Friday, February 11, 2011

World Money Show

I’m attending the World Money Show in Orlando until tomorrow so I won’t be posting anymore today. It’s always good for a currency trader to get out and listen to people who trade other markets.

As usual when I go away, there's some interesting price action going on with the currency pairs. It will be interesting to see how USDCHF fares as it approaches .9783.

See you Monday.

GBPJPY—made it

I haven’t written about this pair since Feb. 1 when I was long from 130.65. I wrote then that the pair had to close above 134.23 for the breakout above the long-term downtrend line to mean anything. Yesterday afternoon, it touched 134.26. I shorted there because I expected it would be good resistance and there was negative divergence. This morning I closed one of the positions; I moved the stop on the other to breakeven. I’m at a conference today so don’t have time to do a lot of analysis but the pair’s behavior is interesting in light of some risk aversion.

Note that it still hasn’t closed above 134.23. I’d expect one of two things in the near-term in order to remain bullish on the pair: it will either quickly retest 134.26 and close above it for the week (very bullish) or it will retrace to .382 or .50 of the recent move up, staying above 132.00 and then retest. This would probably happen next week. Of course, it could always sink like a stone but not until it gets below 130.00 would I be too concerned. It has not been below 130.00 this month although it touched 130.01 on January 31.

A successful close over 134.26 would put the pair on track to resistance 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.

© 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.

Thursday, February 10, 2011

Euro stalling

Euro hasn't done much of anything the last 24 hours in line with the indecision that traders seem to be suffering through. As long as support holds at 1.3479, the general tone is at least neutral. However, 1.3862 is the price that the pair needs to overcome for anyone to believe the pair is still bullish.

AUDUSD--stalling

AUDUSD is stalling. Only until it can break above 1.0257 are the bulls going to be vindicated that the uptrend is in force but it just can't seem to quite get there, reaching only 1.0200 last Friday.

A look at the daily chart shows an upward rectangle within a downward sloping rectangle. In addition, if you study the 1.0183 and the 1.0257 tops, you see they're sharp. This last set of topping days is more rounded. People refer to this as Adam and Eve tops--I've never noticed that it makes much difference in overall performance but the rounding does suggest a more gradual drying up and tends to be bearish. Regardless, until there's a close below .9804 or better, .9538, the double or triple top is not confirmed. The bottom of the smaller rectangle is .9926; the lower boundary of the larger one is .9760.

Here's the daily chart:


Wednesday, February 9, 2011

USDCHF—more resistance

Swissy managed to climb above the resistance line and the .618 retracement of last week's move down (.9610) to a high of .9661. It has started to stumble a bit and may be forming an evening star candle formation on the three-hour chart. This isn't certain until the current candle closes. .9543/24 is a likely support since it's fib confluence and the prior low. Below that is .9463, .9424, .9331, and .9301.

.9784 is still the number to watch on the upside. I wrote yesterday that the only real resistance was .9688 so it needs to get through this. If it can do so and close above .9784, then it's possible it can get to 1.0280 or more. I have a target on my three-hour Point & Figure chart of 1.0250 which won't be invalidated until .9300 is broken.

I'm still long from .9444 and added another position yesterday at .9578.

Here's the three-hour chart:












© 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.

GBPUSD—dragonfly doji

The best Cable could do yesterday was 1.6163 which is better than it has done this morning with a high of 1.6101.

On the three-hour chart yesterday morning, a candle known as a dragonfly formed with a low of 1.6029. These candles with a long lower shadow and open and close prices the same (or as in this case one pip apart), often serve to define where support is. Thus, if Cable closes beneath this, it would be quite bearish.

Another thing to notice on the chart is the series of steps down. The pair has currently climbed back to retest the last one so let's see what happens but I'm leaning towards a sell. I'd like to see a momentum failure on the short-term chart, divergence or bearish candles.

Support is at 1.6029/00, 1.5900, 1.5751, 1.5345, and 1.5274/64 (fib confluence) as well as the round psychological number of 1.50.

Resistance is at 1.6300, 1.6461, 1.6500 and 1.6878

Here's the three-hour chart:












© 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.

Tuesday, February 8, 2011

USDCHF—resistance

A few minutes ago, Swissy whacked its head on a speed line coming in at .9603. So now it's going to be interesting to see what happens because, as I wrote yesterday, it's just above the top of the range it's been hovering in lately and the .618 of last week's move down is .9610. Given the beating the dollar is taking lately I'm not sure it can pull off a close above here but here's looking at you, kid.

Support is at this morning's low of .9524 (just beneath the recent range) then .9463, .9424, .9331, and the old bugaboo, .9301. .9784 is the number to watch on the upside. The only real resistance between here and there is .9688. If it can maintain this rally and close above .9784, then it's possible it can get to 1.0280 or more. I have a target on my three-hour Point & Figure chart of 1.0250 which won't be invalidated until .9300 is broken.

I'm still long from .9444 but I took some partial profits a few minutes ago for +126 pips.

Here's the three-hour chart:












© 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.

GBPUSD—short-term

A reader emailed me to ask if I was short Cable since I commented in the last post that my money was on the bears. No, I'm not. In fact I'm studying the short-term charts now which look somewhat bullish. It's currently at short-term support of 1.6036.

What I should always remember to say in the weekly analysis is that this is longer term analysis. In the case of Cable, it is near the top of the triangle which would imply a short. Had I been on top of it when it was at 1.6163 overnight, I might have sold there.I wasn't and didn't. At this point, I need to see momentum fail on the short-term chart or a retest of 1.6150 or thereabouts with failing momentum or divergence or bearish candles.

© 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.

GBPUSD—weekly

Cable has managed six days of closes over 1.60 and it looks as though the bulls are fixated on overtaking 1.6300. What can't be overlooked, however, is that it's coiling inside a triangle on the weekly chart and the lower boundary, a logical target for the next move, is 1.4619 or thereabouts. Before it got there it would find support at 1.5900, 1.5751, 1.5345, and 1.5274/64 (fib confluence) as well as the round psychological number of 1.50. Of course, an Elliott Wave afficianado would say the pair must break down from this triangle since it entered it in a downtrend but take that with a grain of salt.

The fib confluence of 1.5274/64 lends support to the idea that Cable might be settling into a trading range between 1.5297 and 1.6300. This, too, would suggest the next move would be down. Everyone has eyes on resistance of 1.6300. If price fails again in this range, selling will come into play.

If price does successfully overtake and settle above 1.6300, then 1.6461/1.6500 and 1.6878 come into play. My money is on the bears but be careful with this pair and use tight stops.

Here's a weekly chart:











© 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.

EURUSD—three-hour chart

I'm still long from 1.3517 and Euro is behaving in line with my analysis yesterday. On the 3-hour chart, this looks as though it's leg c of a three wave abc correction which I wrote could carry it to around 1.3670. The high so far this morning is 1.3667, fib confluence and polarity.

There's a good chance this little rally could achieve 1.3727 (.618 of the move down from 1.3862 to 1.3509). At this point, I'd be looking for signs of failure to find a position that put me back in synch with the overall downtrend. However, if they don't exist and price closes above 1.3727, I'd look for another run to 1.3862. Where I'd short for sure.

If the pair should reverse downwards, expect initial support at 1.3509 and fib confluence of 1.3485/81 (.382 of 1.2874 to 1.3862 and .382 of the move up to 1.3862 from 1.3255). After that is 1.3361 and if that broke then 1.3244.

Here's the three-hour chart:












© 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.

AUDUSD—weekly chart

Aussie's weekly chart hints at trouble ahead if the pair can't settle above the 1.0257 December high.

The first hint is the potential head and shoulder formation or potential double (actually now triple) top of 1.0183, 1.0257, and 1.0200. Neither of these will be confirmed until price falls below .9537.

The second warning are the two bearish engulfing candles that have happened at each of the previous tops.

The third problem is the bearish divergence with RSI.

There are three clustered price targets for the pair that I wrote about last week between 1.0307 and 1.0378 from the January double bottom, the daily triangle and the daily bull flag. In addition, the pair is in an overall uptrend as one can see by the two uptrend lines coming in from late 2008 and early 2009. But there is quite a bit of room between here and either of those lines so the pair could stay in a longer term uptrend while paying off quite handsomely in the short term. However, just as the upside requires a break above 1.0257, the downside requires a break below .9804 to turn traders bearish. If price reaches .9804, there are sure to be buyers coming in which is what would make it such a critical price. Bottom line, here, is it's basically a wait and see situation. I was stopped out of a long this morning and established a short position but we'll have to see how it shakes out.

elling 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.

Here's the weekly chart (my trades don't show on the weekly chart as I use a different package for long-term charting):











© 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.

USDJPY—weekly chart

The weekly chart clearly shows USDJPY's long-term downtrend. The downtrend line from 8/2008 comes in at 87384; the one from 4/2009 comes in at 90.30. These two lines crossed while forming their second touch at the 94.99 high in 5/2010. A downtrend line needs at least two touches to be valid.

Within this downtrend, there's a triangle pattern. If it's interpreted from an Elliott Wave perspective then it must break downward. The upper boundary of the triangle was touched yesterday at 82.47 which should be point e. I couldn't sleep last night and decided to short at 82.24 since the stop could be tight. I'm not trading because of the triangle by itself but rather because of the overall downtrend, the touch of a downtrend line (which happens to be the upper boundary of the triangle), and momentum behavior on shorter-term charts. When I add those reasons to the weekly triangle and triangles on shorter-term charts, the probability shifts to favor short positions.

However, I don't consider this a slam dunk trade. For one thing, there's much uncertainty among traders—witness the preponderance of doji candles on various charts. For another, the pair hasn't dropped as much on the hourly chart as I would like to see if the downward trend is resuming. This is where the ability to have a tight stop shows its real value. It helps make the risk tolerable given contradictory factors.

Support is at 81.12, 80.94, and 79.30.

Here's the weekly chart (my trades don't show on the weekly chart as I use a different package for long-term charting):











© 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.

Monday, February 7, 2011

USDCHF—narrow range

Swissy is caught in a narrow range, just below resistance, which has been going on since Friday's high. This is generally bullish so let's see if the pair can sustain a close over .9598. A sustained close below the range, .9531, will be a warning signal.

© 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.

USDCHF—weekly chart

As I wrote on Friday, USDCHF has two key prices to watch—.9300 on the downside and .9784, January's high. Last week the pair barely managed to stay above that .9300 low. So far this morning the Swissy has rallied to .9598. The .618 of last week's move down is .9610 so one would want to monitor price behavior and momentum here.

On the weekly chart, the fall from the large triangle still weighs heavily on this pair and it's not unreasonable to argue for lows down to .9000 and possibly lower. However, the declining wedge is interesting on the chart as prices are most likely to break upward from here since the steepest angle is the least sustainable. Note, though, that the lower boundary for the wedge is around .9250. There's also bullish divergence from RSI although lots of divergence is around these days.

I'm long from last week but I'm taking some profits. Still the pair is worth monitoring and if it can close over .9784, then huah as they say. If one then argued that on the weekly chart this is an ABC correction within a larger downward move, it's possible the pair could correct to 1.0280 or more.

Here's the weekly chart:











© 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.

EURUSD—three-hour chart

On the shorter-term 3-hour chart, one can trace five waves down and the a and b of an abc correction. If this interpretation is correct, then c is starting which could carry it near the top of the downward channel (1.3670 or thereabouts). I bought at 1.3517. As long as 1.3485 holds, this seems reasonable.

Here's the three-hour chart:












© 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.

EURUSD—Weekly

Euro has already found a slightly lower low than last week by touching 1.3509 so far this morning.

A look at the weekly chart below suggests a couple of possibilities from an Elliott Wave point of view. First, the pair could be beginning a coil within a triangle with 1.4282 the A point, 1.2874, B, and 1.3682 C. If so, expect D to fall around 1.30 and then a final push upwards before a drop out of the triangle to new lows. My personal view (if this is a valid interpretation) is that I'd have preferred to see wave C at a higher price before the drop to D began.

Alternatively, wave 2 could have ended with the 1.4282 high (it has a nice 3-wave structure from 1.1892) and we could be seeing a resumption of the third wave action that began at 1.5144. If this interpretation is valid then much lower prices are ahead eventually. Of course there would be many rallies along the way. What this cannot be is wave four of the move down from 1.6041 because wave four cannot move beyond the end of wave one which would have been

What is clear on the chart is that last week was another indecisive week as represented by the doji candles. Both of them had longer upper shadows which hint that higher prices were rejected. This makes sense in light of a general uncertainty in various markets. However, it doesn't give up much to trade on. In order to trade Euro, one would want to watch the NorAM action through about 10 AM EST and take direction from that. The price drops have slowed since NorAM began.

1.3485 is .382 of the move from 1.2874 to 1.3862, close to the round number of 1.35 so buyers may begin to come in and the momentum will reflect that on the shorter-term charts. If 1.3485 doesn't hold, there's a zone of support down including 1.3436/12 (fib confluence), 1.3396, 1.3368 (50% of 1.2874 to 1.3862), and 1.3300 (round number). Below that would be serious and could see 1.30, in line with a triangle pattern mentioned above.

Here's the weekly chart:











© 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.

Week ending 4 Feb 2011















Here are last week's high, low and close numbers:

© 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.