Friday, February 4, 2011

Currency market today

In a recap of the week so far as of 10:15AM EST:

AUDUSD reached 1.0200 this morning after a week that has had higher lows each day this week and mostly higher highs (exception was Wednesday where the high was only slightly below that of Tuesday). During the week, it confirmed the January double bottom (.9804 on 1/11 and .9833 on 1/20) with its break above 1.0077. The price target from this is 1.0350. The daily chart sported a triangle that Aussie broke above as expected. The price target from this is 1.0307. Finally, there was also a bull flag on the daily chart. Price broke above; the target is 1.0378. With the series of clustered targets, it seems likely the pair will make it. I even have price targets beyond 1.0400. However, it's not likely to reach those without some retracement from the 102 range as there's other resistance there. There's currently some negative divergence on the three-hour chart—something to keep an eye on. Support is at 1.0109 and 1.0055 in the short term. A break below .9804 would be bearish and selling would likely take place with the potential to push price down further to .9690, .9612 and .9544/32. However, there'd also be buyers coming at .9804 so it would likely be quite a battle. There are also the two occurrences of bearish candle formations on the weekly chart to keep an eye on. Nevertheless, so far, at least this week, the bulls are firmly in control.

EURGBP has ranged from a high of .8619 this past Monday to this morning's low of .8424 (forming a hammer on the three-hour chart so this is the first support level. Additional support is at .8400, .8332 and .8285. Falling below .8285 would be very negative, likely bringing in more sellers to possibly push price down to .8143 and then .8068. Resistance is at .8582, .8672, .8818 and .8941. Momentum and volatility will hold clues to future price movements.

EURJPY had a corrective week after last week's high of 114.01. Yesterday showed a 182-pip drop and the pair has edged below its 20 daily SMA. Its low this morning is 110.77. Below here is support at 110.32, 109.58 (nice support), 108.71, 107.62 and 106.83. Depending on momentum behavior, this pair might be a good buy in the lower 110 or upper 109 price zone. However, the Euro is not a strong currency right now so caution is necessary. Should it regain its traction, expect resistance at 112.00, 112.88 and 114.01. Beyond that it's likely to move on up to the top of the long-term trading range at 115.69. On the weekly chart, it's important to remember that the EURJPY has overtaken its downtrend resistance line.

EURUSD had its high point at 1.3862 on Tuesday and it has been dithering and dropping ever since. After the NFP news this morning (a red herring if I ever saw one), price dropped to a low of 1.3545 so far, below its rather strong support at 1.3573 and below Monday's low of 1.3593. Next strong support is at 1.3500—quite a bit further down—and then 1.3435. At 1.35, I'd expect buyers to pile in—it's a nice round number, simple to wrap one's mind, if present, around. If 1.3435 doesn't hold it, expect support at 1.3396 and 1.3254. Should the pair manage to rally, and I doubt it will before the end of the day, expect to see resistance at 1.3662, 1.3750 and then beginning at 1.38 up to 1.3862. After that is 1.4060 but it's questionable whether it will ever get there.

GBPJPY managed to push to a spike high yesterday of 132.95 but then dropped this morning to a low of 130.87. The low this week was 1.3001 on Monday. Additional support is at 129.52. This really needs to hold. If it does, the bottom line here is that I'm still waiting to see Guppy touch 134.23 but there is quite a bit of resistance between here and there. If it can do this, the next resistance is at 135.22, 136.24, and 137.79. After that there is very little in the way of resistance until 141.19 (confluence) and then price resistance at 145.98, last April's high.

This pair, too, has broken above its very long-term downtrend line on the weekly chart so let's see if it can follow through.

GBPUSD had its high of 1.6282 yesterday and it's been downhill ever since to a low of 1.6036 this morning. I'm sure buyers will come in around 1.6000; 1.5942/63 would be an even better buy point at the daily flag upper boundary retest, fibo and polarity. Cable could be settling into a trading range between 1.5297 and 1.6300. If so, huah, as they say. There will be many opportunities to make some good pips. Support is here at 1.6037, 1.5960, 1.5830, and 1.5751 (1/25 low). Below that would be the bears firmly in control. Everyone has eyes on resistance of 1.6300. If price successfully overtakes and settles above this then 1.6461 and 1.6878 come into play.

USDCAD wasn't quite as dull this week but volatility is still low. .9838 is a key support level but I'm more interested in .9800/15, near the top of the ending diagonal/wedge pattern I wrote about earlier this week. Any reasonable person at this point would have to say the probability is for lower prices—the moving averages are pointing down, there was a bearish candle formation on the daily chart this week, price drops if anyone says boo, the dollar is dead blah blah. Where is support below .9800? The bottom of the downward sloping rectangle is .9753; the Feb. 2008 low was .9711; the triangle price target is .9549. Resistance? Well let's talk about that next week.

USDCHF came into the week with two key prices to watch—.9300 on the downside and .9784, January's high. During the week, the pair barely managed to stay above that .9300 low. If it drops below, there's weak support at .9278 but you'd probably see a good-sized drop. Yesterday it began a little rally and continued that this morning. However, until it climbs above .9784, there's not a lot to say.

USDJPY: All one can say is blah. There's low daily volatility, price is below all the daily moving averages and pointing down, and the yen is a weak currency. Yesterday's spike high was .8206 but it fell immediately. You can find better pairs to trade.

© Dianne Fecteau, 2011. 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.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.


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