FOREX TRADING

Dollar Index Drops as Shares Advance

Positive equity and commodity markets had a strong influence in the foreign exchange arena on Monday, sending the dollar index down to the 75.00 support area once again during the overnight session. The major currencies posted some small declines around the Sunday open, but soon afterwards the market reversed tack and since then the majors have moved almost exclusively higher. The only exception is the yen, which attempted to break below a 6-week old support area, but failed to find momentum to hold below 88.50.

Dollar Index Technical View: TheLFB Member Charts

Overall View: Yearly low test. Looking for a move into the 74.00 – 74.30 zone if 74.70 low is broken and can close below on a daily chart

4 Hour Chart Flows: Mixed Price Points: 74.70, and 75.88 Looking for: Looking for a complex move lower, in a short Wave V)

Momentum: The index went into Neutral mode on 26th October and has struggled to find the momentum to create and hold a short trend. The sentiment is flowing from overbought to oversold in quick time and is following the global market open and close of Asian, European, and U.S. commercial markets. This is a tight trading range that is sitting at yearly lows, yet looks comfortable

Elliott Wave: The dollar index is trading lower, away from the 75.88 top that was hit on Friday. The market has came out with a complex, short black wave b/ii move with a triangle in the middle, which has been developing for more than two weeks.

The current price action now signals for a move lower into a black wave c with a target around the 74.30 – 74.00 area, especially once the 74.70 low is tested and then taken out.

The euro (Eur/Usd 1.4975) surged 130 pips from the overnight session, as the dollar fell across the board. The single currency started the day near the 20-day moving average, and since then, the pair has been moving only higher. Moreover, in its uptrend, the euro broke above a resistance trend-line that has been holding the market since Nov 11 09.

Euro Technical View: TheLFB Member Charts

4 Hour Chart Flows: Long Price Points: 1.4800, and 1.5000 Looking for: A move higher, within the existing bear channel

Momentum: The pair went into Neutral mode on 26th October and has struggled to find the momentum to create and hold a long trend. The sentiment is flowing from overbought to oversold in quick time and is following the global market open and close of Asian, European, and U.S. commercial markets. This is a tight trading range.

Elliott Wave: The Eur/Usd pair is still trapped between the 1.4800 support and 1.5000 resistance zone. A break of the psychological 1.5000 level will put bullish targets in play somewhere around 1.5200, if traders can initially break and hold a daily chart close above the current 1.5062 yearly highs.

Overall, it seems that the market has been forming a short A), B), C) correction in the past two weeks, which will signal for another bullish leg to come. Prices are still trapped in an overall bear channel, so traders need to be patient until the break appears.

The pound (Gbp/Usd 1.6600) is currently testing the 20-day moving average and the 1.6600 swing point area, after it gained 130 pips overnight. A break above these levels might shift the pair’s outlook to long once again. The pound’s uptrend comes after four days in which it moved only lower and shed 350 pips.

The aussie (Aud/Usd 0.9235) followed the market’s general momentum and headed higher throughout the Asian and European sessions. The aussie’s uptrend was fueled by the rally seen in the metals market, where gold reached a new all-time high. To the upside, the next important price point is the 0.9400 area.

The cad (Usd/Cad 1.0580) fell 140 pips during the overnight session, being the pair that moved the most in percentage points. This is rather strange, since most of cad’s trading volumes are normally recorded through the U.S. trading hours.

The swissy (Usd/Chf 1.0085) is heading once again towards the 1.0050 area, which had been the main support area of the last few weeks of trading. A breakbelow this price point will clear the swissy’s road towards the 0.9850 test.

The yen (Usd/Jpy 88.85) saw an increase in trading volumes throughout the London open, something that helped it push below the 88.70 area. However, the downtrend was short-lived, and the pair retraced almost the entire move. Right now, the yen is showing bearish signs.

Investors Buy The Dip, Equities Surge

Equity Futures: Dow +87.00. S&P +10.70. NASDAQ +17.00. Japanese Nikkei +60.00. German Dax +8.00.

European Trade: European markets maintained a very upbeat sentiment that held easily from the opening bell, with six sectors advancing more than 2%. The European cash markets posted strong gains, with most indexes advancing more than 1.5%, in one of the strongest sessions of the last few weeks of trade. At the same time the S&P futures index tested the 1100.00 resistance area, which has been an important swing point in recent trade.

After a mixed Asian session, the European cash market and U.S. futures indexes managed to post, and hold, strong gains that were aided by investors who bought on dips created late last week. The European blue-chip companies, as tracked by the DJ STOXX 50 gained 1.65%, with the Germany’s Dax, France’s CAC 40 and Spain’s IBEX gaining more than 1.50%.

The emerging Eastern European markets lagged behind in Monday trade, with investors cautious due to currency risks and exposure to a region that is absorbing negative growth headlines over the weekend. The DJ STOXX Eastern Europe 300 rose 0.70%, almost half of the performance posted by the Western and Central European stock markets, although still adding to the overall positive sentiment that will undoubtedly assist Wall Street at the open.

S&P Technical View: TheLFB Member Charts

Overall View: Bullish continuation above 1112

4 Hour Chart Flows: Long Price Points: 1082, and 1112 Looking for: A break of 1082 or 1112 to signal mid-term sentiment

Momentum: S&P futures went into long mode in the near-term on Nov 13th and have easily held that trend, and that has allowed the tests of 4 hour chart support to be bought. There is a tight sideways channel forming and that is allowing the move from overbought to oversold, and back again, to be completed over a 5 day period. It seems to be a meander higher at the moment.

Elliott Wave: S&P futures were lower at the end of the past week, but the market became extremely bullish again after traders were unable to push the prices through the significant 1082 support region.

Traders with a short bias should be very patient here, as another move into the yearly highs may follow over the coming days, if Asian and European equity markets can hold support. In this case major currency pairs will benefit against the U.S. dollar.

Sector Moves: Automobile & parts, banks, basic resources, chemicals, construction materials and the financial sectors advanced more than 2% in Monday morning trade, providing a strong boost to the equity market. Each sector represented in the European equity markets advanced in Monday trade, which is a first for the last few weeks of trading.

Just a handful of stock declined in European trade. In the U.K. FTSE, only three companies traded in the red, while in Spain’s IBEX, only Endesa fell. At the same time, in the German Dax and in the Swiss SMI each of the member companies managed to advance. The basic materials companies lead the gains in each of these indexes.

Economic Moves: During the European session, the PMI report showed that the French, German and euro-area service and manufacturing sides of the economy expanded in November, something that points out that the economy is in recovery mode. These reads will be reflected in the euro area Q4 GDP data.

Crude oil was recently trading at $78.55 per barrel, higher by $1.05

Gold was recently trading up by $19.20 to $1166.00.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

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