EURUSD—three-hour chart

The most notable feature of the three-hour chart (to me) is the AB=CD pattern. It's very symmetrical and is valid by all the rules one applies to such a pattern.

Thinking about the psychology of the AB=CD pattern, sellers were active at point A and price dropped accordingly to the B point. When price rose, to point C, those who weren't in on the first ride down, jumped in. Some of the shorts from A took profits, fearful of further price rise, but that didn't happen and price again headed down to D. Here, though, bulls are waiting and willing to buy and price heads up. Those original shorts who didn't take profits at B or those who jumped in at point C decide to take profits which causes more buying to take place because that's what they must do to cover their shorts. Those who sold at point D are now getting nervous and may cover or are being set up for a short squeeze. Price, then, continues up which it is in fact doing. As it continues up, more timid bulls get bolder and that’s the dance we participate in.

The other thing notable on the chart is the channel. Last night price was slapped down at 1.3627, the upper boundary. While this is short-term bearish, the bulls aren't throwing in the towel yet. So far, price is finding support at 1.3546. This is near two speed lines which makes me a bit wary that it may rise from here.

Finally, this could be the beginning of the third of a third wave on the three-hour chart which should be a good downward move although there's some good support below.

Resistance is at 1.3627/50 and 1.3694. Above this, expect to see resistance at 1.3769 and then 1.3850/62.

Support is here at 1.3546, then the area between 1.3451 and 1.3462 is very strong. At least it was—third Friday's are option expiration day each month so let's see if that makes a difference.

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—daily

The daily chart has quite a bit of interest.

First, there's a bull flag which I outlined in blue. The target for this flag is around 1.4282 depending on where it breaks out. This is in line with a monthly downtrend line which should give any Euro bear reason to pause and at least consider the possibility. Euro must settle above 1.38 for this to be realistic.

There's also a smaller bear flag that I outlined in dark grey. The top of this is about 1.3642. As I've blogged this week, this is also a 50% retracement of the move down. As I also blogged yesterday, I expected the pair to find significant resistance at 1.3617. Euro edged above that last evening to 1.3627. I'm not thrilled with it edging above—it was good resistance and it shows the bulls are in there. It did trigger my short sell order at 1.3619 which I've obviously set to breakeven.

The lower boundary of this bear flag is about 1.35. If that holds, then Euro will try another upward breakout. If it doesn't hold then shorts can expect a drop to around 1.3069 which is close to the psychological support of 1.30. However, price support of 1.3429 and some significant fibo support around 1.3368 is in the way of it getting there.

RSI is nudging its uptrend line and a drop below, along with a drop below the blue, price uptrend line will be bearish.

Bottom line here is that I'm obviously bearish but there's enough conflicting information to suggest that the price top might not be in. Keep stops tight if short. If you haven't entered, be careful when choosing an entry.

Here's the daily 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 bearish but uncertainty

The weekly chart is also bearish with three progressively shorter downtrend lines that should serve as resistance. The nearest one has the resistance at 1.3774 which is in line with shorter term price projections should the pair climb over 1.3750. The second one nudges into the 1.40 area and just as I wrote in the last post on the monthly chart, there are older price projections that support this. So there's a bit of uncertainty as to where price might go.

Also of interest on the weekly chart is the failed evening star pattern. I circled the first two candles that would have been part of this pattern. The third one would have had to close deep into the body of the first candle. Obviously, this didn't happen. I always take note of failed patterns because they sometimes are powerful signals that the opposite price action may occur. The two completed weekly candles since then (this is the third week) were indecisive but seemed to be rejecting higher prices with their long upper shadows.

This week is the third week with a lower low and lower high which is bearish. However, the 10 and 20 EMA have been serving as support, even for this week's candle with a long, lower shadow (so far it's a shadow, but how likely is the pair to drop significantly today?)

Another thing to note on the chart is that this is the 5th week of a primary cycle following the low from January. I could go further into a cycle discussion but I won't as I'm unconvinced it's relevant. Still, it's something to be aware of. If there is any meaning, this is part of a longer cycle and it's unlikely to have topped yet. However, I think price will contain any additional rise and not some mystical cycle mumbo-jumbo so again, the place to watch is the upper 1.37 price and, if it gets beyond that, the 1.40 area. Support on the weekly chart is at 1.3480 and 1.3428, the 10- and 20-EMA.

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—monthly bearish but higher possible

Because of contradictory signals in the shorter time frame, I decided to pull back again to the monthly chart.

February's low so far of 1.3429 is significantly higher than January's low of 1.2874. The high of 1.3862 this month (which occurred the first of the month) is higher than January's high of 1.3759. Higher high and higher low has the month on track to be up from last month which says, clearly, that the bulls have control.

This does not make the monthly chart bullish. It is not a trend change from down to up because there have been two lower highs that touched and confirmed the downtrend line (1.6041 and 1.5144) and two lower lows (1.2329 and 1.1892). The monthly chart is bearish no matter how you look at it. Unless you're a died-in-the-wool Euro bull who sees this as a temporary correction off the high of 1.6041. Good luck with that.

What's not clear on the monthly chart is whether the third high is really in yet. 1.4282 didn't quite make it to the downtrend line which is bearish. However, with the bullish activity so far this month, it's possible the pair could continue up and this would reinstate earlier projections I had for the pair at the end of last year that reached into the 1.43 area. This would be consistent with both the longer-term downtrend line from July '08 and the shorter monthly bear flag up. It's too soon to spend time dwelling on this—there are significant resistance points along the way—but it's something to stay cognizant of, especially with all the bearish sentiment floating about. Bottom line: keep stops on short positions tight.

Obviously, on any chart, the near-term resistance to overcome is 1.3862. On much shorter-term charts, the resistance is 1.3627 which it tapped last evening.

Here's the monthly 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—holding parity

While Aussie has been correcting since the early January high of 1.0256, the pair has managed to close above parity in all but two of the last thirteen trading days. On those two, one was three pips below; the other was seven.

The daily chart below shows an upward channel beginning at the end of November. I bought on Tuesday at the intersection of two uptrend lines (.9963), one from July and one from November. I added to my position this morning on a slight dip to 1.0030.

Ideally the pair would stay above .9980 (trend line and near the .382 retracement of the move down from 1.0257) and the recent low at .9944. Below .9804 would be bearish as it would confirm a double top (the 1.0257 and 1.0200 highs). Below .9538 would confirm a triple top or head and shoulders pattern with a cool target of .8819.

However, the pair is in a triangle on the daily chart and the low of .9944 was a fifth touch (point E). Symmetrical triangles are often continuation patterns. From the EW perspective, they resolve in the direction from which they were entered. In the case of the Aussie this is upward. Also, the pair is still in a long-term uptrend. So buying is the higher probability trade on the daily chart. Still, it needs to settle above 1.0257 to be really bullish.

Here's the 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—looking to short

Euro climbed to a high of 1.3609 overnight. This is within my 1.3590 to 1.3650 range that I wrote about yesterday. There were several reasons this zone was possible. First, the .382 retracement and confluence are together at 1.3594. Second, the upper boundary of the channel and the 50% of the retracement of the move down are found at 1.3642. Finally, at 1.3617, a downward trend line from 1.3862, an upper boundary of the bear flag, and a short-term speed line converge. As a result, I'm still looking for a short on weakness in this area.

If it makes it past this area, well bully for it. Then I'd be watching the 1.3697 to 1.3769 zone for possible weakness as I explained yesterday. Beyond that…the uptrend has resumed. As I noted yesterday, this channel could also be a daily flag so close attention needs to be paid at its upper boundaries because the target for this is 1.4282. This isn't a possibility until the pair settles above 1.38.

I'm thinking, though, that this could be the beginning of the third of a third wave on the three-hour chart which should move price quite a bit down. Remember that the area between 1.3451 and 1.3462 is well-defended so that's strong support.

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—update

Euro took quite a tumble this past hour. However, it has now found support three times within the past 47 hours between 1.3451 and 1.3462. This is not a coincidence—there's something about that price that is meaningful. What, we don't know, but is it possible somebody big has an options barrier there? Regardless, below 1.3450 would be bad for the bulls. Another thing to note on the hourly chart is the expanding range with three higher highs. The potential butterfly pattern I wrote about earlier for this time frame is dead.












© 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.

Correction

I meant to say in the last post that my second position was added yesterday, not Monday.

USDCHF—moving on up

The Swissy found some energy this morning and appears to be making another run for the prior .9784 high that it just missed making on the 11th. Perhaps this time it can overtake it.The bull flag has a target of about .9950 and 1.0148 if you run it off the daily with the flagpole beginning at .9329. Between those two would be resistance at 1.0067. I'm still long from .9444 and added another long position on Monday at .9674.

This is taking place within a general dollar strenthening. Let's see how long it lasts.

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.

USDX—weekly

It's been a while since I've discussed the USDX. Despite all the gloom and doom around the USD, there hasn't been a lot to say. The index is still tracking upward with three (almost four) touches on the uptrend line since the lows in 2008. The negative divergence appears to be working itself out. 76.87 formed on the low of a hanging man candle should be support.

Here's the 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—potential revesal

Euro is bouncing around a bit but while there's short-term bullish behavior, there's evidence that a bearish downward move will take place between 1.3590 to 1.3650. The .382 retracement and confluence are together at 1.3594. In addition, as I wrote yesterday, the upper boundary of the channel (which is contracting) and the 50% of the retracement of the move down are found between 1.3641 and 1.3644.

Besides that evidence, the hourly chart (not shown) indicates a potential butterfly bearish pattern. X begins the pattern at 1.3558; A is at 1.3432; B at 1.3550; and C is 1.3477. Point D would complete the pattern and should be between 1.3595 and 1.3637. As a result, I'll look to short in that general area but only if there are bearish indicators such as divergence or bearish candles.

The reason I'll want additional evidence is that Euro could get higher, possibly to 1.3769. There's an AB=CD pattern (marked below) on the three hour chart where AB (1.3862 to 1.3509) and CD (1.3744 to 1.3429) are approximately equal at 353 and 315 pips respectively. This is a bullish pattern and the target for it is between 1.3697 and 1.3769. These coincide almost perfectly with the .618 and the .786 retracement points.

Since, we could be at the beginning of a third wave down on the daily chart, I'd try a short here as well.

As I noted yesterday, this channel could also be a daily flag so close attention needs to be paid at its upper boundaries because the target for this is 1.4282. This isn't a possibility until the pair settles above 1.38. At that point, the bears would have to go back to their cave.

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.

Prices compared to 2010 year end

The chart below shows that only the Aussie, EURGBP, and USDCAD have gone down so far this year. GBPJPY has gained the most in both pips and percent and all the yen crosses have done well in general.












© 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 channel

My short position was stopped out at 1.3514 (-14 pips).

Euro is headed up again, possibly to the intersection of the upper boundary of the channel (rectangle) and the 50% of the retracement of the move down at 1.3645. This rectangle could also be a daily flag so close attention needs to be paid at its upper boundaries. It could also be the beginning of a third wave down on the daily chart.

Within the rectangle, there are two impulsive waves down of five waves each separated by a three wave correction. Waves one and three are 318 and 315 pips respectively which means wave five must be less than 315 pips (an EW rule is that wave three cannot be the shortest wave). Because wave two was sharp, wave four should be less so (the guideline of alternation).

Resistance is 1.3590 (confluence and parity) and 1.3645 (see above). Above those would bring 1.3700, 1.3750 and 1.3862 to the table.

Support is at 1.3429 and 1.3380.

We'll just have to wait to see but my current plans are to go short at the upper boundary or, if momentum seems strong, buy on a breakout (most likely on the pullback of a breakout).

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.

GBPJPY—rally

My short from 134.02 profit-stopped out at 133.91 (+11 pips, barely worth bothering with).

In early morning London trading the pair spiked to 134.59 before falling back. I was awake, trying to catch up on some analysis after being out of town part of last week. I watched the Guppy immediately fall but around the 50% retracement point of the move up from yesterday's low it hesitated.

I bought at 133.91 (the same price I'd been stopped at in the other direction but I didn't notice that until just now). My reason for doing so, besides the hesitation, was that momentum wasn't supporting the move down from Thursday's high. Also, this pair had violated a long term resistance line and that's a powerful hint things may be changing. So I'm long. After I bought the pair spiked down a bit more, almost to the .618 retracement of the move up from yesterday. After that it resumed its rally, so far reaching 134.97.

Support is at 1.3319 (yesterday's low) and then there's a zone of support down to 132.00. Below that is 130.01.

Resistance is at 135.22, 136.24, and 137.79. After that there is little in the way of resistance until 141.19 (confluence) and then price resistance at 145.98, last April's high.

If one assumes this is an ABC correction off of 125.51, targets are 136.53 if wave C equals A and 140.86 at 1.618A. If one assumes a daily flag, the target is 136.25. So if I don't get stopped out (my stop is now slightly better than breakeven), I'll take partial profits in the 136 area.

Here's a 15-minute 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—monthly

With the ups and downs of daily and intraday movements, it's helpful to back off and look at the much larger picture. Below is a monthly chart of the Euro beginning in March 2006.The low then was 1.1860. Interesting that the pair came within pips of that low during the current downtrend. This means the Euro basically went nowhere in the last five years although there was a lot of money to be made during this time.

An obvious characterisic of the chart is that the pair has been in a downtrend for 31 months from its July 2008 high. There have been two touches of the downtrend line which is all it takes to make the line valid. So far at least, each correction in this downtrend has been well capped by the downtrend line. In addition, each correction is sharp (defying the Elliott guideline of alternation but that's neither here nor there), each retracing about 75% of the prior move down.

Another thing to note about the chart is that at least on a gross basis, an Elliott impulsive count down that assessed the current action as being within a wave four correction, doesn't apply for the simple reason that if wave one ended at 1.2329 and wave three at 1.1892, then wave four, peaking so far at 1.4282 has violated the territory of wave one. This would violate one of the three ironclad rules of EWT.

Perhaps this is currently wave three where two ended at 1.5144 and we're in two of three? This is possible. If this is true, wave three of three either began at 1.4282 or will be beginning from the top of the current corrective rectangle up (note that price could exceed 1.45 under this scenario).

So what's a trader to do if one is not still long from either 1.6041 or 1.5144 or even 1.4282? If one believes this is a downtrend, all one can do is sell highs. If one believes it's an uptrend after a temporary ABC correction which ended with 1.1892 (it's possible—but note that for a zigzag correction, wave C exceeded .618 of A but fell far short of equality with it), then buy rallies. Or one can trade this as a sideways, upward slanting movement which I actually like and is the reason I go long sometimes and short other times based on patterns on shorter time frames. Every long term movement is made up of numerous short term patterns. I'll look at some of these in the next couple of days. This approach requires flexibility. More important, it requires giving up preconceived notions of bullishness or bearishness and relying on the chart to guide one's trades. This approach means profits.

Here's the monthly 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—update

Euro has retraced .382 of the move down since NorAm came in and is headed for 50% at 1.3492. Let's see if it can overcome that.

GBPJPY—stalling

I wrote last week that I'd shorted the Guppy after it touched 134.26. I entered two positions at 1.3402 and closed one of them on Friday when it seemed as though it was stalling (133.60 for +42 pips). The pair is stubbornly staying above 132.85 and there's a zone of support down to 132.00. Until it breaks below that there's not a lot to say. Below 132.00 is support at 130.01. If it does begin to break down, it's evidence that the move above the three-hour upward channel was a fake-out and the bottom of the channel is a potential target.

If it can resume its rally, 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 little in the way of resistance until 141.19 (confluence) and then price resistance at 145.98, last April's high.

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—pressure is on

The bearish pressure that followed the high of 1.3861 appears to still be exerting downward pressure with a drop to a low of 1.3432 so far this morning. There's a small head and shoulders on the daily chart (left shoulder was 1.3789; head was 1.3861; right shoulder was 1.3744). The confirmation level was 1.3509 and the target is 1.3157. Before it gets there, support is at 1.3396 and 1.3244/32 (strong support). Euro is within a larger downward channel and the lower boundary is 1.2607, right on a speed line as well. If the pair can't climb back and close above 1.35 today, the bears will have seized control and won't easily give it back.

Resistance is at 1.3498 and 1.3744. 1.40 seems a dream at this point.

I went short on Friday at 1.3535 based on the shorter-term charts.

Here's the daily 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—3-Hour

Dropping down quite a bit from the weekly chart, Aussie is in a triangle on the three-hour chart as well, entering it from the low of .9538 last year. If this is a standard, five-touch triangle, there will be one more small push to the upside ending around 1.0190 which would be point E. After that price would fall, eventually puncturing the triangle's lower boundary around .9975. The three-hour chart also has negative diversion of price and RSI.

At this point, it's probably best to stand aside until this is resolved. My inclination is to go long but I'm going to wait a bit and see how this all plays out. If it resolves to the upside there will still be time to get in and make pips as it works its way up within an upward-sloping rectangle on the daily chart (not shown).

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

Aussie ended last week with the bears probably feeling they were in control, dropping 229 pips from its high on Tuesday to a low on Friday of .9960. This may be an illusion for the bears and if they are in control, it's tenuous.

First, what's bearish? The most significant is that the pair can't seem to gain any traction to get above the 1.0257 high everyone keeps waiting for. Each time the pair approaches a high (1.0183, 1.0257, and 1.0200), there's a bearish candle pattern (circled on the chart below). So supply is coming in and it came in at a lower level this time than the last time. Then, too, the low last week dropped below parity (although it managed to close above at 1.0018). There is also negative divergence on the weekly and daily chart. Finally, the pair could be in an ABC correction from the high of 1.0257. If this is true, the A wave ran from 1.0257 down to .9804; B ran up to 1.0200; and C has started and will move lower.

On the positive side, even though last week had a lower high than the week before (but only by 11 pips), it had a higher low and closed above parity. More important, Aussie approached the bottom of the weekly triangle (which is at .9947 and also near an uptrend line coming in from last June) but didn't quite make it. From an Elliott perspective, the pair entered the triangle from an uptrend and the fact it didn't quite make point E is consistent with the Elliott interpretation of an upward breakout in these types of triangles. The upper boundary is at 1.0184 so that's something to watch this week. A sustained close above would validate that the consolidation is over and the pair is ready to resume it's uptrend. Finally, the longer-term pattern is an uptrend and it hasn't been reversed. Not until a break of .9804 and then .9537 would this change.

A break of .9804 and .9537 would confirm a topping pattern—double/triple top or head and shoulders. These are quite a bit lower than current prices but even if a trader waited until that point, there would be plenty of room to make some serious money. Until then, it's probably safest to assume the pair is consolidating prior to moving higher. Interesting pair to keep an eye on today and this week.











© 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 11 Feb 2011—high, low, close