Top Three Chart Patterns for Wednesday
Mark Whistler is the founder of www.WallStreetRockStar.com and is the author of multiple books on trading. Mark’s newest book, The Swing Trader’s Bible – co-authored with CNBC/Fox News regular guest Matt McCall – will be on shelves in late summer, 2008. In addition, Mark also writes regularly for TraderDaily.com and Investopedia.com.
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Top Chart Setup #1: Euro in Breakdown Zone
Looking at the below chart of the EUR/USD, we see some interesting developments setting up. The euro attempted to break above 1.5800 on Monday evening, but failed just after German GDP and consumer sentiment came out. The event has now brought the EUR/USD back below the Fibonacci 61.8% retracement from April highs to May lows in the relevant range.
What’s more, with daily stochastics showing a potentially overbought situation, traders will want to keep an eye on the 61.8% retracement in the relative range in the 1.5750 area. Early Wednesday morning, the euro attempted a short-squeeze, though bulls failed to hold ground halfway back to 1.5800. Should the EUR/USD fail from present levels, a clear “double top” would be confirmed on both the daily and weekly charts. A breach of ascending support at 1.5500 could have euro bulls scrambling for the hills, while bears eye the 1.5300 area.
Top Chart Setup #2: Kiwi Bulls Bomb at Resistance
Taking a look at the New Zealand dollar against the greenback, we see that the “kiwi” (trader slang for the New Zealand dollar) has run higher over the past month, based on interest rate expectations. Now though, the NZD/USD is running into lateral and descending resistance, while also just about to tag the top Bollinger Band. What’s more, daily stochastics are entering the overbought region, which could be helping prompt a reversal.
At present, the larger three-month trend remains down, thus those seeking a breakout while the kiwi continues to trade below .7900 could prove to be slightly presumptuous at present levels. During early morning trading Wednesday, the NZD/USD fell sharply out of bed, but held ground just below the 0.7850 area. Looking ahead, one, or two more daily closes below previous sessions could indicate kiwi bulls have decided to thrown in the towel, at least in the short term.
Top Chart Setup #3: The Mighty Peso
If that headline didn’t get you, I don’t know what will.
Anyway, it’s true, the peso has been gaining ground on the U.S. dollar. Looking at the below weekly chart, we see that the greenback is trading at Forex-traded lows against the peso, as noted since electronic-traded Forex for the pair commenced in 2005. At present, while the weekly stochastics are in oversold territory, as we know in the historical relationship with the euro, weekly stochastics can travel in overbought, or oversold territory for sometime. At the end of the day, a breach of the 10.3300 whole number would indicate further downside to come. Given the pair have slightly edged off the lower Bollinger Band, a dead cat bounce could also be in the cards from here. Overall, though, the U.S. dollar is showing significant weakness against its southern neighbor.
