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Currency Pair Overview:
Mixed Forex Trade
The overnight trading hours provided mixed trading patterns in the currency market, as the major pairs tried to push the dollar index lower with only limited success. The exceptions were the pound and the yen, that went in the opposite direction in a trading session that looked lost. The pound had a weak attempt to push higher, but failed to hold as the market trades beneath major resistance levels. Conversely, the yen is moving lower for the first time in a long period after reaching deep into overbought territory.
Prices on the dollar index reached new lows around the 74.00 zone where the trend quickly reversed. Technical traders are looking for a move higher now, away from an ending diagonal pattern shown in the wave V) position, as 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 81.00 region.
The euro (Eur/Usd 1.4435) is still trying to develop an upside trend, but so far, the market seems to lack the momentum to hold higher. The euro advanced 60 pips during the late Asian session, but this move was completely retraced throughout the first part of the European trading hours. Things are trading near to the session’s opening price, in the 1.4400 area. If the euro fails to push higher from here, the market might enter in a re-distribution phase, which could lead the pair much lower.
The pound (Gbp/Usd 1.6025) has broken below the 200-day moving average during the overnight session, a level that acted as a very important price point in the past. This is usually seen as a bearish sign, and one that might force some pound bulls to switch camp in the near-term. If support is not easily found at 1.6000, the pound’s outlook lies to the downside, with a possible target in the 1.5800 area.
Momentum: The cable trend went Short on 3rd December, and has meandered sideways since then. The pair can be just as easily bought as sold.
Elliott Wave: The Gbp/Usd wave count shows a leading diagonal pattern in wave A) that was completed at the temporary 1.5834 low, where the market made a reversal into a Long, corrective wave B).
Wave B) is a corrective pattern and as such, we will look for a three wave of a retrace into the 50% (1.6360) or 61.8% (1.6480) Fibonacci resistance regions, before a larger down-trend can continue.
The second wave (blue wave b) of a three wave retracement is already in progress, which means that technical traders will look for a higher wave c in the near future. A bounce into a higher wave c may appear around 1.6000, trend-line support region.
The aussie (Aud/Usd 0.9145) added a few points overnight, but so far has failed to push above the 0.9150 area. The Australian and the Canadian dollars are being pulled higher by the gains seen in the commodity market. As long as raw materials continue to be in an uptrend, the two pairs are likely to outperform the other major currencies.
The cad (Usd/Cad 1.0375) is trading close to the 1.0350 area, the same place where the market based in Monday trade. A break lower will probably come on broad dollar weakness, something that was not seen very often since November of last year. During the intra-day session, the cad re-tested the 1.0420 area, which had been the main swing point low of the last three months of trading.
The swissy (Usd/Chf 1.0285) remains stuck in the 1.0300 area, close to the 100-day moving average. Some time ago, the swissy was seen as a trending pair, but all this has changed lately and now the it looks like a pair that favors ranged bound trading.
The yen (Usd/Jpy 91.90) lost approximately 100 pips during the last two days of trading, in a move that investors waited some time to see. This downtrend will be seen as a corrective move, since the medium and long term trends remain to the upside. Additionally, this short-term downtrend will probably allow additional institutional investors to build long Usd/Jpy positions.
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