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Currency Pair Overview:
Back To The Open At The Close
Overall, the U.S. trading session was relatively slow in the currency market, with the major pairs retracing the downtrend seen earlier in the European session. The recent sell-off in the major currencies has helped the dollar index break briefly above the 76.00 area, and above a trend-line that has been holding the Usd lover the last few weeks. This is an important swing point for the dollar index, which might shape the base for a short to medium term uptrend if the market can continue to re-price FOMC interest rate futures, following the recent better than expected macroeconomic data.
Prices on the dollar index have reached new lows over the past week around the 74.00 zone, where the trend has run out of momentum. Traders may be looking for a completed ending diagonal in the wave V) position, as we can count three completed waves down in a blue wave V).
If the wave count is correct, (and if the dollar bears are done), the market should break through the upper resistance line in the mid-term, which will confirm a temporary bullish trend, if the current lows can hold.
The euro (Eur/Usd 1.4815) is currently trading just below the 1.4830 area, which has been the swing point low of the last four weeks of trading. Breaking below a support area usually denotes a bearish outlook, which is inline with the negative momentum that the pair has seen lately. To the downside, the next important support area is in the 1.4600 area, close to the 100-day moving averages.
Eur/Usd did not break through the 1.5143 top recently, as prices reversed sharply after the NFP release. The weekly close was below the long-term support line, which suggests that the top was hit, and lower Eur/Usd levels are underway.
The wave count is showing an impulse Long wave C leg, with an extended structure in the black wave 5 with top at 1.5143, from where the prices traded lower recently. The latest price action now signals for a move into a Short blue wave 1)/A), as long as the market trades below the yearly highs.
The pound (Gbp/Usd 1.6445) tested the 1.6320 area during the early U.S. trading hours, but it failed to move any lower. From there, the pound spent the U.S. trading hours retracing the ground lost earlier in the day, and now it is forming a bullish pin-bar pattern on the daily chart. In addition, the pound is currently trading just above the 50 and 100-day moving averages, two levels that might provide important support area over the next few trading sessions.
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.
The aussie (Aud/Usd 0.9120) had a daily range of approximately 140 pips, in-line with the ATR of the last few weeks of trading. Still, the aussie has failed to pull any important moves and spent the day swinging around the 50-day moving average. Looking ahead, the aussie will confirm any bearish momentum only if it breaks and holds below the 0.9050 area, while a bullish momentum comes with a close above the 20-day moving average, in the 0.9235 area.
The cad (Usd/Cad 1.0520) and the Japanese yen are the only two currencies that strengthened considerably against the dollar in Monday trade. Most of the strength behind the Canadian dollar came from the excellent Building Permits report, which printed 18.0% in contrast to the expected a 1.1% read. The Canadian business cycle seems to be in an expansion phase, something that could pull the Canadian dollar below the 1.0420 barrier against the U.S. dollar on the medium term.
The swissy (Usd/Chf 1.0200) is currently struggling to break above the 1.0200 area, which was the main swing point high in November 2009. The swissy will be able to hold this move only if the market can continue to buy dollars, but still, it will run relatively quickly in the resistance level formed in the 1.0300-1.0350 area. A break above this level might not come easily.
The yen (Usd/Jpy 89.50) lost 80 pips in Monday trade, declining for the first time in the last five days of trading. Despite today’s downtrend, the main direction for the pair remains to the upside. Some market commentators say It is thought that the Bank of Japan’s quantative easing program is behind the upwards move in Usd/Jpy.
Disclosure: No positions