There's uncertainty in the market today as traders wait for the US NFP number and for Bernanke's address to the Congressional Budget Committee later today.
AUDUSD began the week with a high of 1.0214 on Monday. The weekly trend has been down with a low of .9908 this morning. Next major support level is the uptrend line from June at .9849
EURGBP has also trended down this week, going from a high of .8646 on Monday to a low yesterday of .8395 which is about where it is this morning. The uptrend line from June comes in at .8334
EURJPY (I'm still short) went from a low of 107.80 on Monday to a high of 110.24 on Tuesday. It has been dropping and is desperately trying to base in the low 108 area.
EURUSD (I'm still short) never made it above 1.3434 this week on Tuesday. It is current low this morning is 1.2961. There's a speed line coming in at 1.2807 which should hold as support but we'll have to see—there's so much negative sentiment out there.
GBPJPY began the week with a low of 125.78 and trotted up to a high of 129.31 on Wednesday. It has been fighting that resistance level since then. If it breaks through, the next resistance is 131.38, a downward trend line from last April.
GBPUSD (the market filled my long limit order of 1.5419 overnight but I've already moved my stop to breakeven as the uncertainty is too great to let the trade alone today) saw a high of 1.5646 on Tuesday before dropping to a low overnight of 1.5407. It's possible the small triangle on the daily chart will provide the next resistance at 1.5610.
USDCAD started the week with a low of .9890 from where it leapt to a high of 1.0034 Tuesday. Alas, it has been struggling ever since. The uptrend line from .9890 might provide support at .9941.
USDCHF (I'm long with three positions) look comatose Monday, with a low of .9323. It's the poster child of success this week, climbing to a high of .9708 yesterday. This is near the 50% of the move down from 1.0066 so let's see how it fares.
USDJPY touched a low of 81.97 on Monday. It then marched upwards where it is currently struggling with a downtrend line from June coming in at 88.39.
Friday, January 7, 2011
Thursday, January 6, 2011
EURUSD—sinking
Euro has continued to sink. In doing so, it has dropped below its daily 200 SMA and is resting on a speed line. A close below here would add bearish pressure to the pair. Not that it needs additional bearish pressure…
The low so far of 1.3006 is near the early December low of 1.2969. Below this lies support at 1.2785 (a fibo of the 1.1876 to 1.4283 move), 1.2644 (early September low), and 1.2588 (August low). A rally would find resistance at 1.3056, 1.3260/75, 1.3378, 1.3434 and 1.3500.
I'm still short from 1.3222.
Here's a daily chart:
© Dianne Fecteau, 2010. 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.
The low so far of 1.3006 is near the early December low of 1.2969. Below this lies support at 1.2785 (a fibo of the 1.1876 to 1.4283 move), 1.2644 (early September low), and 1.2588 (August low). A rally would find resistance at 1.3056, 1.3260/75, 1.3378, 1.3434 and 1.3500.
I'm still short from 1.3222.
Here's a daily chart:
© Dianne Fecteau, 2010. 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.
EURJPY—down to 108.11
EURJPY dropped to a low of 108.11 over the last two hours but it needs to go lower than this.
Looking again at the hourly chart, one can see it forming a triangle or possibly an asymmetrical head and shoulders pattern (which would not be confirmed until it broke below 107.80). It also may be in a zigzag flat correction with the C leg yet to begin. If a C leg began after the 108.11 low, price could reach to 110.15 to a high of 112.78 (C = 1.618 A).
Here's the hourly chart:
Looking again at the hourly chart, one can see it forming a triangle or possibly an asymmetrical head and shoulders pattern (which would not be confirmed until it broke below 107.80). It also may be in a zigzag flat correction with the C leg yet to begin. If a C leg began after the 108.11 low, price could reach to 110.15 to a high of 112.78 (C = 1.618 A).
Here's the hourly chart:
© Dianne Fecteau, 2010. 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.
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.
USDCHF—Narrow range
I have two long positions—one from .9338 and one from .9490. I took partial profits on the former at +325 pips.
Since eight yesterday morning, the pair has been in a narrow 74-pip range, along with EURCHF, EURJPY, GBPJPY, USDJPY and USDTRY. This is hinting at market uncertainty for all currencies vis-à-vis the yen and the Swiss Franc. We'll have to wait and see.
© Dianne Fecteau, 2010. 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.
Since eight yesterday morning, the pair has been in a narrow 74-pip range, along with EURCHF, EURJPY, GBPJPY, USDJPY and USDTRY. This is hinting at market uncertainty for all currencies vis-à-vis the yen and the Swiss Franc. We'll have to wait and see.
© Dianne Fecteau, 2010. 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.
EURJPY—Long term range within long term downtrend
Yesterday, I wrote that my buy order executed at 109.27. I should have written sell order since the pair was at resistance as I stated in the title of that post. Early yesterday morning I placed a limit order for a sell at 109.27. Around 8:15 EST, the market filled the order.
There were a variety of reasons I was leaning short—in the longer term there was a downtrend in place since October 2009, another leg down of that downtrend had began in early October 2010. There was a double top in place from October 6 (115.69) and November 4 (115.42), confirmed with the break of the trough at 111.56. One could make the case for a triple top if the 114.95 high from November 22 is included with the trough at 111.05. The target from this was 106.41. EURJPY reached 107.62. It then rose to 111.24 on January 4. This rally looked like an ABC correction on the hourly chart. I would have entered then but I missed it because I was busy with setting up charts and worksheets for the coming year.
This happens—small traders miss good trades because there are only so many things a person can do at once. My planning is more important to me than any given trade.
When I looked at the pair early yesterday morning it had reached a low of 108.52. I decided that if it rallied 50% of the recent move down, I would go short and this is why I entered a limit order to do so.
In deciding on the limit order, I also had to decide on where to put my stop, of course. Above 111.24 was too much risk in my mind because there has been a rough range since May 2010 of 115.69 down to 105.80 (It hasn't again achieved that low which is troublesome—but that's another part of a longer term analysis). In any case, if EURJPY decided to climb to the top of the range, I didn't want that much risk. I set my stop at 109.77, 50 pips above my short. This was above the .618 retracement and well into the long hourly bar that had started the current decline.
I watched it for a while and was frankly concerned that it hovered about without doing much of anything once I was short. In general, hovering is not a good sign. At best, it indicates too much uncertainty; at worst, it indicates the pair is storing up energy for another big move (often up in a scenario such as this). I do have higher price targets from other calculations so this was weighing on me. I finally stopped watching—I was in the trade for decent reasons. If it went against me, it went against me.
Looking at it this morning, I see it came within one pip of my stop! As of 7:43 Am EST, it's only 23 pips in my favor. Clearly, the pair is trying to base in the 108 area (overnight low was 108.81).
Now I need to decide whether to close the trade or stick to my original analysis. If I stick to it, is it too early to move the stop to breakeven? I always use the market to tell me if my analysis is wrong—here I'm detecting mixed signals in the short term. The strongest is the lack of any real movement in over 24 hours. Regardless, I still have an overall longer-term range to play in—certainly if the pair rose to the 115 area it would be a sweet short.
Here's the hourly chart:
© Dianne Fecteau, 2010. 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.
There were a variety of reasons I was leaning short—in the longer term there was a downtrend in place since October 2009, another leg down of that downtrend had began in early October 2010. There was a double top in place from October 6 (115.69) and November 4 (115.42), confirmed with the break of the trough at 111.56. One could make the case for a triple top if the 114.95 high from November 22 is included with the trough at 111.05. The target from this was 106.41. EURJPY reached 107.62. It then rose to 111.24 on January 4. This rally looked like an ABC correction on the hourly chart. I would have entered then but I missed it because I was busy with setting up charts and worksheets for the coming year.
This happens—small traders miss good trades because there are only so many things a person can do at once. My planning is more important to me than any given trade.
When I looked at the pair early yesterday morning it had reached a low of 108.52. I decided that if it rallied 50% of the recent move down, I would go short and this is why I entered a limit order to do so.
In deciding on the limit order, I also had to decide on where to put my stop, of course. Above 111.24 was too much risk in my mind because there has been a rough range since May 2010 of 115.69 down to 105.80 (It hasn't again achieved that low which is troublesome—but that's another part of a longer term analysis). In any case, if EURJPY decided to climb to the top of the range, I didn't want that much risk. I set my stop at 109.77, 50 pips above my short. This was above the .618 retracement and well into the long hourly bar that had started the current decline.
I watched it for a while and was frankly concerned that it hovered about without doing much of anything once I was short. In general, hovering is not a good sign. At best, it indicates too much uncertainty; at worst, it indicates the pair is storing up energy for another big move (often up in a scenario such as this). I do have higher price targets from other calculations so this was weighing on me. I finally stopped watching—I was in the trade for decent reasons. If it went against me, it went against me.
Looking at it this morning, I see it came within one pip of my stop! As of 7:43 Am EST, it's only 23 pips in my favor. Clearly, the pair is trying to base in the 108 area (overnight low was 108.81).
Now I need to decide whether to close the trade or stick to my original analysis. If I stick to it, is it too early to move the stop to breakeven? I always use the market to tell me if my analysis is wrong—here I'm detecting mixed signals in the short term. The strongest is the lack of any real movement in over 24 hours. Regardless, I still have an overall longer-term range to play in—certainly if the pair rose to the 115 area it would be a sweet short.
Here's the hourly chart:
© Dianne Fecteau, 2010. 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.
Wednesday, January 5, 2011
EURJPY—At resistance
My buy order was executed at 109.27. I'll have to see how this goes. Will post a chart later.
© Dianne Fecteau, 2010. 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.
© Dianne Fecteau, 2010. 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.
USDCHF—Rally continues
I'm still in my long position from .9338 and I added another position yesterday at .9490. The rally through resistance at .9500 and .9593 seems to have caught a number of traders by surprise. The high so far this morning is .9645. Now the pair has to fight through some interim price resistance up to the downtrend line coming in from August at .9872. After that is the November high of 1.006. So far, at least, the pair seems to be fulfilling its seasonal tendency for the USD to rally against the Swissy in January.
© Dianne Fecteau, 2010. 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.
© Dianne Fecteau, 2010. 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.
EURUSD—no reason to buy
One has to search to find reasons to buy the Euro. I expect it will continue to decline into the 1.20s—not immediately and not without some rallies. However, a rally looks unlikely today.
I shorted this morning at 1.3222. This is right near the first support level I wrote about yesterday and it was clear it was faltering there. It's most likely going to hesitate around the current level of 1.3160 (as of 9:10 AM EST) down to 1.31 but after that, the next support is 1.3056 and 1.2969 (Dec and Nov lows). In the unlikely event of a rally, expect resistance at 1.3244, then 1.3430 and 1.3500. You can see where it attempted to break 1.3244 on the hourly chart below before selling off.
© Dianne Fecteau, 2010. 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.
I shorted this morning at 1.3222. This is right near the first support level I wrote about yesterday and it was clear it was faltering there. It's most likely going to hesitate around the current level of 1.3160 (as of 9:10 AM EST) down to 1.31 but after that, the next support is 1.3056 and 1.2969 (Dec and Nov lows). In the unlikely event of a rally, expect resistance at 1.3244, then 1.3430 and 1.3500. You can see where it attempted to break 1.3244 on the hourly chart below before selling off.
© Dianne Fecteau, 2010. 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.
AUDUSD—Weak
On Tuesday, AUDUSD had a lower high and lower low than Monday, reaching a low of 1.0017. The drop has continued this morning to a low of .9972. This is just below the second support level I identified on Monday. It's also near or below the .9976/65 early November lows. Because of the layers of support, I'd expect a period of consolidation here. The place to look for that is on the lower term charts. For example, on the hourly chart, there was positive divergence earlier this morning although RSI has since broken below its downtrend line. There were also two lower highs and lower lows on this chart within the downward sloping rectangle. They had a symmetrical look in time and price that made it possible a harmonic pattern known as a "Three Drive" pattern was forming. This is a series of three, evenly spaced, tops or bottoms. In the case of the Aussie, it would have been bullish because it was forming downwards (see the hourly chart below). One looks for symmetry in this pattern, both in price and time. It looks as though it may be breaking down and the pattern won't be confirmed but these are the things to look for if one is looking to scalp consolidations. A tight stop would be mandatory because there are pressures on this pair—seasonality factors, price versus moving averages, etc.
I'd stay short if I had a short position. I am not and will most likely use rallies to short.
The next support levels are .9897, .9831/12, .9757/37, .9643 and .9544. I believe the last one is achievable unless the pair gets back above 1.0183. If the pair rallies, expect resistance around .9985, 1.0075, 1.0104 and 1.0183.
Here's the one-hour chart:
© Dianne Fecteau, 2010. 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.
I'd stay short if I had a short position. I am not and will most likely use rallies to short.
The next support levels are .9897, .9831/12, .9757/37, .9643 and .9544. I believe the last one is achievable unless the pair gets back above 1.0183. If the pair rallies, expect resistance around .9985, 1.0075, 1.0104 and 1.0183.
Here's the one-hour chart:
© Dianne Fecteau, 2010. 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.
Tuesday, January 4, 2011
EURUSD—bleak
Euro is struggling against massive negative sentiment given the wall of worry that exists over the debt crisis. In addition, there is a slight seasonal tendency for the Euro to go lower in January. It's not enough data to make a statistically compelling case but it is a tendency.
The first question is whether it can make it past December's high of 1.3500 and then 1.3640. If it can, then above that is the 1.3779/85 area where there is a cluster of resistance from price, fibs, and moving averages. Support lies at 1.3230, 1.3056 and 1.2969 (Dec and Nov lows).
Estonia began using the Euro January 1. Even though they're a poor country, they're probably one of the most solvent.
© Dianne Fecteau, 2010. 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.
The first question is whether it can make it past December's high of 1.3500 and then 1.3640. If it can, then above that is the 1.3779/85 area where there is a cluster of resistance from price, fibs, and moving averages. Support lies at 1.3230, 1.3056 and 1.2969 (Dec and Nov lows).
Estonia began using the Euro January 1. Even though they're a poor country, they're probably one of the most solvent.
© Dianne Fecteau, 2010. 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.
Week to date Highs and Lows
Here are the highs and lows for the week to date:
© Dianne Fecteau, 2010. 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.
© Dianne Fecteau, 2010. 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.
USDCHF—Rally
Just as the AUDUSD dropped, one would expect the USDCHF to rise, given there is generally negative correlation between the two pairs.
The high so far today has been .9476. This is within the rally zone that I blogged about yesterday (.9448 to .9593). It's hovering here, near the October low of .9463. There is a seasonal tendency for the USD to rally against the Swissy in January. Yesterday, I also noted the positive divergence on the daily, weekly, and monthly charts and the fact that the pair had sunk to new lows in a low liquidity environment.
The question is whether the bullish moves from October and November, which carried the pair to a high of 1.006, are returning. Or should one get ready to short? I did buy yesterday afternoon at .9338 and took some partial profits this morning at .9462. This was a low-risk trade as I could set my stop close by and the low seemed extreme. My dilemma now is whether to reverse.
On the three-hour chart, the pair is not overbought. RSI is over 70 (overbought) on the one-hour chart (not shown). Not until it definitively drops out of that status on the hourly chart would I consider the current rally over. On the three hour chart there is a potential for an evening star formation but this can't be confirmed until another three hour candle forms. My course of action, then, is to manage my stop so as to not give back too much profit. To that end, I've moved it to about the 50% point of the move and may tighten it further depending on subsequent price behavior.
This is a trade, just like AUDUSD, that is going to require close watching. The potential for a big move in the opposite direction is still present (I can find a few ways to forecast .8000 for the USDCHF) which would certainly be a new low to mull over. But the beauty of that is that there will be plenty of room to get in on the move should it start to occur.
Here's the three-hour chart:
© Dianne Fecteau, 2010. 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.
The high so far today has been .9476. This is within the rally zone that I blogged about yesterday (.9448 to .9593). It's hovering here, near the October low of .9463. There is a seasonal tendency for the USD to rally against the Swissy in January. Yesterday, I also noted the positive divergence on the daily, weekly, and monthly charts and the fact that the pair had sunk to new lows in a low liquidity environment.
The question is whether the bullish moves from October and November, which carried the pair to a high of 1.006, are returning. Or should one get ready to short? I did buy yesterday afternoon at .9338 and took some partial profits this morning at .9462. This was a low-risk trade as I could set my stop close by and the low seemed extreme. My dilemma now is whether to reverse.
On the three-hour chart, the pair is not overbought. RSI is over 70 (overbought) on the one-hour chart (not shown). Not until it definitively drops out of that status on the hourly chart would I consider the current rally over. On the three hour chart there is a potential for an evening star formation but this can't be confirmed until another three hour candle forms. My course of action, then, is to manage my stop so as to not give back too much profit. To that end, I've moved it to about the 50% point of the move and may tighten it further depending on subsequent price behavior.
This is a trade, just like AUDUSD, that is going to require close watching. The potential for a big move in the opposite direction is still present (I can find a few ways to forecast .8000 for the USDCHF) which would certainly be a new low to mull over. But the beauty of that is that there will be plenty of room to get in on the move should it start to occur.
Here's the three-hour chart:
© Dianne Fecteau, 2010. 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.
AUDUSD—Reaction
AUDUSD has dropped, reaching a low of 1.0056 upon which it formed a hammer on the three-hour chart below. This is between the two support levels I blogged about yesterday (1.0183 and .9982 where the latter is .382 of the move from .9537 to 1.0257). Reaching this low also meant the pair dipped below the 10-day SMA of 1.0106. There is a slight seasonal tendency to drop during January (17 down Januarys out of 29 since 1982).
So is this a pullback where one should begin to think about buying in anticipation of the pair reaching various price targets ranging from 1.0307 to 1.0640? (See yesterday's blog for those targets). Or is it the beginning of a more pronounced move down?
Nobody knows for sure. One way to attempt an answer is to examine the current low more closely. Another is to see if there are any buy signals forming on shorter-term charts.
The current low is at polarity (previous highs and lows) as a look to the left of the chart shows. This strengthens the price as support and makes the hammer more meaningful. Therefore, a break below 1.0056 would hint at further lows. It is only a three-hour chart—it says nothing about what it will do tomorrow or the next day necessarily—but it's a clue.
Notice that instead of a buy signal on the three-hour chart, there is negative divergence and that the pair is not oversold. On the one-hour chart (not shown) it was oversold and has bounced above it. This can sometimes be considered a buy signal when a pair has been in a strong uptrend but I'd prefer to see another test of the 1.0056 to go along with this. Note also on the three-hour chart that the price has broken below an uptrend line. RSI has too. In addition, the RSI level is lower than it has been. This is not the same as divergence in that it hints that momentum for downward movement is stronger than it has been in the recent past. Finally, combine all this with the fact that the 1.0257 high occurred in an illiquid holiday market when price extremes are common. I would be hesitant to jump in here with a buy. A little more wait and see is called for. Below 1.0056 lies a cluster of price and fib support around .9982. I'll look for a buy signal there. If none is forthcoming, then there may be additional lows in store, potentially down to .9570 although that seems unlikely at the moment.
Here's the three-hour chart:
© Dianne Fecteau, 2010. 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.
So is this a pullback where one should begin to think about buying in anticipation of the pair reaching various price targets ranging from 1.0307 to 1.0640? (See yesterday's blog for those targets). Or is it the beginning of a more pronounced move down?
Nobody knows for sure. One way to attempt an answer is to examine the current low more closely. Another is to see if there are any buy signals forming on shorter-term charts.
The current low is at polarity (previous highs and lows) as a look to the left of the chart shows. This strengthens the price as support and makes the hammer more meaningful. Therefore, a break below 1.0056 would hint at further lows. It is only a three-hour chart—it says nothing about what it will do tomorrow or the next day necessarily—but it's a clue.
Notice that instead of a buy signal on the three-hour chart, there is negative divergence and that the pair is not oversold. On the one-hour chart (not shown) it was oversold and has bounced above it. This can sometimes be considered a buy signal when a pair has been in a strong uptrend but I'd prefer to see another test of the 1.0056 to go along with this. Note also on the three-hour chart that the price has broken below an uptrend line. RSI has too. In addition, the RSI level is lower than it has been. This is not the same as divergence in that it hints that momentum for downward movement is stronger than it has been in the recent past. Finally, combine all this with the fact that the 1.0257 high occurred in an illiquid holiday market when price extremes are common. I would be hesitant to jump in here with a buy. A little more wait and see is called for. Below 1.0056 lies a cluster of price and fib support around .9982. I'll look for a buy signal there. If none is forthcoming, then there may be additional lows in store, potentially down to .9570 although that seems unlikely at the moment.
Here's the three-hour chart:
© Dianne Fecteau, 2010. 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.
Monday, January 3, 2011
AUDUSD—Year-end Evaluation
AUDUSD closed out the year with a bang, reaching a high of 1.0257 Friday, a price not seen since July 1982. The pair has a slight tendency to drop during January (17 down Januarys out of 29 since 1982).
1.0307 is the top upward line drawn on the weekly chart below. There was an inverted head and shoulder pattern on the daily chart (not shown) that I blogged about in November. Its target is 1.0371. Above that is a psychological 1.0500 resistance level. I also have a 1.0640 target from one of my Point and Figure charts. That will remain valid unless the pair closes below .9570. The pair has been in an overall uptrend since 2001 even if you take into account the severe correction in 2008.
Taking the opposite point of view, in looking at the weekly chart, one could make a case that this is an expanded flat unfolding with this being the B wave. All this is Elliott Wave speak, a "theory" with which I am not completely enamored. Expanded flats typically are 138% longer than wave A. This is much more than that but it can't be ruled out until price exceeds 1.0608 (161.8% the length of A). To be an expanded flat, wave C needs to end beyond Wave A. Wave C could end higher than wave A's 6007, in which case the entire mess would be called a running flat.
Another way to look at the weekly chart is from the perspective of this being a CD leg of an AB-CD move of some sort. If so, expect some consolidation, possibly a small push higher (into the 1.0307/71 zone) and then a reaction downwards. Under this scenario (which I'm currently leaning towards), one would short at those prices. However, there is support at 1.0183 and .9982 (.382 of the move from .9537 to 1.0257). If one started to see buy signals there, it would be best to close the position and reverse. The picture should become clearer in the next day or so.
Here's the weekly chart:
© Dianne Fecteau, 2010. 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.
1.0307 is the top upward line drawn on the weekly chart below. There was an inverted head and shoulder pattern on the daily chart (not shown) that I blogged about in November. Its target is 1.0371. Above that is a psychological 1.0500 resistance level. I also have a 1.0640 target from one of my Point and Figure charts. That will remain valid unless the pair closes below .9570. The pair has been in an overall uptrend since 2001 even if you take into account the severe correction in 2008.
Taking the opposite point of view, in looking at the weekly chart, one could make a case that this is an expanded flat unfolding with this being the B wave. All this is Elliott Wave speak, a "theory" with which I am not completely enamored. Expanded flats typically are 138% longer than wave A. This is much more than that but it can't be ruled out until price exceeds 1.0608 (161.8% the length of A). To be an expanded flat, wave C needs to end beyond Wave A. Wave C could end higher than wave A's 6007, in which case the entire mess would be called a running flat.
Another way to look at the weekly chart is from the perspective of this being a CD leg of an AB-CD move of some sort. If so, expect some consolidation, possibly a small push higher (into the 1.0307/71 zone) and then a reaction downwards. Under this scenario (which I'm currently leaning towards), one would short at those prices. However, there is support at 1.0183 and .9982 (.382 of the move from .9537 to 1.0257). If one started to see buy signals there, it would be best to close the position and reverse. The picture should become clearer in the next day or so.
Here's the weekly chart:
© Dianne Fecteau, 2010. 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.
USDCHF—Year-end Evaluation
The USD performed poorly against the Swissy as the year wound down. In fact, every currency performs poorly against the Swissy and has done so for dozens of years—look at any monthly chart of EURCHF, GBPCHF, etc.
There is a seasonal tendency for the USD to rally against the Swissy in January. A look at prices since 1982 shows that the pair has gone up 20 times and down 9 times. 29 years is not enough to make a definitive statement but there does appear to be some seasonal tendency.
Another issue is that the pair sunk to new lows in a low liquidity environment. This calls into question the validity of the move technically. There were bullish moves in October and November. These carried the pair to a high of 1.006. Currently, though, the pair is below the October low. That's significant because the October low formed a hammer on the monthly chart.
There is positive divergence on the daily, weekly, and monthly charts. The significance is that new momentum lows aren't accompanying new price lows. The pair remains oversold on the daily chart. Other than the divergence, there is no clear sign that a bottom is in place. However, nothing continues straight down. One would expect some sort of rally. The question is, does one wait and short a rally or try a long position?
In favor of waiting for a rally is the triangle on the weekly and monthly charts. Since the triangle is always a continuation pattern from an Elliott Wave viewpoint and often is from traditional pattern analysis, the probability is that there will be additional moves down. Looking at the monthly chart below, one can see five touches of the triangle. A potential downside target for EW triangles is .9072. Psychological support is at .9200. It could go lower. Thus, a rally would provide a nice short. A potential rally zone is between .9448 and .9593. This encompasses a few highs and lows from November and December as well as the 10 daily SMA (at .9511) and the .382 retracement of the move down from 1.0066 to .9301.
Any long position would have a stop below the .9301 low as well as trailing stops up to the resistance zone. I have additional research to do on this pair before taking a position one way or the other.
Here's the monthly chart and a gloomy picture it is:
© Dianne Fecteau, 2010. 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.
There is a seasonal tendency for the USD to rally against the Swissy in January. A look at prices since 1982 shows that the pair has gone up 20 times and down 9 times. 29 years is not enough to make a definitive statement but there does appear to be some seasonal tendency.
Another issue is that the pair sunk to new lows in a low liquidity environment. This calls into question the validity of the move technically. There were bullish moves in October and November. These carried the pair to a high of 1.006. Currently, though, the pair is below the October low. That's significant because the October low formed a hammer on the monthly chart.
There is positive divergence on the daily, weekly, and monthly charts. The significance is that new momentum lows aren't accompanying new price lows. The pair remains oversold on the daily chart. Other than the divergence, there is no clear sign that a bottom is in place. However, nothing continues straight down. One would expect some sort of rally. The question is, does one wait and short a rally or try a long position?
In favor of waiting for a rally is the triangle on the weekly and monthly charts. Since the triangle is always a continuation pattern from an Elliott Wave viewpoint and often is from traditional pattern analysis, the probability is that there will be additional moves down. Looking at the monthly chart below, one can see five touches of the triangle. A potential downside target for EW triangles is .9072. Psychological support is at .9200. It could go lower. Thus, a rally would provide a nice short. A potential rally zone is between .9448 and .9593. This encompasses a few highs and lows from November and December as well as the 10 daily SMA (at .9511) and the .382 retracement of the move down from 1.0066 to .9301.
Any long position would have a stop below the .9301 low as well as trailing stops up to the resistance zone. I have additional research to do on this pair before taking a position one way or the other.
Here's the monthly chart and a gloomy picture it is:
© Dianne Fecteau, 2010. 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.
2010 Highs and Lows
Here are the year's highs and lows for 2010. The date of the high or low is in parenthesis. Only one pair made a new high at the end of the year—AUDUSD—while the USD suffered, making new lows on 12/31 against both the Canadian dollar and the Swiss Franc. GBPJPY also made a new low on 12/30. Some of this is most likely due to low liquidity and the resulting market extremes. Liquidity may continue to be low for the next couple of days.
AUDUSD High:1.0257 (12/31); Low: .8066 (5/25)
EURGBP High: .9152 (3/1); Low: .8067 (6/29)
EURJPY High:134.36 (1/11); Low: 105.43 (8/24)
EURUSD High:1.4581 (1/13); Low: 1.1876 (6/7)
GBPJPY High:150.74 (1/4); Low: 125.51 (12/30)
GBPUSD High:1.6460 (1/19); Low: 1.4229 (5/20)
USDCAD High:1.0856 (5/25); Low: .9926 (12/31)
USDCHF High:1.1732 (6/1); Low: .9301 (12/31)
USDJPY High: 94.99 (5/4 and 5/5); Low: 80.22 (11/1)
AUDUSD High:1.0257 (12/31); Low: .8066 (5/25)
EURGBP High: .9152 (3/1); Low: .8067 (6/29)
EURJPY High:134.36 (1/11); Low: 105.43 (8/24)
EURUSD High:1.4581 (1/13); Low: 1.1876 (6/7)
GBPJPY High:150.74 (1/4); Low: 125.51 (12/30)
GBPUSD High:1.6460 (1/19); Low: 1.4229 (5/20)
USDCAD High:1.0856 (5/25); Low: .9926 (12/31)
USDCHF High:1.1732 (6/1); Low: .9301 (12/31)
USDJPY High: 94.99 (5/4 and 5/5); Low: 80.22 (11/1)
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