profits?

One reason is I’m thinking of shorting. There is the downtrend as you can see from the chart yesterday. Always go with the trend, you hear. Well hip, hip hooray for the trend followers. What are you supposed to do in a sideways market? I’m not afraid to go against the trend if I see clear signals. Being with the trend usually leads to bigger profits and it’s often “safer.” But in this case, because of conflicting signals across different time frames and because of the current price behavior I lean short. So I had to close my long position.

With both pairs, I’m surprised there’s not more oomph from the rate hike. Ozzie should be on track for .9000 and wouldn’t that be grand? But let’s watch it. Let’s see how it unfolds. Many people are already counting their profits from that level and the market has a way of not going along with the best laid plans of mice and men.

None of the above are trade recommendations. Remember that trading involves substantial risk.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

Euro up but can it break resistance?

Yesterday I tried a short in the Euro and was fairly quickly stopped out with a loss of 25 pips. Why such a small stop? I wrote yesterday about the mixed signals on the chart and I wasn’t going to take on a wide stop in that environment. Late in the day, around 5 PM EST, I bought at 1.4654. You can see this trade on the hour chart above. It’s now profit stopped.

Note the interesting way it’s running into resistance again at 1.4750, the same levels it has had problems before. Also, the candles look indecisive now—there are smaller bodies and lots of upper shadows, indicating higher prices are being rejected. It doesn’t mean it can’t rise above these levels but there’s a bit of a struggle going on.

Do you see my two trend lines? One is drawn from the price low and the other from a level above that where there seems to be some support. Usually I get better results with Fibonacci calculations and with trend lines when I run them off a price level that the pair seems to respect in some way, i.e. it has touched it more than once. The extreme low or high can be just that—an extreme that doesn’t mean much.

Equity futures were bidding up this morning and the US stock market just opened with a bounce up so today may be a dollar drubbing day. But we’ll have to see after an hour or so.

This is not a trade recommendation. Remember that trading involves substantial risk.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

AUDUSD and AUDNZD

AUDUSD

The one hour chart below shows the Ozzie bounced decisively off a low of .8569 Friday. My short was profit stopped out Friday with a tiny 15 pips profit. Now I’m out completely. We’re just going to have to see whether it starts to stumble again as it approaches its highs.

The hourly chart has some interesting things on it. The bullish candle that followed its bounce off the low would have pointed to taking a long position had I been paying attention. I wasn’t so I didn’t. The second bullish candle is also promising. What still concerns me about the pair is the RSI.

So what will I do? If it falls back to the up trend line (drawn in blue) I may try a small long position. If it reaches last week’s highs and stumbles I may try a short. It may be stumbling now so I’m dropping down to a 15-minute chart to watch it. But there’s nothing definitive to indicate a short just yet.

AUDNZD
Speaking of AUD, the daily chart for the AUDNZD shows that it’s nearing the bottom of a downward channel as well as touching an upward trend line. I may buy. It’s easy to risk since I can set a tight stop. Here’s the chart:

None of the above are trade recommendations. Remember that trading involves substantial risk.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

What's Up with the Euro?

Weekly—it is in an uptrend but closed this past Friday with a lower low than the prior week. One could make the argument for an evening star. This is a three candle pattern. Did you know both Venus and Mercury are called evening (and morning) stars? It’s because they can’t be opposite the sun which means they can’t, for example, rise at sunset. Venus, which is brighter than Mercury, appears in the sky just before it gets dark. Obviously it’s bearish. The criteria are that the first candle is a longish white candle, the second should be a star, and the third candle needs to close well into the first candle’s body. In Steve Nison’s book, Japanese Candlestick Charting techniques, he writes that a star is a small body candle that gaps away from the candle preceding it. Within the Forex markets you don’t usually see gaps and when I went to his course a couple of years ago, he said it wasn’t necessary in this market. Any star pattern is more significant if it’s at support or resistance. The high of this star was 1.4846 which has been the high since the summer of ’08. I’d say this was resistance. From the weekly chart I lean bearish but have to keep in mind the overall uptrend.

Daily—it has been in an uptrend until the last nine days when it’s been in a range between 1.4467 and 1.4846. It’s either gathering energy for another push higher or getting ready to turn down. Or it may continue to range a bit. Now those are the kind of definitive statements that make you want to pull your hair out, don’t they? Should I buy or sell is what most people want to know. But we don’t know the future and can only build a case based on clues. There was a double top. It broke the neckline and is back at that neckline now. There’s divergence with RSI (price has been headed up and RSI is flat or headed downward). This is bearish. What troubles me is that RSI hasn’t fallen below 46 since April. This is bullish. Finally, notice on the daily below, what Charles Bulkowski in his Encyclopedia of Chart Patterns (John Wiley & Sons, 2005), calls an ascending broadening wedge. Both lines are headed upward. Neither line is horizontal. The top line is steeper. There should be at least three distinct touches on each side. We have two on the top and three on the bottom. Neither of the double tops quite made a touch. Bulkowski also says a close below the lower trend line is usually a genuine breakout. It has so closed. Of course no pattern is fool-proof and there are many Euro bulls out there. So, on the daily we have conflicting signals.

3-hour and 1-hour—it’s in a downtrend lately. The last few candles have been indecisive ones. It’s at the top of a downward channel. This channel could also be a flag which would be bullish. So there are some mixed signals here as well.

I did go short this morning as you can see on the daily chart below but with a tight stop. We’ll just have to see.

None of the above are trade recommendations. Remember that trading involves substantial risk.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.