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Currency Pair Overview:
Overnight Order-Flow Blockage
The currency market once again came to a halt in overnight trade, during the last full trading session of 2009. On the daily chart, most pairs are trading near important swing points, just waiting for some additional momentum to appear, while the dollar index is again preparing to break above the 78.00 area, in a move that is expected to happen in near term the future, now that the solar sellers crumpled in the previous session.
Momentum: The dollar index went into Long mode in early December and has held that trend since. The near-term path of least resistance is consolidation around new highs, with long-bounces on flat equity trading days, and major pairs probing support whenever they can. A weekly close above 78.50 will be a signal that buyers are dominating, and until then we may see further tests of support.
Elliott Wave: The dollar index made a powerful bullish reversal recently. The Usd became bullish after the 77.30 low was hit, where a three wave, a-b-c move completed a Short corrective wave IV). Traders will look for a move higher in the near-term as a Long wave V) seems to be in process that should reach new highs. Meanwhile the current 77.30 lows must hold.
The euro (Eur/Usd 1.4355) had an attempt to extend the sell-off seen during the prior session and break below the 1.4300 area overnight, but this downtrend needs just a little more momentum to break through. Right now, the euro is trading again near Wednesday opening price, after it formed a bearish formation on the daily chart in Tuesday trade.
The pound (Gbp/Usd 1.5860) is trading in the 1.5850 area, the same place where the market based during the prior two sessions. The pound has been surrounded by downbeat sentiment lately, which was reflected directly in the pair’s price action. To the downside, the next important support area is in the 1.5800 and then in the 1.5700 areas.
The aussie (Aud/Usd 0.8930) is holding in the 0.8950 area, the same place where the market formed an important swing point over the last three months of trading. The medium term outlook lies to the downside, but for the pair to confirm this, it would have to move hard from the current area.
Momentum: The pair's trend went Flat on 26th October, and moved sideways since then with no real strength, until eventually moving Short in December.
Elliott Wave: Aussie traded up to the 0.8990 zone, before the market reversed recently. Overall, we are still looking for a move into a Short wave v, helped by the fact that the Long, corrective wave iv, did not trade into the territory of a blue wave i. Traders will look for five waves of decline towards new lows so long as the market trades below 0.9013 resistance.
The cad (Usd/Cad 1.0475) has become correlated with the rest of the current market for the first time in almost two weeks. This comes as Usd/Cad was rejected from the 1.0420 area, which has been the swing point low of the last two months of trading. Even though the Canadian dollar showed a lot of strength lately, it is unlikely that the pair will be able to break lower against the Usd alone. Caution is needed on the Usd/Cad, until such time that momentum is built that is backed by the dollar index components.
The swissy (Usd/Chf 1.0360) has a waste of time during the overnight session. The pair had a range of only 30 pips, something that should keep traders away from it until the market builds additional momentum. Intra-day chaotic moves are becoming a main characteristic of the swissy.
The yen (Usd/Jpy 92.15) had a very small range overnight, as the market trades near to the 92.50 area, the same place where the things have topped for almost four months. A break above this price point can only come on broad yen weakness, which might force the Usd/Jpy to move lower at first, until it builds momentum to break a major resistance point.
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