Behind USD's trade

Written by Research | 11 January 2010

Tight Squeeze!

With ever conflicting report from the US manufacturing figures and Non-farm Payrolls and a few reports in between major economic numbers will defintely throw off every trader from forex to the stock market as indicated in the previous market actions from the start of the first trading weeks of this year.

It's not being a bias analyst or a contrarian trader but the market's direction is not a matter of price calls becasue it is already a fact that the supports and resistance of each and every currency is well defined from their previous performances on the charts. One of the best indicators and technical tools to use has always been the Fibonacci theory on retracements and extensions not to mention the Elliot Wave. As long as a trader would appply its pre-dominat use of these technical tools complimented with a percentage trading, probabilities are that investors positions specially in the foreign exchange market could be greater than the average Joe!

The USDX coupled with a few European currencies such as the EUR/USD and the EUR/GBP cross has been in a whip-swing for the past week's volatile movement due to the market reactions to fundamental reports. Key basis for the USDX is the opening price range of 77.90-78.00 and the EUR/USD 1.4350 support as of this writing. As both currencies are in a corrective mode such as the USDX lowering price movement and the Euro's upward influence towards the GBP/USD at the 1.6090. However, there is not much volumes as major particpants are still re-adjusting their fresh new positions at the beginning of the year.

The candlestick configuration on these two particluar pairs would already indicate that a bargain hunting for prices are in the market as many traders haggle for prices on both sides of the trade causing a consolidation not becasue of uncertainty where the market will go but just the opposite. Everyone is entitled to their own analysis but the obvious would not be shown nor the true sentiments of the market.

Although, the USD's movement will be toward to the north of the chart but in a ladder-like formation as it had done through the past year. the build-up on volumes may still be slow but our contentions are still the same. Watching the volumes and open interest on the side of the fiancial futures may be of real help. The correlationships of spot and futures should really be understood and learned. As thiese two are also one of the best instrumental tools for analysis that gives a higher probabilty of correct trend indicators.

As for the USD/JPY and the USD/CHF the directional movment higher is our sentiments. Although, expect correctives lower on both pairs, specially the USD/CHF as it is technically influenced with a heavy selling divergence on a day to day basis. the spill over contrary movment may well be seen on the USD/JPY as a contrary hedge against a stronger Swiss Franc. The GBP/USD hold the same scenario heading its corrective movements higher due to the negative reports on the US Dollar and economic driven news report.

Specific target objectives will become more visible as the weeks will come. Although, whenever the time comes we will surely provide our viewrs a good insight as to which of the currency pairs are best to look at.