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Currency Pair Overview:
Up And Down In European Trade
The European open brought a strong wave of long U.S. dollar orders into the market that shortly after hitting, were reversed, and now the major pairs are trading near Wednesday’s opening prices. As seen recently, the Usd/Jpy traded on its own momentum, and ignored everything else that happened in the currency market. Ahead, investors prepare for a busy U.S. session, which includes both December’s ADP and ISM non-manufacturing numbers, and the FOMC minutes for the meeting held on Dec 15-16. In between the crude oil inventory numbers are released.
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 traded higher on Tuesday, towards the upper resistance line of a trading channel, where a recent truing point appeared. Traders should patiently wait on a break out of the channel and the wave (x) high at 78.20, before a Usd bull market can continue.
In this case we will look for a Long, blue wave V) target somewhere around the 79.00 zone, if the 77.09 support (wave IV) low) remains untouched.
The euro (Eur/Usd 1.4355) tested the 1.4280 area during the early European trading hours, and bounced from that level. Around the same area, the euro hits a support trend-line that connects the lows formed on Dec 22 and Jan 04. A move below this price point would clear the road down to the 1.4000 level. However, in its possible downtrend, the pair has one more major level to break, the 200-day moving average in the 1.4200 area.
The pound (Gbp/Usd 1.6005) was the only major pair that strengthened during the first part of the European session. However, as soon as it hit the 1.6055 area, the pair started retracing some of the ground gained earlier. In the 1.6055 area, the pound bounced from the resistance trend-line that has held the market since Jan 04 09. On the daily chart, the pound currently is in a short mode.
The aussie (Aud/Usd 0.9135) had a 50-pip range overnight, within the same channel that the pair has spent most of the current week in. The 0.9150 area will be an important price point for the aussie over the next few days of trading, since in this region, the pair is testing a trend-line that has held the market since Nov 16 09. A break higher, and the aussie enters into long mode. A bounce lower on broad dollar strength and the aussie could drop to the 0.8950 area once again.
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. In recent trade, a Neutral trend has been established.
Elliott Wave: Aussie traded 70 pips above our 61.8% retracement area (0.9100) recently, and the pair is still searching for the top of a black wave II). We are looking for the top of a Long, zig-zag correction labeled as a blue a-b-c, which means we are expecting a short trend in the near-term.
If we are on the right track then market may fall sharply over the coming days, if the 0.9321 critical resistance can hold. Any move above 0.9321 would require a re-worked wave count.
The cad (Usd/Cad 1.0375) saw a small trading range overnight, but that is likely to change as the market absorbs all that the U.S. session has in store. On the daily chart, the cad is trading near to the lowest values touched over the last two months of trading, aided by the strength that the commodity market has shown this week.
The swissy (Usd/Chf 1.0340) spent the session trading in the 1.0300-1.0350 range, similar to how it performed over the last few trading sessions. Looking ahead, it seems that the swissy can break free from its range only if the entire market finds the strength to trend in one direction.
The yen (Usd/Jpy 92.45) traded independently of other pairs overnight, ignoring everything else that happened in the currency market. The pair started heading higher during the Asian session and continued throughout the European trading hours. The Usd/Jpy is expected to become volatile during the upcoming U.S. session, since this pair is very sensitive to U.S. macroeconomic data.
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