Forex rebates on every trade - win or lose!

Dave,

I'm out now. Will just stayed sidelined for now looking for a clear pattern to develop. Playing the bull tack is certainly slower than the bear tack at the moment.

Update Time: Hong Kong 07:30 London 23:30 New York 18:30



FX Analyst - Pro Commentary - March 26th

GBPUSD

Price: 1.8060
Day View
Resistance: 1.8085 1.8115 1.8140 1.8155

Support: 1.8040 1.8025 1.7990 1.7965



Bias: Favor choppy consolidation today

Bullish: Further aggressive losses yesterday hardly support a bullish stance. However, with the decline having reached the prior downtrend channel high we feel there is room for a correction from here. Watch the 1.8040 support carefully - we feel this could hold. Further support is at 1.7990-1.8005. From this next corrective low we suspect we should see a choppy rally back higher again. First sign is a break above 1.8085 and this would then cause a test of 1.8115 and should rally back to 1.8155.



Bearish: Yesterday's losses were once again very aggressive. However, having tested the prior downtrend channel high we are reluctant to look for a further move lower today. Maximum downside is at 1.7990-1.8005 although a higher support at 1.8040 may well hold. Thus a bearish stance is only suggested on a break of 1.7990 and if seen would spur further losses down to 1.7965 at least and we suspect further towards 1.7904 and 1.7860.





Week View
Resistance: 1.8155 1.8225 1.8330 1.8405

Support: 1.7965 1.7904 1.7860 1.7820



Continued losses have been seen below the 4-hour Pivot Cloud which suggest resumption of the downtrend. Schaff Trend Cycle has remained at zero with FXS-RSI confirming the bearish divergence and has declined into oversold territory. Clearly the prior downtrend channel is the stalling area for any downside pressure and this may cause a pullback but overall the outlook does seem further bearish.



Bullish: The losses bit deeper than expected reaching 1.7988 but held the prior downtrend channel high. While we do feel this should provide a few days of corrective price activity we cannot consider a bullish scenario until key resistance at 1.8155 and then 1.8225 is broken. On this break we would then look for a rally back to the pivot resistance at 1.8405. Further resistance is seen at 1.8330.



Bearish: Losses have been slightly stronger than expected but given the support provided by the prior downtrend channel high we feel there could be a lull in the downward move in favor of a short period of corrective price activity before the next leg lower. Thus only a direct break of 1.7988 would see price dip to 1.7930 minimum. In the medium term we look for price to continue to 1.7860 at least and lower later.



Month View
(Updated 22nd February)

Resistance: 1.8875 1.9025 1.9140 1.9305

Support: 1.8520 1.8205 1.8020 1.7820



We were rather disappointed by the break back above 1.8577 but now consider the 1.9140 high seen last week as a probable key peak and look for losses to develop over the coming months. These should break below 1.8520 and 1.8205 en route the 1.7820 corrective low at least.

me too got bored and thought it might go lower now waiting to see

sorry darling, lots of distractions this morning,
but focused and ready for action now............


no, you naughty girl, not that kind of action,
well, not on here anyway...

watching for 182.25 up - it's had one go and failed,
seems to be back in line with euro today

still kicking myself for being greedy this morning -
was only 10 points adrift

Shame, Beebs, looks like I'll have to take my husband instead.

:o)

One of the problems with charts, is that it's easy to look back retrospectively and say "Ah yes, that's the high and that's the low." It's not always so easy at the time. This morning, for instance, it appeared to me that the Cable was breaking the resistance line to the 3/4 day downtrend. As the day has progressed, I'm now not so sure that this is in fact the case. The movement earlier today was news driven on the Ifo data, and I'm inclined now to discount the price action in my interpretation of the charts. My current line of thought is that the downtrend is possibly still intact and we could see a move below the 18000 early next week.

We'll see. Michigan in a minute so let's see if that has an effect.

hmmmmm, was looking for a wee short as well,
think it's a trifle overdone to the up side,
but my greed again - waiting for 182 and a bit
could mean i'm just going to be watching...


is he bigger than me ?

Don't know. Are you bigger than 10"?

:o)

much, much bigger.

threatening 182.00 prob on mich sent figs
waiting still

Beebs,

It's quality, not quantity that's important.

Have a good weekend. I'm off now. Running a short over the weekend. Stop on the day's high, open limit.

have a good one hilly baby
cu nxt wk

Thanks for the calendar posting, Hilary. That's very useful.

Does anyone else see a head and shoulders pattern forming on the Cable chart?

There is a very interesting article in the Weekend FT Money Guide section about technical analysis of the Euro/Dollar showing the behaviour of RSI during the recent peak. Also, this month's Traders' Magazine has some good articles on currency trading.

Doug

Doug -- and I just cancelled my sub to the weekend FT because I never found time to read it. Bummer.

D.

Doug,

You're not the only person who can see a potential head and shoulders on the cable. The right shoulder needs to move below the neckline though for confirmation. Personally, I'm looking for an up-leg over the next few days. Long stops on a move below the Thursday low for the time being, open limit.

Morning All,

Gordon Brown was quoted yesterday as saying credit will be down in the GDP by 2007. Listing various amounts each year. So maybe this result will credit or discredit his comments. Should get a reaction in GBPUSD at **UPDATE** (08:30 BST) 9.30.

Currently Negative on the Euro due to possible rate drop. (Or more other peoples opinion is rate down hence my feeling the euro will decline.)

Here you go, MM. I'm sure the FT won't mind me posting it (as long as they don't know about it :-) Best read with a 1-year chart showing RSI(14).

Technical analysis: Euro-dollar rate momentum
By Vince Heaney
FT Your Money; Mar 24, 2004



The more overwhelming the consensus view of a market's future direction, the more likely a sharp move in the opposite direction. The euro/dollar exchange rate is a case in point. Further dollar depreciation to correct the bloated US current account deficit is widely expected, yet in mid-March the dollar had recovered by more than 5 per cent against the euro since its February low.

The underlying economic fundamentals acting on the US dollar are little different in March than in February, and are of no help in identifying short-term price movements against the prevailing trend.

However, the nature of trading in the foreign exchange market lends itself toward technical analysis. A significant proportion of foreign exchange market parti- cipants trade in a highly leveraged manner - risking large sums of money for relatively small percentage price movements. Investors in individual equities are accustomed to withstanding double-digit percentage movements in their investments. In the foreign exchange market, a 2 per cent move is a large price change that will prompt many short-term traders to liquidate their positions.

Technical analysis can make sense of the fall in the euro/dollar exchange rate from February's high of 1.2927. At the February peak, looking at prices alone, an investor would form the bullish conclusion that the market had broken to a marginal new high.

Indicators of market momentum, however, did not confirm the push to a new high. The Relative Strength Index (RSI) is a widely followed momentum indicator. The RSI formula takes the average gain made on the days the market rose and compares it to the average loss made on the days the market fell, usually over a 14-day period. Values are calculated to fall within a range between 0 and 100.

Readings above 70 indicate overbought conditions - when the upward movement of the market has progressed too far, too quickly and a pullback may be imminent.

The strong rally in euro/dollar from September last year reached a peak in mid-January at 1.2898, with the RSI reaching 89, firmly in overbought territory. But the move to a marginal new price high on February 18 at 1.2927 was accompanied by a much lower peak in the RSI at 71. This divergence between price and momentum peaks showed that the momentum underlying the upward move was waning. Much like driving a car, you have to slow down before turning in a new direction.

With an early indicator of a possible change in market direction in place, the technical analyst could look for other corroborating evidence.

Elliott Wave Theory, a popular system of technical analysis, states that markets move in a five-wave pattern in the direction of the trend, while corrections take the form of a three-wave zig-zag. A full exposition of Elliott Wave Theory is beyond the scope of a single article, but a useful introduction can be found in John J. Murphy's "Technical analysis of the financial markets".

The theory is often criticised for being imprecise. But the short-term chartist could leave aside attempts to place the euro/dollar rally since September 2003 within the longer-term wave patterns and focus on what was likely to happen in the coming weeks. From the September low at 1.0760, the rally had completed a clear five-wave pattern, suggesting conditions were right for a correction.

The completion of a double top formation added a third piece of evidence that a pullback was in prospect. The early January peak, at 1.2898, was followed by a decline to 1.2331. The renewed rally took euro/dollar to a marginal fresh high, but the market was unable to close above 1.2898. The pattern, which signals a reversal of market direction, was completed when euro/dollar declined back below 1.2331 - the trough between the two peaks.

Technical analysis also offers guidelines on how deep the correction might be. Elliott Wave Theory looks for market pull-backs to conform to certain percentage retracements of the prior advance or decline. These are 38.2 per cent, 50 per cent and 61.8 per cent of the prior move.

The decline to the March 3 low at 1.2056, slightly breached, but did not close below the 38.2 per cent retracement of the September-February move at 1.2099. With the correction likely to unfold in a three-wave zig-zag pattern, the initial drop to 1.2056 may not mark the end of the deline.

A move towards the 50 per cent retracement level would target 1.1843, which corresponds closely to the October peaks at 1.1860, while the 61.8 per cent retracement level offers support at 1.1587.

Meanwhile, after completing a double top formation, technical analysts look for a market to drop by an amount equal to the height of the formation. In this instance, the peak was at 1.2927 and the pattern was completed at 1.2331, suggesting a move to 1.1735. A move in euro/dollar to below the March 3 low at 1.2056 would imply a further drop towards these lower support levels.

Investors looking to buy on the dip should, however, bear in mind that a move below 1.1930 risks a deeper correction based on longer-term Elliott Wave analysis. A move below 1.1587 would confirm this scenario. But, regardless of how much ground the dollar claws back against the euro, the broader message is clear: when faced with an overwhelming consensus view, keep a close eye on the technical outlook.

short 182.14
going for failure again @182.20,
stop in 182.42

Good Call Beeble

tks tellon,
though worried now about euro/ divergence,
if the euro would weaken a little, i'd run
the position longer. still, can't complain,
stop moved to 181.69 to lock some in....

The Euro looks like its in a Bull Flag on the 30min & 1 Hour chart. Although looking at the daily I think it has broken down out of a Triangle range. I belived this morning it was going down, I still think so. Just need to work on my timing.