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Currency Pair Overview: Rising Equities Help The Majors

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Currency Pair Overview:

Rising Equities Help The Majors

Positive equity market trade helped pull the major currencies higher against the dollar in Monday trade. The gains were mainly led by the pound and the aussie, while the euro lagged behind. The gains came after a period in which the currency market looked to want to only buy the U.S. dollar, albeit on very light trading volume levels. The overall lack of momentum on either side f the Usd has raised some doubts about the sustainability of near-term moves.

TheLFB Charting LinkDollar Index Technical View: TheLFB Member Charts
4 Hour Chart Flows: Short Price Points: 1.4457 Looking for: A Short wave V, if 1.4457 holds

Momentum: The euro trend went Short on 3rd December, and has meandered lower since then. It does look as though a long test of resistance is overdue.

Elliott Wave: Eur/Usd is trading around the 1.4457 high that was hit around a week ago. It seems that the pair is already trading in a Short, red wave V, which is the final leg of an impulse structure from the 1.5143 top, which could reach new lows over the coming days.

Traders should be very patient, since market-wide volume is very low and it can take a few days before 1.4216 can be finally taken out.

The minimum target of wave V is shown around the 1.4100 zone, if 1.4457 resistance stays in place.

The euro (Eur/Usd 1.4395) is currently approaching the 1.4400 area, the same place where the market topped and formed two bearish patterns over the last few days of trading. A break above this area will probably allow the euro to test the 1.4580 level, near the 38.2% retracement of the downtrend started at the beginning of December. However, if the euro bounces again from the 1.4400 area it will be interpreted as a strong bearish sign.

TheLFB Charting LinkEuro Technical View: TheLFB Member Charts
4 Hour Chart Flows: Short Price Points: 1.4457 Looking for: A Short wave V, if 1.4457 holds

Momentum: The euro trend went Short on 3rd December, and has meandered lower since then. It does look as though a long test of resistance is overdue.

Elliott Wave: Eur/Usd is trading around the 1.4457 high that was hit around a week ago. It seems that the pair is already trading in a Short, red wave V, which is the final leg of an impulse structure from the 1.5143 top, which could reach new lows over the coming days.

Traders should be very patient, since market-wide volume is very low and it can take a few days before 1.4216 can be finally taken out.

The minimum target of wave V is shown around the 1.4100 zone, if 1.4457 resistance stays in place.

The pound (Gbp/Usd 1.6210) had a strong European session after a report showed that the manufacturing side of the U.K. economy expanded more than expected in December. The pound rose nearly 180 pips in reaction to the economic release, after it initially tested support at the 200-day simple moving average (NYSE:SMA) in the 1.6050 area. The pound still has a mixed outlook, and that will stay until the either of the previous session highs and lows are taken out, and held.

The aussie (Aud/Usd 0.9055) fell 50 pips during the Asian session, but managed to turn around and recover every pip lost earlier in the day, and it also went on to gain some additional ground. The aussie is trading in the 0.9050 area, and holding above the important swing point area at 0.8950 which has been in play over the last few days of trading. It should be noted that aussie’s current trading volumes are still light, which means that traders might see some additional tests of the 0.8950 area.

The cad (Usd/Cad 1.0380) continues to head lower, extending the downtrend observed since mid-December. Throughout the overnight session, the pair broke below the 1.0420 area, which was the main support zone over the last three months. The move will now need to hold lower for the session, if Usd/Cad wants to attract sellers to a test of the 1.0200 area over the upcoming 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 swissy (Usd/Chf 1.0340) is trading just above the 1.0300 area, which is protected by the 20 and by the 100-day simple moving averages (SMA’s). This is probably keeping Swiss franc bulls out of the market for now, since the swissy had been constantly lagging overnight, compared to the other major currencies.

The yen
(Usd/Jpy 92.80) is trading at the highest value since September 2009, as the Japanese yen (Jpy) return to its status as a funding currency, used to borrow low and then to buy high in another currency denomination or asset class. The fact that the Bank of Japan and the Japanese government seem determined to fight deflation makes some investors think that the real value of the Japanese yen (Jpy) will be eroded by inflation. in the medium to long term, the Usd/Jpy outlook lies to the upside.



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