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Currency Pair Overview:
Macro Data Sparks Forex Volatility
The dollar index market had been very active throughout the current session, with the major pairs absorbing the latest regional macroeconomic data releases. This has helped the market to develop volatility as investors moved to USD/JPY and the AUD/JPY on the dips. The euro and the swissy were the weakest pairs overnight, dragged lower by the wide-market belief that the euro-area economy will recover slower than other regions.
Dollar Index Technical View: TheLFB Member Charts
Daily chart trend: Mixed. Main price points: 74.19, and 76.82. Looking for: A Long wave I/ A
Prices on the dollar index reached new lows around the 74.00 zone where the trend quickly reversed at the end of 2009. Traders can look for a move higher in the mid-term away from an ending diagonal pattern shown in wave V) position as the prices have broken through the upper resistance line of an ending diagonal pattern.
If the wave count is correct then the market should trade higher over the coming weeks and months, with a three wave move (red I/A-II/B-III/C ) towards the 81 region.
The euro (EUR/USD 1.4295) looked very weak even from the early Tuesday session, and majority of selling came after a poor ZEW business survey report. The pair is trading in the 1.4300 area, just above the 200-day moving average. In the near-term, the euro could bounce from this area, in a technical near-term play.
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The pound (GBP/USD 1.6370) showed a lot of momentum during the first part of the day, but the broad dollar strength eventually pulled the pair back to its open price. In intra-day moves the pound gained as much as 120 pips as traders took into account the ultra-inflationary CPI report. Favor a straddle.
The aussie (AUD/USD 0.9235) tested the 0.9180 area in intra-day trade, hitting a support region that was set over the last few trading sessions. However, a wave of long orders came around this area, which helped the aussie recover most of the selling seen earlier in the day. Favor long positions, targeting the 0.9325 area.
The cad (USD/CAD 1.0320) continued to trade on thin momentum in Tuesday trade, with a period of consolidation that was triggered by today’s BoC interest rate meeting. As expected, the BoC warnings on C$ strength were reiterated today, but the market decided to ignore them. Favor a straddle.
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Cad Technical View: TheLFB Member Charts
Daily chart trend: Short. Main price points: 1.0205 Looking for: A Short, wave 5)
The daily wave count was re-worked into un-finished bear market towards the 1.0000 zone that market may reach over the coming days and weeks. We came out with a Short, blue wave 5) in progress after a market has finished a complex, triangle pattern in blue wave 4).
Wave 5) is the final wave of an impulse structure and as such, we will look for a Long reversal once wave 5) finds the lows somewhere below the 1.0205 2009 low.
The swissy (USD/CHF 1.0315) had an important day of trading, in which it managed to break above both the 20 and above the 100-day moving averages. This is an important moment for the swissy, which might put USD/CHF on course for a bullish trend. Favor the long side.
The yen (USD/JPY 91.05) had an attempt to break below the 100-day moving average throughout the day, but traders rushed to buy the USD/JPY around these low values. In its uptrend, the yen broke above the 90.80 area, where the pair met a resistance trend-line that has held the market for the last two weeks.