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Currency Pair Overview:
Cable Snaps- Majors Follow
The dollar-buying frenzy continued in early Thursday trade, albeit at a slower pace. The pound, which to some extent managed to hold support in the previous session, lost 150 pips overnight, making it the weakest looking pair. Looking ahead, the U.S. session is likely to remain volatile, especially at 08:30 EST and 10:00 EST when investors await the Unemployment Claims and the Philly Fed Manufacturing Index. If these two reports are released better than expected, the market could experience another round of dollar buying, as it will fortify the market’s view that the U.S. economy is recovering much faster than expected.
Momentum: The dollar index went into Long mode in early December and held that trend up until early January. 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 is extremely bullish with an impulse structure in place from the 76.60 lows, that were reached in wave IV). Prices have broken through the 78.45, wave III) top, which is confirming that a Long wave V) is in progress.
Currently we are looking for a black sub-wave iii that is developing, which it needs to be structured by a five wave move. The red wave iii) of that five wave move is now searching for a near-term top, which may get hit somewhere around the 78.80 region, from where a Short, corrective wave iv) may follow.
The euro (Eur/Usd 1.4035) lost another 60 pips overnight, to reach a fresh new 5-month low. The euro is trading beneath the main daily moving averages, which is a bearish sign. The pair is preparing to break the 1.4000 area, which is an important area to gauge sentiment from. Stand aside if not already in.
The pound (Gbp/Usd 1.6140) was the weakest pair throughout the overnight session, dropping 150 pips to break below the 200-day moving average. Most of the selling came throughout the European trading hours, at a time when the other major pairs were barely moving. To the downside, a next possible target is the 1.6000 area.
The aussie (Aud/Usd 0.9065) initially advanced a few pips during the Asian session, helped by the positive macroeconomic reports coming from China. The pair eventually moved lower, breaking below the support area formed by the 20 and the 50-day moving averages. Favor a straddle.
The cad (Usd/Cad 1.0515) continued its uptrend in Thursday trade, ahead of the BoC Monetary Policy Report. Investors expect the BoC to continue its verbal intervention in the currency market, which should devalue the Canadian dollar. As such, the Usd/Cad is expected to remain in a bull-run, targeting the 1.0750 area.
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 1.0485) is preparing to test the 1.0500 area, the highest level reached since September 09. The technical view is for the swissy to be able to push above this level, but he pair is looking overbought in intra-day trade. Favor the long side of market.
Momentum: The pair's trend went Long on 3rd December, and is only just now starting to move towards a short trend from a recent neutral stance.
Elliott Wave: Swissy is very bullish, and showing an impulse structure, that is in process. The Long, blue wave i needs to be structured by five sub-waves. Currently, we are looking for a red wave i) that may find the top somewhere around the 1.0500 region, from where a Short, corrective wave iv) bounce will be expected.
Overall swissy view is bullish on the long-term and we are looking for a huge black wave C)/ III) leg, shown on our daily chart.
The yen (Usd/Jpy 91.65) seems to have set a base in the 90.50 area over the last few days of trading, something that would allow the pair to build momentum once again to test the 200-day moving average at 93.00. In Thursday trade, the yen gained 50 pips and is currently trading near to the 20-day moving average. Overall, favor short Jpy trades.
Disclosure: No positions