FOREX TRADING

The market showed a tendency to move higher against the U.S. dollar during the Asian and the European sessions, but so far, the major pairs have failed to break out of the range of the prior few days of trading. One exception was the pound, which advanced 90 pips overnight, but even so, this is below the pair’s ATR for this time of the day. Unless something happens during the U.S. session, the trading range is expected to remain subdued. The macroeconomic calendar is relatively light this Wednesday ahead of the Fed Beige Book, which does not necessarily help the currency market ahead of historically slow dollar index movement in Wall Street trade.

Dollar Index Technical View: TheLFB Member Charts

4 Hour Chart Flows: Mixed Price Points: 78.45 Looking for: Low of a Short, wave IV)

Momentum: The dollar index went into Long mode in early December and held that trend up until January’s Non-farm Payroll release. The read turned short this week, and a weekly chart close below 76.50 will be a signal that sellers have the upper hand.

Elliott Wave: The dollar index traded lower recently, towards the 77.00 region, offering the chance to monitor a complex corrective pattern, shown in our blue wave IV) position.

A corrective pattern seems to be a double zig-zag structure with a wave c of a wave (Y) that is in process, that may find its lows somewhere the around 76.70 or 76.50 region, before an up-trend can continue. Once a double zig-zag in wave IV) is complete, we will look for a move into the 78.00 zone and then look above the 78.50 wave III) top.

From an Elliott wave perspective, bullish expectations remains valid so long as the market trades above the critical 75.58 support zone, which is the top area of a blue wave I).

The euro (Eur/Usd 1.4505) tested the 1.4450 support area twice during the overnight session, at the same place were the market based in Tuesday trade. For now, the euro has bounced off this intra-day support, but it might test it again later in the day if oil and equity markets move lower. To the upside, the next important resistance area is in the 1.4600 zone.

The pound (Gbp/Usd 1.6235) is approaching the 1.6250 swing area, after gaining more than 90 pips during the Asian and the European sessions. A break above the 1.6250 area is important, but may be difficult to break because this area has acted as an important swing point in the recent past. In addition, within the next 100 pips, the pound will meet two important moving averages, the 50 and the 100 daily SMA’s.

Pound Technical View: TheLFB Member Charts

4 Hour Chart Flows: Mixed. Price Points: 1.5831, and 1.5300 – 1.5350. Looking for: Top of a Long, black wave B) reversal

Momentum: The cable trend went Short on 3rd December, and has meandered sideways since then. The pair can be just as easily bought as sold.

Elliott Wave: The pair is bullish this week, as expected from previous wave posts, and looks to be trading in the last leg, wave c, of a zig-zag pattern that we are looking for in a larger black wave B).

The target of a Long wave c is around the 1.6300-1.3500 resistance zone, where a zig-zag correction may complete a larger black, corrective wave B). After that completes, a down-trend towards the 1.5900 and 1.5800 zones should happen.

Any break of the blue wave b low (around 1.5890) or a break of 1.5831 support of a black wave A) will suggest that a Long, black wave B) reversal is already completed.

The aussie (Aud/Usd 0.9250) gained a few pips overnight, but overall, lagged behind the other major pairs. This is linked to the mixed session observed overnight in the commodity market; the same one that dragged the pair 90 pips lower during the prior day of trading. Ahead, the aussie will probably trade in correlated fashion with the commodity market.

The cad (Usd/Cad 1.0360) bounced from the 1.0400 area, where the pair hit a resistance trend-line that has held the market since Dec 17 09. If the dollar index continues losing ground over the upcoming sessions, this could help the cad to move down to the 1.0250 area once again, where it formed an intra-day swing point low earlier this week.

The swissy (Usd/Chf 1.0190) tested the 50-day moving average during the first part of the day, but as expected has failed to push above this price point. Against the Euro, the Swiss franc gained a few pips for the first time in a very long period.

The yen (Usd/Jpy 91.35) is currently posting gains for the first time in three days, in a time in which it shed 180 pips. If the yen continues to move higher, especially above the 20-day moving average and above the 91.30 area, then the Usd/Jpy outlook will shift to long.

Equities Move On Basic Materials And Tech

Equity Futures: Dow +8.00. S&P +1.80. NASDAQ +2.00. Japanese Nikkei -5.00. German DAX +3.00.

European Trade: Equity markets traded in mixed fashion throughout the overnight hours. The Asian markets closed lower, but European shares managed to turn into the green after the opening bell. At the same time, S&P futures posted some small gains, on light trading volumes.

European markets started the Wednesday session in the red, but shares turned positive helped by the basic materials and technology sectors. In intra-day trade, the U.K. FTSE fell 0.15%, Germany’s DAX gained 0.30%, while Finland’s OMX index gained 0.90%, being among the top gainers in the region. In emerging European trade, shares stayed above the breakeven line, but the recorded market volumes were quite low.

Basic material companies advance aided by the gains seen in the metals market, and by a report issued by Morgan Stanley, which showed that this sector will benefit from the recovery of global industrial production. Since the beginning of the cash session the basic materials sector added approximately 1%, being the top performer.

Technology shares gained after Goldman Sachs upgraded Infineon. The semiconductor manufacturer Infineon gained 3.90% in intra-day trade, leading the pack of gainers in the German DAX index. However, the positive momentum observed in the technology shares might not be extended through the upcoming U.S. session, since Google announced that it might quit its offices in China. In pre-market trading, Google shares were down 1.5%

In the commodity market, metals advanced a few basis points, but energy commodities, such as crude oil, gasoline or heating oil fell ahead of the U.S. Crude Oil Inventories report from the U.S., where a surplus of 1.4M barrels is expected to be reported. Usually, this report creates some volatility in the commodity market. Agriculture products traded mixed overnight.

S&P Technical View: TheLFB Member Charts

4 Hour Chart Flows: Long Price Points: 1127 Looking for: Near-term bearish view

Momentum: The S&P futures market confirmed a Long momentum read on Nov 11th and built a solid near-term support base around 1095. The 1125 area will be a major support zone. The moves to test and hold support are impressive, and are backed with global equity markets that are also holding support.

Elliott Wave: S&P futures were bearish over the past few sessions, after reaching the 1147 highs. The market traded lower, down to the 1127 region, which indicates that prices could easily move much lower than that.

Some changes to the wave count have been made, as market could have already finished a five wave bullish structure from a triangle low (1088). The new wave count now signals for a move towards the 1112 support region in the near-term after a blue wave ii)/b) completed, so long as the 1147 top stays in place.

Upcoming Economic Moves:
10:30 EST Usd OIl Inven. Exp 1.4M, Prev 1.3M
14:00 EST Usd Fed Beige Book
14:00 EST Usd Budget. Exp -87.9B, Prev -120.3B

Crude oil was recently trading at $79.80 per barrel, lower by $0.90

Gold was recently trading up by $2.40 to $1131.80.

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

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