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Currency Pair Overview:
Majors Inch Higher In Overnight Trading
The market showed a tendency to move higher against the U.S. dollar during the Asian and the European sessions, but so far, the major pairs have failed to break out of the range of the prior few days of trading. One exception was the pound, which advanced 90 pips overnight, but even so, this is below the pair’s ATR for this time of the day. Unless something happens during the U.S. session, the trading range is expected to remain subdued. The macroeconomic calendar is relatively light this Wednesday ahead of the Fed Beige Book, which does not necessarily help the currency market ahead of historically slow dollar index movement in Wall Street trade.
Momentum: The dollar index went into Long mode in early December and held that trend up until January's Non-farm Payroll release. The read turned short this week, and a weekly chart close below 76.50 will be a signal that sellers have the upper hand.
Elliott Wave: The dollar index traded lower recently, towards the 77.00 region, offering the chance to monitor a complex corrective pattern, shown in our blue wave IV) position.
A corrective pattern seems to be a double zig-zag structure with a wave c of a wave (NYSE:Y) that is in process, that may find its lows somewhere the around 76.70 or 76.50 region, before an up-trend can continue. Once a double zig-zag in wave IV) is complete, we will look for a move into the 78.00 zone and then look above the 78.50 wave III) top.
From an Elliott wave perspective, bullish expectations remains valid so long as the market trades above the critical 75.58 support zone, which is the top area of a blue wave I).
The euro (Eur/Usd 1.4505) tested the 1.4450 support area twice during the overnight session, at the same place were the market based in Tuesday trade. For now, the euro has bounced off this intra-day support, but it might test it again later in the day if oil and equity markets move lower. To the upside, the next important resistance area is in the 1.4600 zone.
The pound (Gbp/Usd 1.6235) is approaching the 1.6250 swing area, after gaining more than 90 pips during the Asian and the European sessions. A break above the 1.6250 area is important, but may be difficult to break because this area has acted as an important swing point in the recent past. In addition, within the next 100 pips, the pound will meet two important moving averages, the 50 and the 100 daily SMA’s.
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 pair is bullish this week, as expected from previous wave posts, and looks to be trading in the last leg, wave c, of a zig-zag pattern that we are looking for in a larger black wave B).
The target of a Long wave c is around the 1.6300-1.3500 resistance zone, where a zig-zag correction may complete a larger black, corrective wave B). After that completes, a down-trend towards the 1.5900 and 1.5800 zones should happen.
Any break of the blue wave b low (around 1.5890) or a break of 1.5831 support of a black wave A) will suggest that a Long, black wave B) reversal is already completed.
The aussie (Aud/Usd 0.9250) gained a few pips overnight, but overall, lagged behind the other major pairs. This is linked to the mixed session observed overnight in the commodity market; the same one that dragged the pair 90 pips lower during the prior day of trading. Ahead, the aussie will probably trade in correlated fashion with the commodity market.
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 cad (Usd/Cad 1.0360) bounced from the 1.0400 area, where the pair hit a resistance trend-line that has held the market since Dec 17 09. If the dollar index continues losing ground over the upcoming sessions, this could help the cad to move down to the 1.0250 area once again, where it formed an intra-day swing point low earlier this week.
The swissy (Usd/Chf 1.0190) tested the 50-day moving average during the first part of the day, but as expected has failed to push above this price point. Against the Euro, the Swiss franc gained a few pips for the first time in a very long period.
The yen (Usd/Jpy 91.35) is currently posting gains for the first time in three days, in a time in which it shed 180 pips. If the yen continues to move higher, especially above the 20-day moving average and above the 91.30 area, then the Usd/Jpy outlook will shift to long.