Currency Pair Overview: Slow U.S. Forex Session

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Currency Pair Overview:

Slow U.S. Forex Session

The slow trading session observed in the equity arena had a great influence in the foreign exchange market, practically holding it from moving anywhere during the U.S. session. Despite the flat U.S. hours, the European sessions saw a number of important moves.

Over the last year of trading, most of he trading action was concentrated during the U.S. session, however, the market is currently showing signs that it wants to return to its pre-credit crisis behavior, when the important moves were developed during the European and early U.S. sessions. Ahead, the macroeconomic calendar is loaded, something that might be reflected in the currency market.

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 have reached new lows over the past few weeks around the 74.00 zone where the trend has quickly reversed. 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, which is now signaling that a bull market is in process.

If the wave count is correct and if the dollar bears are done then the market should break through the 76.82 resistance area, which will confirm a current turning point.  In this case, a Long three wave move towards the 79.00 area is expected.

The euro (EUR\/USD 1.4535) spent the second half of the U.S. session trading near TheLFB S3 (1.4530), after it plunged 120 pips earlier in the day. In recent trading, the euro broke below a trend-line that had been holding the market since July 09. Usually, such breakouts are seen as very bearish, and might indicate that the current downtrend is here to stay. To the downside, the next important level is in the 1.4400 area.

Euro Technical View: TheLFB Member Charts  
4 Hour Chart Flows: Short Price Points: 1.4500, and 1.5140 Looking for: Bottom of a Short wave I)

Momentum: The euro trend went Short on 3rd December, and has meandered lower since then. (The pair looks lost).

Elliott Wave: EUR\/USD dropped through the 1.4585 support in reaction to European equity markets failing to hold the initial gap higher, which means that a Short, black wave I) is not yet completed. We are looking for a move down towards the 200% Fibonacci extension level of the red wave II distance, around the 1.4500 zone, where an impulsive decline (five wave move) may finish off this move.

Our expectations of a near-term euro recovery remains the same, as we are still expecting a Long corrective a-b-c pull-back in wave II) before the larger down-trend continues. A Long pull-back will be confirmed once prices break through the upper resistance line of a trading channel at 1.4650. 

The RSI is slowly moving higher and signaling a near-term euro recovery, after a bullish divergence from the over-sold zone.

The pound (GBP\/USD 1.6265) continued to trade within a descending triangle formation on the 4-hour charts, with the support line in the 1.6200 area, while the resistance area in the 1.6300. Usually, descending triangles end up breaking to the downside, which is inline with the bearish sentiment seen recently in the market.

Aussie (AUD\/USD 0.9060) is currently trading in the 0.9150 area, near a trend-line that has held the market since late November. A bounce higher from this area would be very positive for the pair, and has the potential to send it much higher. However, the aussie fought against the windmills in Tuesday trade, since the entire market was buying dollars. 

The cad (USD\/CAD 1.0615) is trading trapped between two crucial areas. On one side, the cad the is flanked by the 1.0550 area, where the 20 and the 50-day moving averages meet, while on the other, the cad is trading just below the 1.0650 area, where it meets a resistance trendline that has been holding the market since September. The cad’s main goal on the short-term is to break free from either one of these two areas.

The swissy (USD\/CHF 1.0405) rose with relative ease up to the 1.0400 area, but from here, the pair spent the entire U.S. session struggling to move higher. The swissy has failed to pull any sustainable moves due to its light trading momentum. To the upside, the next target is the 1.0530 area.

The yen  (USD\/JPY 89.60) started heading higher during the Asian session, and extended this uptrend until the middle of the U.S. session. In this time, the yen has gained 130 pips, but it retraced a little  after bouncing from the 90.00 area, where it meet a resistance trend-line that has been holding the market since April 09. A break higher would turn the pair’s outlook to long.

TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index.