AUDUSD—another new high
Friday, April 29, 2011
Ridiculous but welcome since I'm still long from .9940. I took profits on other position. New high this morning of 1.0964.
USDCHF—another new low
Damned if USDCHF did not find a new low at .8651, not too far below the prior low. Is it a retest of the low before a rally? Could be, but don't bet the bank on it. Price did not complete the symmetrical triangle I wrote about yesterday before breaking below—this indicates weakness and a potential price of .8537.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
USDCHF—struggling
Thursday, April 28, 2011
Two days ago, USDCHF fell to a low of .8671 just above S2 of the weekly pivot calculation. As I wrote then, the low formed a hammer candle at weak support and there was positive divergence on the three-hour chart. The pair then rose to .8834 and dropped to .8689. On the one-hour chart, this looks clear as a potential ABC pattern. Leg C of this would be .8790 if C=.618 of A, and .8852 if it should equal A, or .8953 if 1.618A. The pair has only managed to rally to .8761 and here it is struggling.
The pair also appears to be coiling within a triangle. If this is a consolidation move and it breaks below it, the potential target is .8537. This aligns with some targets I have from Elliott analysis on monthly and weekly charts. Unfortunately, I have other targets lower than that, down to .7980 from point and figure work and from Elliott. A reader pointed out that a downtrend line drawn off the lows for the past 100 years is coming in but it looks as though the pair is threatening to break that. One would still expect a rally up to at least .8790 as the triangle legs aren't complete.
Interesting price behavior at interesting psychological extremes. Is there anyone who has a positive opinion about the dollar. On the other hand, who is left to sell except some weak hands?
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
The pair also appears to be coiling within a triangle. If this is a consolidation move and it breaks below it, the potential target is .8537. This aligns with some targets I have from Elliott analysis on monthly and weekly charts. Unfortunately, I have other targets lower than that, down to .7980 from point and figure work and from Elliott. A reader pointed out that a downtrend line drawn off the lows for the past 100 years is coming in but it looks as though the pair is threatening to break that. One would still expect a rally up to at least .8790 as the triangle legs aren't complete.
Interesting price behavior at interesting psychological extremes. Is there anyone who has a positive opinion about the dollar. On the other hand, who is left to sell except some weak hands?
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
GBPUSD—resistance
Wednesday, April 27, 2011
Can GBPUSD overcome its current resistance? On the weekly chart, there is a short-term downtrend line coming in from 1.6879 that had its second touch last week. The prior high is 1.6600; the high this morning was 1.6581.
I bought yesterday at 1.6457 based on the low of 1.6432 being near the .382 retracement of 1.6166/1.6600, the weekly pivot being at 1.6425, a prior breakout point at 1.6428, and the pair being near the bottom of a flag pattern on the three-hour chart. Obviously, I've locked in some profits and my stop is above breakeven.
The pair is down to a low of 1.6545 so far. This is near weak support at 1.6553/49. Additional support is at 1.6504, the breakout point of the flag pattern. If things look OK as to momentum and price if it returns there, I may add to my position. Beneath this is 1.6428/17.
I have price targets to 1.6953, 1.7045 and 1.7140 should the pair start to boogey.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
I bought yesterday at 1.6457 based on the low of 1.6432 being near the .382 retracement of 1.6166/1.6600, the weekly pivot being at 1.6425, a prior breakout point at 1.6428, and the pair being near the bottom of a flag pattern on the three-hour chart. Obviously, I've locked in some profits and my stop is above breakeven.
The pair is down to a low of 1.6545 so far. This is near weak support at 1.6553/49. Additional support is at 1.6504, the breakout point of the flag pattern. If things look OK as to momentum and price if it returns there, I may add to my position. Beneath this is 1.6428/17.
I have price targets to 1.6953, 1.7045 and 1.7140 should the pair start to boogey.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
USDCHF—new low
USDCHF fell to a low of .8671 just above S2 of the weekly pivot calculation. On the three-hour chart, this low formed within a hammer candle. Since the hammer is at weak support and there is positive divergence on the three-hour chart, let us see if the pair can overcome current resistance at .8765. Just above here is the psychological resistance of .8800.
I am almost positive that Bernanke can say something today to assure the dollar will continue to decline.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
I am almost positive that Bernanke can say something today to assure the dollar will continue to decline.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
USDCHF—at wedge support
Tuesday, April 26, 2011
On the weekly chart, the price has fallen to the bottom of a descending wedge (outlined in red) with the low at 87.46. This is taking place within the downward sloping rectangle. Bulkowski, in his book Encyclopedia of Chart Patterns, notes that there should be at least five touches with a minimum duration of three weeks. While wedges can be consolidation patterns of the prevailing trend, falling wedges can resolve to the upside simply because the steepest angle is usually more difficult to maintain. If price does break upward, it can move quickly. This is because energy is being stored up as the price moves become narrower. Note, too, that there is positive divergence on the weekly chart. However, as I wrote yesterday, one can go broke trading positive or negative divergence.
It would take a brave person to suggest buying the dollar at this point. After all, the sentiment against it is extreme. An extreme position never maintains itself in the markets but it can take time to resolve. Still, nothing continues straight down so there should be a reaction at some point.
A weekly close below the lower boundary of the wedge would be bearish. I have a target of .7980 on my daily point & figure chart. On a long-term monthly chart, one can make an Elliott Wave argument for .8500 down to .7500. S1 of the annual pivot is at .8520; S2 and S3 of the monthly pivot is at .8716 and .8513 respectively; S1, S2 and S3 of the weekly pivot are at .8758, .8653, and .8525.
Resistance is at the top of the wedge, near the round number 90. The next resistance is at .9150. This is the daily 50 SMA and this held price on the daily chart in early April.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
It would take a brave person to suggest buying the dollar at this point. After all, the sentiment against it is extreme. An extreme position never maintains itself in the markets but it can take time to resolve. Still, nothing continues straight down so there should be a reaction at some point.
A weekly close below the lower boundary of the wedge would be bearish. I have a target of .7980 on my daily point & figure chart. On a long-term monthly chart, one can make an Elliott Wave argument for .8500 down to .7500. S1 of the annual pivot is at .8520; S2 and S3 of the monthly pivot is at .8716 and .8513 respectively; S1, S2 and S3 of the weekly pivot are at .8758, .8653, and .8525.
Resistance is at the top of the wedge, near the round number 90. The next resistance is at .9150. This is the daily 50 SMA and this held price on the daily chart in early April.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
AUDUSD—comparison of two up trends
Monday, April 25, 2011
On the monthly chart, a comparison of two up trends is interesting as to time and price.
The current ascent began with the 10/2008 low of .6007 to the recent high of 1.0778. This was 4,771 pips over a period of 31 months. The ascent that began with the 4/2001 low of .4775 to the 7/2008 high of .9851, totaled 5,076 pips over a period of 88 months. The gains from 2008 have been 94% of those in the prior uptrend but in only 35% of the time. Has price gotten ahead of time?
Momentum, as measured by RSI, is also more gradual in the current up trend. Even with the meteoric rise the Aussie has been experiencing, RSI is not "overbought" (over 70). Nor has it achieved its prior highs—negative divergence with price. If ever there was a good example of how one cannot trade divergence by itself, this is it.
Look closer at the divergence though. Connie Brown, writing in Technical Analysis for the Trading Professional, discusses a positive or negative reversal, a hidden divergence. For example, I wrote the words positive reversal below the down slanting red line under RSI between 2003 and 2006. She describes this as the market building internal strength—price is higher but there is a new oscillator low. She provides a method of calculating price moves from these and, in this case, her method resulted in a price target of .9473, quite a bit lower than the .9851 high but arguably higher than one might have otherwise calculated at that point in time, especially if one let oneself be blinded by the negative divergence.
Another interesting characteristic of the chart is the AB=CD comparison. In the former uptrend, AB (4775/8010) was 3,235 pips. CD (6774/9851) was 3,077 pips. Close enough. In the current uptrend, AB (6007/9408) is 3,401 pips. If CD is equal to that, then the price target for CD is 1.1467. Far-fetched? Perhaps. If the pair made it to the top of the upward sloping rectangle, that would be about 1.15. I also have a daily point and figure target of 1.14.
As I wrote last week, that the Commitment of Traders report is near an extreme of non-commercial longs to shorts. Extremes are not a good thing. However, you cannot trade that either. Even if the Aussie suffered a sharp correction, the overall trend from .4775 is up with two touches of the trend line.
Resistance is between 1.0750 and 1.0830, then 1.0900. Support is at 1.0583. Additional support is at 1.0444, 1.0390, 1.0289, 1.0248 and 1.0205.
For those who trade on shorter periods than the monthly chart, there are many opportunities to buy and sell but buying pullbacks has obviously been a good strategy for the last several years.
Here's the monthly chart.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
The current ascent began with the 10/2008 low of .6007 to the recent high of 1.0778. This was 4,771 pips over a period of 31 months. The ascent that began with the 4/2001 low of .4775 to the 7/2008 high of .9851, totaled 5,076 pips over a period of 88 months. The gains from 2008 have been 94% of those in the prior uptrend but in only 35% of the time. Has price gotten ahead of time?
Momentum, as measured by RSI, is also more gradual in the current up trend. Even with the meteoric rise the Aussie has been experiencing, RSI is not "overbought" (over 70). Nor has it achieved its prior highs—negative divergence with price. If ever there was a good example of how one cannot trade divergence by itself, this is it.
Look closer at the divergence though. Connie Brown, writing in Technical Analysis for the Trading Professional, discusses a positive or negative reversal, a hidden divergence. For example, I wrote the words positive reversal below the down slanting red line under RSI between 2003 and 2006. She describes this as the market building internal strength—price is higher but there is a new oscillator low. She provides a method of calculating price moves from these and, in this case, her method resulted in a price target of .9473, quite a bit lower than the .9851 high but arguably higher than one might have otherwise calculated at that point in time, especially if one let oneself be blinded by the negative divergence.
Another interesting characteristic of the chart is the AB=CD comparison. In the former uptrend, AB (4775/8010) was 3,235 pips. CD (6774/9851) was 3,077 pips. Close enough. In the current uptrend, AB (6007/9408) is 3,401 pips. If CD is equal to that, then the price target for CD is 1.1467. Far-fetched? Perhaps. If the pair made it to the top of the upward sloping rectangle, that would be about 1.15. I also have a daily point and figure target of 1.14.
As I wrote last week, that the Commitment of Traders report is near an extreme of non-commercial longs to shorts. Extremes are not a good thing. However, you cannot trade that either. Even if the Aussie suffered a sharp correction, the overall trend from .4775 is up with two touches of the trend line.
Resistance is between 1.0750 and 1.0830, then 1.0900. Support is at 1.0583. Additional support is at 1.0444, 1.0390, 1.0289, 1.0248 and 1.0205.
For those who trade on shorter periods than the monthly chart, there are many opportunities to buy and sell but buying pullbacks has obviously been a good strategy for the last several years.
Here's the monthly chart.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
No posts Good Friday
Thursday, April 21, 2011
Tomorrow is Good Friday and I will not be posting. For those who celebrate Easter, have a glorious and blessed holiday.
Lower liquidity
Once London closes today, expect much lower liquidity as we move into a holiday weekend.
EURUSD—new high
New high yesterday; new high today of 1.4649. The bulls are frothing at the mouth. The real Elliott Wave people (i.e. those who follow the rules and guidelines of the theory correctly and not those who distort the theory to suit their own means) are very quiet since most reasonable EW interpretations has been calling for a drop. So where might price go from here?
We're beyond a few price targets. Probably nobody much remembers the daily flag whose pole began at 1.2874 and ended at 1.3862 before forming the flag. That price target was 1.4566. Resistance is at the round numbers of course—1.47, 1.48, etc. If we are in a double ABC correction on the weekly chart, such as I posted on April 8 with the A wave beginning at 1.2859, then 1.618 of A is 1.5052. The top of the daily rectangle is at 1.5016. The two together will make for nice resistance if Euro should climb that far. Above that is the November 2009 high of 1.5144. I have a target on my daily Point and Figure chart of 1.5620 but I do not believe the European Central Bank has enough money to push it up that high, ha-ha. Everyone seems to forget this rise is taking place within some interesting fundamental factors. Euro bulls would call those sour grapes but I don't see why we all have to pretend the emperor is wearing new clothes.
Note that there is a broadening top forming. There are only two touches so far (if this is a high before a correction). An orthodox broadening top requires three touches at the top. These are deadly because they suggest a highly excited, out of control market. So if one is inclined to go long, buy on a pullback, watch momentum, and use tight stops.
There is negative divergence on the three-hour chart. Nearby support is at 1.4577 (the very steep short-term uptrend line), 1.4517 (prior resistance, short-term), 1.4451 (.618 of 1.6041/1.1876), 1.4400 and 1.4341 (lower boundary of the daily rectangle).
Here is a three-hour chart.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
We're beyond a few price targets. Probably nobody much remembers the daily flag whose pole began at 1.2874 and ended at 1.3862 before forming the flag. That price target was 1.4566. Resistance is at the round numbers of course—1.47, 1.48, etc. If we are in a double ABC correction on the weekly chart, such as I posted on April 8 with the A wave beginning at 1.2859, then 1.618 of A is 1.5052. The top of the daily rectangle is at 1.5016. The two together will make for nice resistance if Euro should climb that far. Above that is the November 2009 high of 1.5144. I have a target on my daily Point and Figure chart of 1.5620 but I do not believe the European Central Bank has enough money to push it up that high, ha-ha. Everyone seems to forget this rise is taking place within some interesting fundamental factors. Euro bulls would call those sour grapes but I don't see why we all have to pretend the emperor is wearing new clothes.
Note that there is a broadening top forming. There are only two touches so far (if this is a high before a correction). An orthodox broadening top requires three touches at the top. These are deadly because they suggest a highly excited, out of control market. So if one is inclined to go long, buy on a pullback, watch momentum, and use tight stops.
There is negative divergence on the three-hour chart. Nearby support is at 1.4577 (the very steep short-term uptrend line), 1.4517 (prior resistance, short-term), 1.4451 (.618 of 1.6041/1.1876), 1.4400 and 1.4341 (lower boundary of the daily rectangle).
Here is a three-hour chart.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
EURUSD—above resistance
Wednesday, April 20, 2011
With the high this morning of 1.4547, Euro is above the 1.4520 resistance that had capped a congestion range. It is clear that buyers did enter as I wrote about the weekly chart on Monday. Because it held at 1.4157, that strengthens that area which was already a strong support zone.
If Euro can maintain the move, the target of the top of the daily triangle at 1.4969 is possible. However, note the negative divergence on the daily chart. Failure here will find support at 1.4326 (the lower boundary of the rectangle), 1.4157 and the psychological 1.40.
Here's the daily chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
If Euro can maintain the move, the target of the top of the daily triangle at 1.4969 is possible. However, note the negative divergence on the daily chart. Failure here will find support at 1.4326 (the lower boundary of the rectangle), 1.4157 and the psychological 1.40.
Here's the daily chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
AUDUSD—nice move
With the new high this morning of 1.0687, Aussie has accomplished a major price target. I added two positions yesterday at 1.0500 thinking this was perhaps a bit high for an entry but one of them hit their profit target at 1.0650 and the other is still on. My other two positions are from .9940 and 1.0236. I've taken partial profits on the one from .9940.
Where is it going to go from here? As I wrote yesterday, I have price targets at various levels up to 1.14. In the minutes released yesterday by the Reserve Bank of Australia, there is comment that since Japan is a major export market for Australia and since there is going to be massive rebuilding and reconstruction in Japan, Australia's exports to Japan may increase. What is interesting is that exporters usually find a strong currency to be a challenge. The Australian dollar is very strong indeed.
Since 1.0650 was a major target, one would expect sellers to take some profits. This should depress prices a bit—let's see if it happens or if buyers are on a tear. It is difficult to believe price can keep rising like this. Where are the buyers who have not already bought in? On the most recent Commitment of Traders report, there were 97,153 long noncommercial traders and only 6,502 short ones. These are extremes. Such extremes do not occur frequently.
First level of support should now be at 1.0583. Additional support is at 1.0444, 1.0390, 1.0289, 1.0248 and 1.0205.
Below is the three-hour chart I prepared yesterday where I entered because there was a hammer at the low of 1.0444 and it was near a price projection I had made for an ABC correction.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Where is it going to go from here? As I wrote yesterday, I have price targets at various levels up to 1.14. In the minutes released yesterday by the Reserve Bank of Australia, there is comment that since Japan is a major export market for Australia and since there is going to be massive rebuilding and reconstruction in Japan, Australia's exports to Japan may increase. What is interesting is that exporters usually find a strong currency to be a challenge. The Australian dollar is very strong indeed.
Since 1.0650 was a major target, one would expect sellers to take some profits. This should depress prices a bit—let's see if it happens or if buyers are on a tear. It is difficult to believe price can keep rising like this. Where are the buyers who have not already bought in? On the most recent Commitment of Traders report, there were 97,153 long noncommercial traders and only 6,502 short ones. These are extremes. Such extremes do not occur frequently.
First level of support should now be at 1.0583. Additional support is at 1.0444, 1.0390, 1.0289, 1.0248 and 1.0205.
Below is the three-hour chart I prepared yesterday where I entered because there was a hammer at the low of 1.0444 and it was near a price projection I had made for an ABC correction.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
AUDUSD—weekly
Tuesday, April 19, 2011
The most noticeable characteristic on the weekly chart, besides the robust uptrend, is the doji candle that formed this past week. This candle is a dragonfly doji. In the dragonfly, the open and close takes place at or very near the high. In this case, the high for the week was 1.0581 (almost spot on the high of the prior week at 1.0583 that was the open for the week) and the close was 1.0566. The low for the week was 1.0390. Many see this type candle as bullish because psychologically it shows that price dropped to lower lows but managed to close near the highs. Nonetheless, it reinforces resistance at 1.0583.
Any type of doji, after up trend, hints that the market may be running out of steam. This doji, coming as it does at a new high, is suspicious. If this week's price action results in the Aussie closing at lower lows, then it will confirm an evening star pattern which. This is bearish.
Still, bearishness may only mean a correction before the uptrend resumes. After 1.0390, there is strong support in a price zone from 1.0289/82 (week ending 4/8 low and weekly 10 EMA) down to 1.0248 (.382 of the 9704/10583 move) and 1.0205. With such a strong uptrend in place, this zone most likely would hold any correction.
I'm still long with various positions from .9940. I would probably add on significant dips. It is true that this trend is mature and it is true there is negative divergence on the weekly chart. However, unless we're going to have a significant correction across many markets and unless there is going to be some sort of policy change that supports the US dollar (haha, let me not choke laughing), it's more likely the Aussie will resume an uptrend after any correction. If it does so, 106.50 is next and there are price targets up to 114. Of course much backing and filling would occur along the way.
Here's the weekly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Any type of doji, after up trend, hints that the market may be running out of steam. This doji, coming as it does at a new high, is suspicious. If this week's price action results in the Aussie closing at lower lows, then it will confirm an evening star pattern which. This is bearish.
Still, bearishness may only mean a correction before the uptrend resumes. After 1.0390, there is strong support in a price zone from 1.0289/82 (week ending 4/8 low and weekly 10 EMA) down to 1.0248 (.382 of the 9704/10583 move) and 1.0205. With such a strong uptrend in place, this zone most likely would hold any correction.
I'm still long with various positions from .9940. I would probably add on significant dips. It is true that this trend is mature and it is true there is negative divergence on the weekly chart. However, unless we're going to have a significant correction across many markets and unless there is going to be some sort of policy change that supports the US dollar (haha, let me not choke laughing), it's more likely the Aussie will resume an uptrend after any correction. If it does so, 106.50 is next and there are price targets up to 114. Of course much backing and filling would occur along the way.
Here's the weekly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
EURUSD—weekly
Monday, April 18, 2011
Euro high last week was 1.4520 before dropping off to a low of 1.4267 this morning. This is major support since 1.4263/43 was a prior high and parity. Beneath that is 1.4227 (.382 of the move up from 1.3752) and 1.4223 (the broken long-term downtrend line on the weekly chart). Buyers may well enter. If the bulls fail to hold price there, then below that is a support zone beginning at 1.4166 down through 1.4103. Note that the pair is still within the rectangle on the weekly chart and could move up rather sharply.
On the weekly chart, there is a possible evening star forming. This is a three-candle pattern where the first candle is a strong bullish candle, the second is a much smaller sometimes doji star, and the third candle closing deeply within the first one. Forming at resistance, as it is, adds more significance if the close at the end of the week confirms the pattern. That is not tradable for many short-term traders but the way to trade it, if you believe it is going to happen, is to short rallies on the shorter-term charts.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
On the weekly chart, there is a possible evening star forming. This is a three-candle pattern where the first candle is a strong bullish candle, the second is a much smaller sometimes doji star, and the third candle closing deeply within the first one. Forming at resistance, as it is, adds more significance if the close at the end of the week confirms the pattern. That is not tradable for many short-term traders but the way to trade it, if you believe it is going to happen, is to short rallies on the shorter-term charts.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
USDJPY—daily This pair continues to show some interesting but messy price behavior. On the daily chart, a flag pattern is forming, possible consolidation on the way to higher prices. If this is a flag, the target is 92.13, which seems somewhat unlikely although certainly not impossible. However, before this ever happened, bulls need to carry the price above 84.20/77, 85.16 and the recent spike high of 85.52. Note that the price has moved back inside the triangle (the dotted lines) that contained it for the most part over the last several months. The low so far has been 82.65, very close to the support I blogged about last week of 82.56. A .382 retracement of the recent move up from the 76.59 low would be 82.11; 50% is 81.06. Here's the daily chart: 
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Overwhelmed
Friday, April 15, 2011
Sorry for no blog posts Thurday and Friday. Between a touch of the flu, taxes, and my cat, Alban, getting diagnosed with bone cancer, it has been a tough week.
I sat down Thursday morning, early, to try to trade and I just couldn't focus. I was determined to get back to it today but I just don't have the energy. Sometimes, it's better to let it go. We all have to recognize when life overtakes us and realize we can't be at our best.
I'll have it back together by Monday.
I sat down Thursday morning, early, to try to trade and I just couldn't focus. I was determined to get back to it today but I just don't have the energy. Sometimes, it's better to let it go. We all have to recognize when life overtakes us and realize we can't be at our best.
I'll have it back together by Monday.
USDJPY—immediate support and resistance
Wednesday, April 13, 2011
On the daily and hourly time charts, immediate resistance is a zone of 84.20/77, 85.16 and 85.52. Immediate support is at 83.47, 82.56, and 80.71. On the hourly chart, there is a symmetrical triangle with a possible next leg down to a D point at 83.55 before a move up to point E from the Elliott perspective (whereupon it should move down sharply). One can also view the recent hourly price action from 83.47 as an ABC correction with possible C targets of 84.10/84.47/85.06. After that it should move down. Recent high has been 84.26.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
USDJPY—weekly chart
Yesterday I looked at the monthly chart where there were some interesting characteristics. The weekly chart is also interesting in its own way. Price is getting close to a downtrend line resistance from the 110.69, July 2008 high. Tying it back to the monthly chart, 110.69 was the high before it broke below the multi-year symmetrical triangle.
Look at the weekly rectangle before the recent spike low to 76.45. One sees a high of 84.53 and low of 80.22 or 431 pips. Subtracting the 431 pips from the 80.22 low, one gets a target of 75.81, not far below the recent spike low of 76.45. However, that spike low quickly reversed. Price came back in the rectangle and pushed above its upper boundary. Psychologically, the market participants charged down, reversed en masse, and charged back up. Terrific herd behavior.
If price should maintain itself above the rectangle, the potential price target is 88.94. There is negative divergence with RSI on this chart just as there was on the monthly chart. However, before it could get there, price must overcome the downtrend line resistance, located today at 86.19.
Thinking about both the monthly and weekly charts, it is possible wave five ended at 76.45 (I would not bet the bank on this or anything relying only on Elliott Wave Theory but one could argue this wave count). However, if true, the next move would be up in an A wave.
Weekly chart support is at 83.4, 81.39, 80.59 and the egregious 76.45. Below that is not much support.
Here's the weekly chart.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Look at the weekly rectangle before the recent spike low to 76.45. One sees a high of 84.53 and low of 80.22 or 431 pips. Subtracting the 431 pips from the 80.22 low, one gets a target of 75.81, not far below the recent spike low of 76.45. However, that spike low quickly reversed. Price came back in the rectangle and pushed above its upper boundary. Psychologically, the market participants charged down, reversed en masse, and charged back up. Terrific herd behavior.
If price should maintain itself above the rectangle, the potential price target is 88.94. There is negative divergence with RSI on this chart just as there was on the monthly chart. However, before it could get there, price must overcome the downtrend line resistance, located today at 86.19.
Thinking about both the monthly and weekly charts, it is possible wave five ended at 76.45 (I would not bet the bank on this or anything relying only on Elliott Wave Theory but one could argue this wave count). However, if true, the next move would be up in an A wave.
Weekly chart support is at 83.4, 81.39, 80.59 and the egregious 76.45. Below that is not much support.
Here's the weekly chart.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
USDJPY—monthly chart
Tuesday, April 12, 2011
USDJPY fell to 83.47 over night but has since rallied a bit. On the monthly chart, the pair fell from a multi-year triangle in 2009. If one tries to interpret the price target from this based on an Elliott perspective, it's too low to be meaningful (well, it would be meaningful if it happened but it's not realistic from today's vantage point). One could estimate a wave five price target at 62.76 (gulp) if golden section calculations are used.
Interesting is the fact that if you look at the AB=CD harmonic, the 1.27 extension of CD is 76.19. This is based on A beginning at 147.63 and ending at 101.22 (4,641 pips) and C beginning at 135.14. 4,641 times 1.27 equals 5,894. Subtracting that from 135.14 brings it to the 76.19. The pair hit a low of 76.45 in the most recent dip.
Also interesting is the symmetry of the move from 147.63 to 76.45. It's almost, not quite, a three-drive pattern, a harmonic pattern that can signal a trend reversal. Note the positive divergence with RSI on this chart and the hammer at the recent low. These three together suggest higher prices may be coming. For that to happen however, the pair must first overtake the long-term downtrend line. It also needs to overcome resistance at 85.54, 85.93, 90.00 and 94.99.
Here's a monthly chart. I'll post a weekly chart later.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Interesting is the fact that if you look at the AB=CD harmonic, the 1.27 extension of CD is 76.19. This is based on A beginning at 147.63 and ending at 101.22 (4,641 pips) and C beginning at 135.14. 4,641 times 1.27 equals 5,894. Subtracting that from 135.14 brings it to the 76.19. The pair hit a low of 76.45 in the most recent dip.
Also interesting is the symmetry of the move from 147.63 to 76.45. It's almost, not quite, a three-drive pattern, a harmonic pattern that can signal a trend reversal. Note the positive divergence with RSI on this chart and the hammer at the recent low. These three together suggest higher prices may be coming. For that to happen however, the pair must first overtake the long-term downtrend line. It also needs to overcome resistance at 85.54, 85.93, 90.00 and 94.99.
Here's a monthly chart. I'll post a weekly chart later.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
EURUSD—possible consolidation or retracement
Monday, April 11, 2011
Euro reached 1.4488 on Friday so bulls are in control coming into the new week. However, because there is strong resistance here, the possibility is for at least some consolidation and perhaps retracement. The resistance consists of price targets, wave and harmonic projections, and the .618 retracement of the move from 1.6041 to 1.1876 at 1.4451. This does not mean the move up is over. As I wrote on Friday, there is a possibility the pair is moving up within an upward sloping rectangle on the weekly chart that would take it to 1.5150. Applying even rudimentary cycle analysis also makes that possible. Within the daily chart, though, one can see that Euro is at the top of a similar type of rectangle and a drop to the bottom of this pattern wouldn't be unusual. Support is at 1.4420, 1.4384, 1.4320, then major support around 1.4262/43 (prior high and parity), 1.4202 (.382 of the recent move up from 1.3752), and then a zone beginning at 1.4166 down through 1.4100. Most likely, these supports will cause dip buying. Here's the daily chart:
EURUSD—new high
Friday, April 8, 2011
Euro has touched 1.4421 this morning. On the way, it broke the downtrend line on the weekly chart.
This move up has triggered many stops. This covering of short positions helps price rise. Now that price has topped 1.44, a big psychological number, there should be some reaction.
Were there price targets in this range? Yes. As I pointed out in my comment on the daily chart earlier this week, I had targets up to 1.4366. Given that Euro closed at 1.4392 yesterday, one has to look at weekly targets. One of the closest is 1.4432. This is where the current C wave on the weekly chart would be equal to A. 1.4451 is .618 of the move from 1.6041 down to 1.1876. As a result, 1.4450/4500 should top before a reaction. Profit taking will also fuel a reaction. I wouldn't necessarily short the reaction except in very small time frames. With the current signals, higher probability trades are those that buy dips. It is very possible that Euro is heading towards the top of the upward sloping rectangle, around 1.5150.
What about my Elliott count on the weekly chart below that implies this is wave 2 of (3)? Am I daffy? I hope not. While I take it seriously when a pair breaks a major trend line, it's not my only piece of evidence. I don't have good reason yet to change my count. That count is a result of price activity from July 2008 to the present, almost 33 months. The current upward push from 1.1876 took place over the last nine months, about 28% of the total time.
I would like to see the pair retest the trend line, perhaps dip slightly below, and then reverse upward again to gain confidence in buying a large position.
Support for a pullback is at 1.4389, 1.4350/20, 1.4280/43, 1.4152 (strong) and 1.4000.
Here's the weekly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
This move up has triggered many stops. This covering of short positions helps price rise. Now that price has topped 1.44, a big psychological number, there should be some reaction.
Were there price targets in this range? Yes. As I pointed out in my comment on the daily chart earlier this week, I had targets up to 1.4366. Given that Euro closed at 1.4392 yesterday, one has to look at weekly targets. One of the closest is 1.4432. This is where the current C wave on the weekly chart would be equal to A. 1.4451 is .618 of the move from 1.6041 down to 1.1876. As a result, 1.4450/4500 should top before a reaction. Profit taking will also fuel a reaction. I wouldn't necessarily short the reaction except in very small time frames. With the current signals, higher probability trades are those that buy dips. It is very possible that Euro is heading towards the top of the upward sloping rectangle, around 1.5150.
What about my Elliott count on the weekly chart below that implies this is wave 2 of (3)? Am I daffy? I hope not. While I take it seriously when a pair breaks a major trend line, it's not my only piece of evidence. I don't have good reason yet to change my count. That count is a result of price activity from July 2008 to the present, almost 33 months. The current upward push from 1.1876 took place over the last nine months, about 28% of the total time.
I would like to see the pair retest the trend line, perhaps dip slightly below, and then reverse upward again to gain confidence in buying a large position.
Support for a pullback is at 1.4389, 1.4350/20, 1.4280/43, 1.4152 (strong) and 1.4000.
Here's the weekly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
AUDUSD—new highs
Thursday, April 7, 2011
AUDUSD reached a new high this morning of 1.0495. This was the first of several price targets in a zone that extends to 1.0550/95. I've unloaded some longs but still have two positions. I'd expect a reaction between there and 1.0600. Note that some trend lines intersect near 1.0700. (I don't disregard old broken trend lines). There are additional price targets up to 1.1400. While it certainly would not achieve that soon, this currency is a bullish freight train. Since the low in 2008 of 6007, Aussie has gained 4,488 pips, a gain of 75%. One could have done far worse than to simply buy dips in this currency. Commodity currencies in general are strong.
There is negative divergence on the daily chart. However, daily candles are strong—they are not throwing off many upper shadows. If it were, it would be a hint the market is rejecting higher prices.
Support is at 1.0289/57.
Here's the daily chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
There is negative divergence on the daily chart. However, daily candles are strong—they are not throwing off many upper shadows. If it were, it would be a hint the market is rejecting higher prices.
Support is at 1.0289/57.
Here's the daily chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
GBPUSD—April seasonally strong
Wednesday, April 6, 2011
If you look at the monthly chart below, you can see that April tends to be an up month for Cable. I've marked the years above the April candle. This chart begins in 2001 so it is only nine years of data but the pattern goes back further than 2001. Think about it only as something of which to be aware.
Cable is still below the downtrend drawn from 2009. However, the pair broke above a long-term downtrend line from Nov. 2007 in February, closed below it in March and is above it again as of today. The pair needs to close above 1.6401 for this break to gain credibility.
Note the symmetrical triangle. These can be continuation patterns. From an Elliott perspective, they always are continuation patterns that occur in a fourth wave. If this is true, the width of the triangle is the price target for wave five. This would be 3,542 pips (1.3503 to 1.7045). It seems a bit much to contemplate at this point—way down in the 1.11 area.
If, instead of a triangle, one wants to look at this as an ABC correction, then wave C at .618 A would be 1.6400. Other approaches strengthen this resistance. The .382 retracement of the 2.1164/1.3503 decline is at 1.6430 and 1.6410 is R3 of the weekly pivot.
Above 1.6430/1.6500 would strengthen the case for a move to much higher prices. The August 2009 price high is 1.7045. A daily flag target I blogged about March 19 had a target of 1.7215. If this is an ABC correction and wave C equals A, the target is 1.7725.
On the support side, 1.5345 is the most recent swing low. If one buys the Elliott triangle interpretation, leg D of the triangle would be 1.47 or so.
Here is the monthly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Cable is still below the downtrend drawn from 2009. However, the pair broke above a long-term downtrend line from Nov. 2007 in February, closed below it in March and is above it again as of today. The pair needs to close above 1.6401 for this break to gain credibility.
Note the symmetrical triangle. These can be continuation patterns. From an Elliott perspective, they always are continuation patterns that occur in a fourth wave. If this is true, the width of the triangle is the price target for wave five. This would be 3,542 pips (1.3503 to 1.7045). It seems a bit much to contemplate at this point—way down in the 1.11 area.
If, instead of a triangle, one wants to look at this as an ABC correction, then wave C at .618 A would be 1.6400. Other approaches strengthen this resistance. The .382 retracement of the 2.1164/1.3503 decline is at 1.6430 and 1.6410 is R3 of the weekly pivot.
Above 1.6430/1.6500 would strengthen the case for a move to much higher prices. The August 2009 price high is 1.7045. A daily flag target I blogged about March 19 had a target of 1.7215. If this is an ABC correction and wave C equals A, the target is 1.7725.
On the support side, 1.5345 is the most recent swing low. If one buys the Elliott triangle interpretation, leg D of the triangle would be 1.47 or so.
Here is the monthly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
AUDUSD—correcting
Tuesday, April 5, 2011
After yesterday's high of 1.0422, Aussie has pulled back to a low of 1.0289, breaking below its short-term uptrend line. RSI also broke below its uptrend line. The pair appears to be trying to hammer out a bottom here. This is close to key support at 1.0257, the December high. Below that is support at 1.0200, then 1.0143 and 1.0059. If the pair can base here and begin another push upwards, it needs to take out the 1.0422. If so, 1.0500 is next. This would be in line with the overall uptrend that has been in place since 2008. Here's the three-hour chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
EURUSD—failure at resistance
The recent 2011, 1.4269 high was the second time Euro has tried to break above the November high of 1.4182. The first was 1.4248 on March 22. This sets up a potential double top, potential because it requires a push below 1.4021 for confirmation. If it is confirmed the target is 1.3773.
Support is at 1.4139/15, 1.4110 (strong with confluence and an uptrend line), 1.4062, 1.4021 and the psychological 1.4000.
As I blogged yesterday, there are possibilities for a push to 1.4326/66 but, so far, this is out of reach.
Here's the three-hour chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
Support is at 1.4139/15, 1.4110 (strong with confluence and an uptrend line), 1.4062, 1.4021 and the psychological 1.4000.
As I blogged yesterday, there are possibilities for a push to 1.4326/66 but, so far, this is out of reach.
Here's the three-hour chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
EURUSD—Reaction versus change in trend
Monday, April 4, 2011
Is the price rally from the 1.1876 low a corrective reaction or a change in trend? This is almost impossible to answer at this point but looking at the price behavior from the perspective of different theories is useful. Today, I'll discuss the monthly chart considering Dow Theory, Elliott Wave analysis, and simple trend lines.
From the Dow Theory point of view, Euro remains in a primary downtrend on the monthly chart. In Dow Theory, a primary downtrend lasts one to several years and there is at least a 20% decline in value. The Euro had a 23% decline from the1.6041 July 2008 high to the October 2008 1.2329 low. The low of 1.1876 in June 2010 resulted in a percent decline from the high of 26%.
In a primary down trend, there are intermediate trends or reactions that result in price rallies. During these reactions, price retraces 33 to 66% of the prior price change. In the Euro's first reaction from 1.2329, price retraced 76% of the 3,712-pip decline. An intermediate rally fails to bring price above the top of the preceding rally. The rally that began from the low of 1.2329 stopped at 1.5147 in November 2009, well below the prior 1.6041 high. The rally that began at the low of 1.1876 is still in progress. This reaction is well past the 66% retracement of the prior decline of 1.5147 to 1.1876. A 76% reaction would bring price to 1.4362.
Differentiating between the first leg of a new primary trend and an intermediate reaction within the primary trend is difficult. Dow stated that the secondary trend often consists of three or more minor waves. On the monthly or weekly chart, one can see this as a three-wave reaction. One can also examine volume, unavailable in the spot market, and the maturity of the primary trend.
Maturity is tricky. The downtrend has been going on since July 2008 three months shy of three years. Is that mature or immature? In comparison to the prior long uptrend from 2000, it's immature. Dow spoke about three stages within primary trends, with the third stage of a bear market finding assets liquidated regardless of their underlying value. This is not happening. It is questionable if it has happened at all during the downtrend given the financial woes of various Eurozone countries. Another third stage sign is little interest in buying. Obviously, someone is buying or price would not be going up. All this leads to the appearance of this being a corrective rally rather than a change in trend.
By the way, many expect the ECB to raise the interest rate this month. Increasing an interest rate often boosts a currency. However, the proverb of buy the rumor, sell the news, comes to mind. How the Euro reacts to the actual news (if the rate increase takes place) will be interesting to watch.
Obviously, if price exceeds 1.5147, the primary trend has changed from down to up. For short-term traders that seems too far away to be useful; for longer-term traders, it is not that far.
Dow Theory is one piece of evidence. Elliott Wave can be another. From an Elliott point of view, one could argue that the C leg of an ABC correction on the monthly chart is over and that price is beginning another rise. It is possible. However, if one looks at my wave counts on a weekly chart, it seems more likely that price is in a third wave with this current correction being wave two of three. If price exceeds 1.4282, this interpretation is invalid (wave two cannot exceed the start of wave one). The high this morning was 1.4269, tantalizingly close. If it exceeds 1.4282, is a bearish interpretation out of the question? No. The correction could still be taking place. On February 28 I blogged that if one assumes the C wave is currently "in progress, then .618 of the A wave would bring price to 1.4347."
There are no absolute answers from either Dow or Elliott Theories. However, one needs to keep them in mind as many traders follow them.
Another thing to use is a simple trend line. Trend lines can be surprisingly valuable. Clearly, Euro is at an important resistance trend line. This line is currently at 1.4326. A sustained break above this line would be compelling evidence that the trend is breaking upwards. Note that while Euro has clearly broken below a major uptrend line (the dotted line), it has yet to break below the second uptrend line drawn in solid red on the chart below. That trend line is currently at 1.2226.
From doing only this limited analysis (Dow, Elliott and trend lines), I now have a resistance zone beginning at 1.4326 (the trend line) and ending at 1.4366 (the same percentage correction as the prior correction). The mid-point of this zone is a.4346, almost exactly the price projection from the C wave calculation. This zone also coincides with a price resistance on my three-hour point and figure chart. As a result, I will most likely think about selling if price reaches those levels. If price exceeds that zone, the next major resistance is at the upper boundary of the upward sloping rectangle. This is currently around 1.5150. Obviously, on a daily chart, one would see interim resistance levels.
What about time? Time is not as useful as some Gann followers would have you believe. I do look at it, though. One thing to say about it is that the prior correction took 13 months to reach the high of 1.5147. This rally is now in its tenth month. If the rally continues beyond 13 months then it might be significant.
An important factor is momentum. It plays a role in all trade analysis I do, particularly in shorter time charts. On the monthly chart below, RSI has broken above its downtrend line. However, note that it is not pushing into overbought levels (above 70) even though the price rally has been steep.
Here's the monthly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
From the Dow Theory point of view, Euro remains in a primary downtrend on the monthly chart. In Dow Theory, a primary downtrend lasts one to several years and there is at least a 20% decline in value. The Euro had a 23% decline from the1.6041 July 2008 high to the October 2008 1.2329 low. The low of 1.1876 in June 2010 resulted in a percent decline from the high of 26%.
In a primary down trend, there are intermediate trends or reactions that result in price rallies. During these reactions, price retraces 33 to 66% of the prior price change. In the Euro's first reaction from 1.2329, price retraced 76% of the 3,712-pip decline. An intermediate rally fails to bring price above the top of the preceding rally. The rally that began from the low of 1.2329 stopped at 1.5147 in November 2009, well below the prior 1.6041 high. The rally that began at the low of 1.1876 is still in progress. This reaction is well past the 66% retracement of the prior decline of 1.5147 to 1.1876. A 76% reaction would bring price to 1.4362.
Differentiating between the first leg of a new primary trend and an intermediate reaction within the primary trend is difficult. Dow stated that the secondary trend often consists of three or more minor waves. On the monthly or weekly chart, one can see this as a three-wave reaction. One can also examine volume, unavailable in the spot market, and the maturity of the primary trend.
Maturity is tricky. The downtrend has been going on since July 2008 three months shy of three years. Is that mature or immature? In comparison to the prior long uptrend from 2000, it's immature. Dow spoke about three stages within primary trends, with the third stage of a bear market finding assets liquidated regardless of their underlying value. This is not happening. It is questionable if it has happened at all during the downtrend given the financial woes of various Eurozone countries. Another third stage sign is little interest in buying. Obviously, someone is buying or price would not be going up. All this leads to the appearance of this being a corrective rally rather than a change in trend.
By the way, many expect the ECB to raise the interest rate this month. Increasing an interest rate often boosts a currency. However, the proverb of buy the rumor, sell the news, comes to mind. How the Euro reacts to the actual news (if the rate increase takes place) will be interesting to watch.
Obviously, if price exceeds 1.5147, the primary trend has changed from down to up. For short-term traders that seems too far away to be useful; for longer-term traders, it is not that far.
Dow Theory is one piece of evidence. Elliott Wave can be another. From an Elliott point of view, one could argue that the C leg of an ABC correction on the monthly chart is over and that price is beginning another rise. It is possible. However, if one looks at my wave counts on a weekly chart, it seems more likely that price is in a third wave with this current correction being wave two of three. If price exceeds 1.4282, this interpretation is invalid (wave two cannot exceed the start of wave one). The high this morning was 1.4269, tantalizingly close. If it exceeds 1.4282, is a bearish interpretation out of the question? No. The correction could still be taking place. On February 28 I blogged that if one assumes the C wave is currently "in progress, then .618 of the A wave would bring price to 1.4347."
There are no absolute answers from either Dow or Elliott Theories. However, one needs to keep them in mind as many traders follow them.
Another thing to use is a simple trend line. Trend lines can be surprisingly valuable. Clearly, Euro is at an important resistance trend line. This line is currently at 1.4326. A sustained break above this line would be compelling evidence that the trend is breaking upwards. Note that while Euro has clearly broken below a major uptrend line (the dotted line), it has yet to break below the second uptrend line drawn in solid red on the chart below. That trend line is currently at 1.2226.
From doing only this limited analysis (Dow, Elliott and trend lines), I now have a resistance zone beginning at 1.4326 (the trend line) and ending at 1.4366 (the same percentage correction as the prior correction). The mid-point of this zone is a.4346, almost exactly the price projection from the C wave calculation. This zone also coincides with a price resistance on my three-hour point and figure chart. As a result, I will most likely think about selling if price reaches those levels. If price exceeds that zone, the next major resistance is at the upper boundary of the upward sloping rectangle. This is currently around 1.5150. Obviously, on a daily chart, one would see interim resistance levels.
What about time? Time is not as useful as some Gann followers would have you believe. I do look at it, though. One thing to say about it is that the prior correction took 13 months to reach the high of 1.5147. This rally is now in its tenth month. If the rally continues beyond 13 months then it might be significant.
An important factor is momentum. It plays a role in all trade analysis I do, particularly in shorter time charts. On the monthly chart below, RSI has broken above its downtrend line. However, note that it is not pushing into overbought levels (above 70) even though the price rally has been steep.
Here's the monthly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author. My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
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