This Is Becoming A Familiar Pattern

  • February 11, 2005
  • Dave Floyd

After a wild ride yesterday in the FX markets, the dollar was simply not able
to hold onto its’ recent gains on the heels of a better than expected trade
balance number.  It is becoming a familiar pattern, large directional moves
(expansion bar(s)) followed by periods of consolidation.  Many times the
moves are counter to the prevailing trend, making it all the more challenging.

Regardless, we have managed to navigate with a fair degree of success,
closing out a short in NZD/USD, establishing a new long in AUD/USD, and
monitoring a short in USD/CHF.  Below is a technical overview of several
currency pairs, using the daily chart as a point of reference.

USD/CHF, nice break lower today right through 200-day ema at 1.2156 with 1.2034, 1.2000 & 1.1975 in its’ sights. Directional indicators are bearish. 

GBP/USD, overall trend is still down, although a key fib level at 1.8650 was cleared. Daily stochastic is pointing higher, but other directional indicators remain neutral to bearish. Big resistance at 1.8784, 1.8809 and 1.8863. Better trades elsewhere unless you are short-term oriented. 

EUR/USD, while today’s move will be viewed by short-term traders as a key technical development, it is still hard to get too excited about the technical picture when viewed from a daily perspective. The trend is still down, although the stochastic has turned higher, but with 1.2945 the “prove it level”, we would focus our attention elsewhere. 

NZD/USD, despite a better than expected unemployment number which now bestows upon New Zealand the lowest unemployment in the OECD, upside levels are remaining elusive. Directional indicators are bullish, but trend-line resistance at .7170 will be a key level to overcome. Meanwhile, .7100, the Feb 17, 2004 high is also creating a tug of war. We remain bullish, but need to see price action respond more favorable to the macro news.

AUD/USD, a solid break higher on Thursday as .7770 was breached as was .7813, two key resistance levels. Directional indicators remain bullish with .7845 and possible .7947 the near-term targets

The only theme that we are looking to latch onto is the situation in North
Korea, if rhetoric continues to mount, look for Swiss Franc (CHF) to be a
beneficiary.

As always, feel free to send me your comments and questions.

Dave