The eventual breakout of this pattern is key
The U.S. Dollar has found itself up near the resistance of the triangle pattern that it has been trading within for about two months now. Price tested the support of the uptrend line and now prices have bounced and are testing the resistance of the downtrend line. Until prices find there way out of this consolidation, either up through resistance or down through support, this back and forth will continue.
Now I do not use multiple time frame confirmation (the top down approach where longer timeframes are used for guidance with shorter timeframes) so I will look at the consolidation on this morning 30 minute chart irrespective to what’s developing on the daily. However, more often than not there will be overlap on the levels I am watching. Take a look at these two charts of the Dollar:
Even though one is a short term intraday chart and the other is the longest timeframe I will watch, both share a common breakout level, which is to say they share a similar downtrend line. Great! This now let’s me know that if we see a break above 85.71-85.75 we will probably rally to test the resistance at the major psychological number of 86.00. If the downtrend line holds as resistance we can expect near term support at 85.50. The rally in the Dollar was contributed to the better than expected economic data that was released yesterday.
I’m going to level with you: I could care less what the economic data is or was — either way price will reflect it. I knew based on price and chart patterns that the Dollar was already rallying before the news and now I know that we’re at resistance. That’s not to say that I don’t respect what fundamentals can do in brief periods to price, but I don’t use it to set up trades. So if you’re a fundamental trader or are swayed by news, you may or may not like what I’m going to say but here it is anyways: News is not a level playing field. Price is price but news is discounted, manipulated, and is not necessarily available in it’s entirety to the public as a whole at the same time and then after all that you still need a timing and price element to enter and manage a trade. I hear talk of a Dollar rebound and strength but let’s you and I step back a take a look at the chart. Sure it’s off it’s lows, but we’re consolidating and the an eventual break from this consolidation will tell the story. Until then…
If the U.S. Dollar sells off at resistance, there some short term timeframes that are ready to go —
again that’s if the Dollar sells off…
The 30 minute chart of the EUR/USD is trading just below resistance and just looks to be waiting for the Dollar to sell of so it can run higher up through a cluster of downtrend lines.
And by the way, I am still keeping an eye on the EUR/JPY. I’m still quite aware that this is the first major consolidation is a strong uptrend and the market could continue higher. But trading is all about acknowledging and assuming risk. The EUR/JPY is still within the triangle’s support and resistance and I will be keeping a close eye on how prices react near 150.00.
Raghee Horner is an experienced trader with more than 15 years’ experience in the markets. Ms. Horner has taught her brand of technical analysis and charting strategies to students all over the world. She is also the author of the bestselling “Forex Trading for Maximum Profit” and “Thirty Days of Forex Trading”. Emphasizing charting and price action and continues to teach the tools and strategies that encourage self-directed traders to pursue the study of chart analysis and market psychology. She is a much sought after public speaker who has conducted seminars in the US, Canada, the Caribbean, and Asia. For more information on Raghee’s analysis and trading email cs@raghee.com or visit www.raghee.com.