FOREX TRADING

U.S. Midday Currency Market Hit By Risk Aversion

The dollar index strengthened across the board in Thursday trade, as the market traded in a classic risk-aversion phase that mirrored a drop in global equity trade. The major pairs headed lower from the start of the Asian session, and continued to so during the following sessions.

The sell-off on the major currencies against the Usd was driven by equity and commodity market trade, which also posted substantial declines. In the current economic climate of questionable global growth, risk aversion means lower stocks, higher bonds, and stronger Usd as Treasury notes are bought.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD had a bullish momentum yesterday, topped at 1.4989 and closed at 1.4959 after rejected to move consistently below 1.4820 key support area and even after Trichet said that he support a strong Dollar. However, on my daily chart below the bearish channel remains valid and the upper line of the bearish channel provide a good resistance. So I think the bearish correction even a bearish reversal scenario (double top) is still intact. Once again, we need violation to the bearish channel to end this bearish correction and valid break above 1.5062 to confirm the bullish scenario towards 1.5150 and 1.5300

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Daily Technical Analysis

EURUSD Outlook

The EURUSD had a significant bearish momentum yesterday, bottomed at 1.4807 but failed to stay below key support area 1.4820, closed higher at 1.4860 and traded around 1.4887 at the time I wrote this comment. As you can see in my daily chart below, it’s a fact that after peaked at double top formation around 1.5062 area the pair keep moving lower in a bearish channel indicating significant downside correction and even potential bearish reversal, especially if we have a consistent move below 1.4820 area with 1.4625 and 1.4450 as technical targets.

Right now, after failed to stay below 1.4820 yesterday, the pair bouncing to the upside with 1.4950 as potential resistance to be tested. Break above that area should trigger further bullish momentum testing the bearish channel. Bearish correction can only be canceled if the bearish channel violated to the upside, but for me the real bullish continuation scenario can only triggered by a movement above 1.5062.

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Daily Technical Analysis

EURUSD Outlook

What a surprise we had yesterday. As you can see in my h4 chart below, after violated the bearish channel, actually this pair had a nice bullish momentum before Bernanke dropped the bomb with his pessimistic comment about economy recovery by saying this words: ‘Today, financial conditions are considerably better than they were then, but significant economic challenges remain. The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible’ Euro fell after that comment, hit the bottom at 1.4879 as risk aversion came back. I didn’t expected this negative tone but another surprise happened as the Euro recovered quickly, peaked at 1.5015 and closed at 1.4967. I thought that Bernanke’s pessimistic tone will support technical bearish reversal scenario, but it didn’t. I was wrong, but for me nothing is confirmed yet for now. To read Bernanke’s full comment, follow this link below:

Regardless of mixed reaction in the market on Bernanke’s words, technically, the fact that this pair still able to stay above 1.4950/60 right now should continue the pressure on Dollar re-testing 1.5062 today. However for me, only movement above 1.5062 could be seen as bullish continuation confirmation targeting 1.5150 and 1.5300. Immediate support at 1.4920 area. Break below that area could trigger further bearish momentum re-testing key support 1.4850/20 area.

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Positive Equities, And The Dollar Holds On

Overall, after a positive Asian equity trading session, in which the dollar index was pushed to a new low, the currency market started retracing throughout the morning European trade. Interestingly, this is happening on a day that equity markets are trading deep in the green, something that does not happen very often. The recent pattern has been that equity markets trade higher, which pulls the dollar lower.

Over the last two weeks of trading the currency market saw a general lack of momentum and volume, which usually appears near the end of an uptrend, signaling that the market needs a short-term retracement of the dollar selling. The currency market is trading in an overbought condition against the dollar.

Dollar Index Technical View: TheLFB Member Charts

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Daily Technical Analysis

EURUSD Outlook

The EURUSD made indecisive movement yesterday. The pair attempted to push lower, bottomed at 1.4937 but closed higher at 1.4983. I think the pair is now consolidating after significant bullish on Monday. The bias is neutral in nearest term but bullish scenario should remains intact, at least indicated by a bullish channel (yellow) as you can see in my h4 chart below. Immediate support is seen at 1.4930 and lower line of the bullish channel. Break below that area could trigger further bearish correction testing 1.4850 and the major trendline resistance area (blue) and could be a potential threat to my bullish outlook. I still prefer and expect a bullish scenario for this week but I think we need a clear break above 1.5062 to confirm bullish scenario towards 1.5150 and 1.5300. Expected range at 1.4930 – 1.5062.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD made another downside correction on Friday. On h1 chart below we can see that the pair attempted to push lower, slipped below 1.4688 support area (38.2% Fibo retracement of 1.4479 – 1.4817) but so far further downside pressure was limited . The bias is neutral in nearest term. Price is now moving in a bearish channel indicating that the bearish correction remains intact. Only a violation to the bearish channel should continue further bullish momentum re-testing 1.4850. Immediate support at 1.4688/50 area, which is my key support level for today and I will be watching any reaction around that area before make any decision. Consistent movement below that area could be a potential threat to the bullish outlook and challenging 1.4479 area. Although the bullish scenario also remains intact, note that rejection to move above 1.4850 could be an important technical even in longer term which potentially trigger a significant bearish reversal.

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Daily Technical Analysis

EURUSD Outlook

As I had expected, after corrected lower on Wednesday, the EURUSD continued it’s bullish scenario yesterday, topped at 1.4817 and closed at 1.4792. As you might already know, I believe that we are in critical phase now with 1.4850 – 1.4950 as the key resistance level. Break above that area could lead us into a new stage of bullish phase towards 1.5300. The bias is clearly bullish now but we have to be careful and keep watching any reaction around 1.4850. On my daily chart below, we can see that we have potential double top formation around 1.4850 area. If price hit 1.4850 and reject further bullish momentum, we might have a potential bearish correction towards trendline support area (orange). Personally I prefer a bullish continuation testing 1.5000 even 1.5300 but like I said, I will be watching reactions around 1.4850 before make any decisions today. Although short position would be very uncomfortable at this phase, any rejection to move above 1.4850 should diminish my bullish view since that area is a long term key resistance level which is potentially has a bigger impact.

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