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Currency Pair Overview: Dollar Congestion In U.S. Trade

|Includes: FXA, FXB, FXC, FXE, FXF, FXY, SPY, UDN, PowerShares DB USD Bull ETF (UUP) A Forex Trader Portal

Currency Pair Overview:

Dollar Congestion In U.S. Trade

Monday trade had practically no movement in the foreign exchange market, with the major pairs trading range bound all day. The Holiday Season is a period in which institutional players have one of two mandates to fill; either protect existing price areas, or look to gain a little in the last sessions of 2009. On Monday neither was in play and therefore the market’s reluctance to move is expected to last over the next few days.

TheLFB Charting LinkDollar Index Technical View: TheLFB Member Charts
Daily chart trend: Mixed. Main price points: 74.19, and 76.82. Looking for: A Long wave I/ A

Prices on the dollar index  reached new lows around the 74.00 zone where the trend has quickly reversed. Traders are looking for a move higher now, away from an ending diagonal pattern shown in the wave V) position, as the prices have already broken through the upper resistance line and 75.82 zone, which signals that a bull market on the daily chart is in process.

If the wave count is correct then the market should trade much higher over the coming weeks and months, with a three wave move (red I/A-II/B-III/C) towards the 81 region.

The euro (Eur/Usd 1.4380) had a range of only 60 pips in Monday trade, as it spent the second part of the day trading in a range of less than 30 pips. Additionally, the trading volumes were exceptionally low. On the daily chart, the euro is consolidating in the 1.4400 area, a place that has acted as a main swing point in the recent past.

TheLFB Charting LinkEuro Technical View: TheLFB Member Charts
Daily chart trend: Mixed. Main price points: 1.5143. Looking for: A Short wave 1)/A)

Eur/Usd has dropped more than 900 pips since the 1.5143 top was hit, and did it in a very short period of time. Such a sharp move suggests that a new, temporary trend is in progress. The market is now trading in a Short blue wave 1)/A), with a Long wave 2)/B) pull-back to follow, before an even larger down-trend can continue in blue wave 3)/C) towards the 1.3500 1.35700 zone.

The pound (Gbp/Usd 1.6000) is trading in the 1.6000 area, just below the 200-day moving average. Unless the pair obtains additional momentum, a break above this area looks to be almost impossible. In Monday trade, the pound had a range of 200-pips, far below the ATR of the last few weeks of trading.

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.

Aussie (Aud/Usd 0.8870) spent the day struggling to move above the 100-day moving average at 0.8890, and as expected, the pair had failed to make the break-out. In the near-term some further tests and even break-outs can be expected in this area, but the medium term outlook remains bearish.

The cad
(Usd/Cad 1.0425) is the strongest pair among the majors. Over the last two weeks of trading, the C$ has been the only currency constantly strengthening against the Usd. On reaching the 1.0420 area, which has held as support over the last two months of trading, the pair lost momentum. A break lower can only come on strong overall Usd weakness, and that may force a long reversal in order to garner the strength to make the move.

The swissy (Usd/Chf 1.0345) traded on very thin volume on Monday, moving only out of natural inertia, rather than real momentum. Against the euro, the Swiss franc has reached a fresh 9-months low, something that might force the Swiss National Bank to intervene in the currency market once again.

The yen (Usd/Jpy 91.60) had an effective range of only 20 pips during the European and U.S. sessions this Monday, coming to a virtual standstill. On the daily chart, the yen is trading near the support trend-line that has held the market for almost a month. A break lower would allow the yen to retrace some part of the recent uptrend. 

Disclosure: No positions