A Fall in the Making for the NZD/USD and GBP/USD?

Only the NZD/USD and the GBP/USD get the honors of making new lows in ’09 in comparison to the yearly lows of ’08 against the greenback.  This is not an impressive club to be a part of and for now, we are suggesting trading the pair with the most inherent weakness against the dollar, which being these two pairs.  Looking at the daily chart below, we can see how this pair has made a low this year, roughly 10 cents lower than previous years and we are just getting out of January.

GU Daily no fib Chart

The Ichimoku cloud formation is not pretty by any means and does not signify too much a week or two from now except that price could oscillate a bit if it does not find a good direction soon.  However, we feel the direction in the short/medium term (days-few weeks) is to the downside, as it is posting a miserable CCI which cannot make any real gains into the positive territory while momentum is also getting rejected at the zero line and cannot find any significant upward tread as well.  Both of these do not fare well from an oscillator/momentum standpoint.

To make things a little more dreadful, using the charts below, we can see how the pair on Dec. 17th, 2008 started a new swing downward that started at 1.5721 and ended at 1.4387 (roughly 1350 pips later) and bounced to hit the cloud and barely eck past the 61.8fib retracement. Like clockwork it went to the Fib projection at 1.618% at 1.3539 before bouncing a bit.

GU Daily first fib Chart

That bounce indicated by the third chart below only managed to muster up a retracement just beyond the 50% fib at 1.4500 before getting slammed down 450 pips.

GU Daily second fib Chart

The current bounce off of 1.4050 has managed to impress on a short term intraday basis bouncing 220 pips posting 6 consecutive hourly blue candles.  This smaller retracement suggests the pair is likely to continue another swing to the downside and if the fib projection has anything to say about it, it shall land somewhere near 1.2569-1.2600 area giving us an opportunity to snag over 1600 pips from the current position.  We do not suggest selling at the present levels and rather feel it would be better to catch a rally up to 1.4500 again and look for the drop from there; or wait till a close below 1.4000 happens and target 1.3500 for a short target and 1.2600 are for a longer target.

Chris Capre is the Founder of Second Skies LLC which specializes in Trading Systems, Private Mentoring and Advisory services. He has worked for one of the largest retail brokers in the FX market (FXCM) and is now the Fund Manager for White Knight Investments (www.whiteknightfxi.com/index.html). For more information about his services or his company, visit www.2ndskies.com.