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Currency Pair Overview:
Dollar Extends Gains In European Trade
Overall, the currency market experienced thin trading volume throughout the Sunday session, but around the European open the dollar index saw a wave of long orders hit. The long sided moves sent the index close to the 76.00 area, the highest value in two weeks. The dollar strength comes after the NFP data came in surprisingly well, which may indicate that the U.S. interest rates will rise faster than expected. Some analysts had even said that Friday’s numbers might represent a swing point for the dollar in the short to medium term.
Momentum: The index moved into Neutral mode on the 26th of October and since then has struggled to find the strength to easily create and hold a Short trend despites some negative price action days. The sentiment is flowing from overbought to oversold in quick time and is following the global market open and close of Asian, European, and U.S. commercial markets. This is a tight trading range that is sitting at yearly lows, yet looks comfortable.
Elliott Wave: The dollar index traded higher over the past few sessions, as the S&P futures failed to break through the 1114-1116 resistance zone. The wave count presented that was looking for support to hold is still valid, since the 74.19 low has not been taken out. Up-side pressure may become stronger in the mid-term, if S&P futures hold below the 1100 area, and if gold breaks lower, through the 1200 support region.
Any move through the 74.19 low on dollar index, will put an alternative Short wave count in play, where traders will look for the lows of wave Y.
The euro (Eur/Usd 1.4820) took a strong beating over the last few trading sessions, following Friday’s better than expected labor market data. Since then, the euro has plunged approximately 300 pips, to touch a one-month low, of which 100 pips came during the Monday European session. On the daily chart, the euro has shown a lot of bearish momentum lately, which might continue over the upcoming trading sessions. Following this sell-off, the euro has broken below the 50-day moving average, a move that it has failed to pull over the last 8-months. This further denotes a bearish momentum.
Momentum: The pair moved into Neutral mode on the 26th of October and then struggled to find the momentum in order to create and hold a Long trend until the 19th of Nov. The sentiment is flowing from overbought to oversold in quick time and is following the global market open and close of Asian, European, and U.S. commercial markets.
Elliott Wave: The patience paid off. The Eur/Usd exploded lower after the NFP release as traders could not push the prices long, through the 1.5143 resistance zone. Our primary wave count was correct with a Long black wave II top just below the 1.5143 resistance area, before prices fell significantly lower, into a Short black wave III) leg.
The black wave III) leg may be an extended wave, with a Short red wave i developing inside it, which may find temporary lows somewhere around the 1.4750 zone, where a reversal will move things long. and that will form the sub-waves of the larger short move.
The pound (Gbp/Usd 1.6380) is currently trading in the 1.6380 area, near a support trend-line that has been holding the market since Oct 13 09. A move beneath this area will confirm the pound’s downtrend, practically leaving the path almost empty down to the 1.6250 and to the 1.6050 areas. On the fundamental side, the pound is preparing for Thursday’s interest rate decision, which might increase the pair’s volatility.
The aussie (Aud/Usd 0.9095) is in a downtrend for the third consecutive day, and a time in which it shed 160 pips. In Monday’s European trade, the aussie fell 100 pips to test the 0.9050 area, but so far, it has failed to move any lower. The 0.9050 area has been holding the market up for a relatively long period, and if equity and commodity downtrends continue, the aussie will probably start moving towards the 0.8950 level.
The cad (Usd/Cad 1.0595) has gained only 60 pips since Friday’s open, being the pair that moved the least over the last two days of trading. This was caused by the bullish Canadian employment data, also released on Friday. Over the last four weeks of trading, the cad had developed a wide, 300-pip side-ways channel. with the swing point around the 1.570 area. In order for the cad to trend anywhere importantly, it will have first to break this channel, a move that might not come too easily.
The swissy (Usd/Chf 1.0195) gained almost 200 pips over the last two days of trading, being the second most active pair, after the euro. This is quite strange for the swissy, since the pair has the smallest ATR among the major pairs. The long-term trend remains to the downside, but for now, the pair seems to be surrounded by positive momentum.
The yen (Usd/Jpy 90.05) fell 60 pips since the Sunday session started, retracing a small portion of the uptrend seen in Friday trade. On the daily chart, the yen is trading above the 50-day moving average, but below the swing point high that the market made on Nov 11 09. To the upside, the next important resistance area is in the 92.50 zone.
TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index.
Disclosure: No positions