Forex rebates on every trade - win or lose!

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.

and stopped out 181.69 for +45,
now i guarantee it'll drop like a stone.

timing's all that matters tellon,
not easy at times.

lots of analysts/experts on bloomberg today
expecting 118-120, which may mean lower cable
but i suspect not for long - we'll get the ecb
rate cut out the way thurs, then they'll realise
the 's due for a rate increase.

Whats a good MSN channel to join for a similar form of information as this BB?

can't help you there, but hilary posts info
from a site - i think it's fx.com, with some
clever traders in forex. if it's not the right address, ask her tommorow.

I took a look will be giving MSN a miss. Thanks for the info Beeble.

Beeble/Tellon - Hilary uses fxcm.co.uk, best of luck.

Cheers..

Just a thought.. Dropping price of Oil should be helping USD?

Anyone know a good source of real-time news about gold?

Doug

Tellon Euro/USD reckon that the early high on
this or somewhere near it one could be a good shorting opp.

Heading up that way now

Originally my plan was to short at 200. But im holiding off at the moment. Its hovering 195 - 210. Im not sure if im confusing my times but I was sure data was coming out at 9.30..

Just a question.. What types of TA do the people on this board use?

I.E Trend for market direction and Support/Resistance for market timing?

Or Moving Average for direction and bollingerbands for entry?

'finger in the air' for direction

and 'hope for the best' for timing...

Works for me ...NOT at they say



Sorry could not resist :-)

shorted euro at morning highs...2255
Have noticed there can be price extremes very early on
to enter both longs and shorts
then later fear and greed get arbitraged away