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US Dollar Sees Limited Follow Through
By Jamie Saettele | Published  05/17/2006 | Currency | Unrated
US Dollar Sees Limited Follow Through

EUR/USD â,“ Dollar bulls have yet to see any follow through from Mondayâ,"s bearish engulfing candle on the daily.  The pair has traded back above the 1.2900 figure.  Weakening oscillators on the daily are still suggestive of a continued countertrend move and current trading is corrective in the grander scheme unless the pair sees a break of the Monday high at 1.2970.  Resistance is at the 78.6% fibo of 1.2970-1.2769 at 1.2926 as well as the 1.2970 Monday high.  Support rests at t0 day SMA value of 1.2800 followed by yesterdayâ,"s low at 1.2769.

USD/JPY â,“ USD/JPY strength failed just short of the 111.00 figure yesterday and the pair has since plummeted, trading through long lower wicks from Friday and Monday as well as the 61.8% fibo of 101.67-121.40 at 109.22.  A break below the 109.00 figure targets the 9/5/05 low at 108.75.  Additional targets from Fibonacci projections target 108.33 (119.38-1.382 * (121.38-113.41)) as well as 106.50 (the 161.8% projection).  RSI remains below 30 which is suggestive of severe weakness.  Countertrend moves face resistance at todayâ,"s 109.83 high with the confluence of the 10 day SMA / 5/16 high at 110.85/93 as additional resistance.

GBP/USD â,“ Cable has tested and pierced its highs from Friday and Monday at the psychological 1.9000 level â,“ and formed a triple top on the hourly in the process.  Also at this level is the 78.6% fibo of 1.9546-1.7043 at 1.9008 â,“ just 5 pips above todayâ,"s high.  A break above the seemingly strong resistance gives scope to a test of the 4/21/05 high at 1.9215.  Like USD/JPY, GBP/USD RSI is extreme with the indicator at 75.89, indicative of the violent trend.

USD/CHF â,“ USD/CHF reversed course at the confluence of the lower Bollinger band (daily) / 127% of 1.2236-1.3283 at 1.1952 and erased nearly all of Fridayâ,"s losses yesterday on Monday but has lost about half of those gains the past two days.  The pair sits right at support connoted by the 61.8% fibo of 1.1918-1.2167 at 1.2013.  A break below targets the low from Monday at 1.1919.  It is also possible that we test the 161.8% fibo extension from 1.3238-1.2651 (beginning wave 5 at 1.2821), to end the extended 5th wave at 1.1873.

USD/CAD â,“ USD/CAD was rejected at 1.1172 â,“ a resistance zone we described yesterday that was fortified by the â,"23.6% fibo of 1.1771-1.0969 / 5/2, 5/9, 5/15 highs / 20 SMAâ,.  The pair has since reverted to serious weakness, having fallen below 1.1050 since and currently trading at that level.  This could very well be just part of the overall correction after the lows at 1.0968 â,“ as the pair trades at the 61.8% fibo of 1.0968-1.1176 at 1.1048.  If it is, then the next leg of the correction would test the high from yesterday at 1.1176.  There is compelling evidence that we are very close to an interim end in this long decline.  Long advances and declines can be broken into 5 waves.  Dividing the wave near the end of a corrective 4th wave often projects the end of the decline (or advance) by a Fibonacci multiple (.382 or .618).  The chart below shows that we are very close to the 131.8% fibo.  However, a break below 1.0897 would suggest that the end of the decline is not until the 161.8% fibo at 1.0373.

AUD/USD â,“ Aussie has corrected big time back above .7700 but is currently resisted by the 61.8% fibo of .7791-.7592 at .7715.  This is all part of the overall larger correction of the uptrend from .7238.  Resistance is at the previous high of .7791 and a break above would suggest that there is still more room to go regarding the larger uptrend.  Weakness from here targets the 5/15 low at .7593 followed by the 50% fibo of .7238-.7791 at .7514.

NZD/USD â,“ Kiwi has made up ground the last day and a half â,“ testing the .6300 figure this evening.  However, we continue to reiterate that the head and shoulders reversal pattern calls for more weakness with the pair now trading just at its neckline.  The fact that this neckline slopes down suggests that prospects for NZD/USD are quite bearish.  Support is below at the 61.8% fibo of .5991-.6217 at .6165 followed by the 76.4% fibo at .6098.  A break above the left shoulder high at .6372 would decrease probability of this reversal to the downside playing out.

Jamie Saettele is a Technical Currency Analyst for FXCM.