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Currency Pair Overview:
Dollar Strengthens After The ECB Press Conference
The dollar and the Japanese yen bulls took control of the market on Friday, with the greenback strengthening across the board. These gains follow yesterday’s ECB press conference, where Mr. Trichet re-iterated the idea that the U.S. authorities support a strong dollar. Interestingly, over the last few trading sessions, the euro could not push higher, something that signals a turning point. Ahead investors will focus on the U.S. macroeconomic calendar, which starts at 08:30 EST with the CPI and the Empire State Manufacturing reports.
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 bounced higher by more than 50 points after the lows this week at 76.60 were reached. In that area a Short, corrective blue wave IV) with a double zig-zag structure could already be completed, which signals for a bullish Usd in the following week.
It looks to be a move into a Long blue wave V) leg that should reach the 78.00 and even 79.00 area if our wave IV) is complete.
The euro (Eur/Usd 1.4375) was the weakest pair among the majors in Friday trade, declining a little more than 100 pips. It broke below the 1.4430 area, an important swing point over the last month of trading. The next test is in the 1.4300 area.
The pound (Gbp/Usd 1.6275) bounced from the 1.6300 area in Friday trade, shedding approximately 60 pips. The 1.6300 area is protected by the 50 and by the 100-day moving averages. In the near to medium term, the pound is expected continue its uptrend.
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 has reached our 1.6300-1.6350 target zone, in the last leg of wave c, of a zig-zag pattern that we were looking for in a larger black wave B).
Since the recent highs around 1.6350 were reached, the market has calmed down, which indicates that we are at a resistance region from where the pair may fall into lower levels. We are looking for the end of a Long, black wave B) reversal. Wave B) is a corrective pattern, and once the correction is complete the market should continue to trade in the direction of a larger trend, which is short in our case.
We are expecting that cable will drop over the coming days and weeks, towards the 1.6000 and 1.5800 regions.
The aussie (Aud/Usd 0.9245) is trading in an ascending triangle pattern on the 4-hour chart, an is interpreted as a bullish pattern. The pair is trading in the 0.9250 area, near the support trend-line of the triangle formation. A break lower would counter this technical pattern.
The cad (Usd/Cad 1.0275) headed higher overnight, but the gains were contained by the Usd/Cad outlook that clearly lies to the downside on most time-frames. For the short move to be extended, equities and commodities need to continue their uptrend.
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 1.0270) traded in a 90-pip range over the last four days of trading, and overnight managed to move higher. The swissy is trading in the 1.0260 area, near to the 100-day moving average.
The yen (Usd/Jpy 90.75) lost a few pips overnight, but the trading volumes were small. For a while, the yen gave the impression that it wanted to move lower, beneath the 90.80 area, but the move was retraced. The U.S. macroeconomic calendar will impact this pair.
Disclosure: No positions