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Thread: Us dollar index

  1. #1
    fxtrends2010 is offline Junior Member
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    Default Us dollar index

    US Dollar Index: Confirms Head & Shoulders Pattern

    http://1.bp.blogspot.com/_pTgsaPn7Gj...600/091510.bmp

    (if link to chart doesnt work, GOOGLE "fxtrends 2010" to view chart)

    The US Dollar Index has broken below the neckline of a short-term Head & Shoulders pattern. As such, weakness is now anticipated to retest support that held the April & August lows, near the formation’s measured move target. Moreover, the 200-day MA has become resistance, which highlights the inability to reclaim former neckline support. This suggests that weakness could quickly resolve into a bearish thrust to 79.81/80.07 (61.8% retracement/ August low) then briefly recover ahead of a potential final exhaustive decline that would then complete the bear campaign. Meanwhile, reclaiming former neckline support at 81.90 will stabilize and potentially reopen short-term trendline resistance located near 82.70.

    STRATEGY: BUY EUR/USD at 1.2938, risking 1.2883, targeting 1.3382

  2. #2
    fxtrends2010 is offline Junior Member
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    Default GOLD: Continues to ascend to fresh all-time highs

    Gold continues to ascend to new heights. While the latest strength has accelerated and risks an exhaustive spike, the advance remains rather orderly. Since bottoming in July, the yellow metal has rallied in roughly 50 point increments then corrected 26 points before resuming the uptrend. Although, there is no clear wave structure, overbought daily RSI suggests a pullback at current levels. The measured correction would take Gold back to the 1270-1275 region before once again resuming strength. A swing low above the previous all-time high set in June would secure the chance of further upside towards the 1316-1320 area, where a cluster of Fibonacci extensions reside.

    STRATEGY: BUY GOLD at 1275, risking 1258, targeting 1316

    (for corresponding chart & daily updates.....http://fxtrends2010.blogspot.com)

  3. #3
    fxtrends2010 is offline Junior Member
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    Default EUR/USD: Corrects from overbought conditions

    http://fxtrends2010.blogspot.com/201...rt-of-day.html

    The EUR/USD has pulled back from overbought conditions, highlighting a clear 5-wave structure off the September low. It is too early to determine whether a large zig-zag correction has been completed or if this is merely the termination of the first wave of a powerful 3rd wave extension. Either way, the anticipated correction is in play and while the EUR/USD consolidates above previous resistance at 1.3157, an extension to 1.35 is favored. This key level is not only the 50% retracement of the November to June decline, but its also a Fibonacci expansion of the June to August advance. If the current pullback exceeds the normal counter-trend length of 3-4 days, then Wednesday's high could represent an intermediate top and the base of the previous 4th wave at 1.3020 could be tested. Keep in mind that the first week of October marks the 4-month anniversary of the 2010 low and could represent significant resistance in time. Finally, since short-term technical studies are not oversold at the moment, I am looking for further weakness to buy into.

    STRATEGY: BUY EUR/USD at 1.3181, risking 1.3126, targeting 1.3500

  4. #4
    fxtrends2010 is offline Junior Member
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    Default USD/JPY: Nears key support

    To view the corresponding chart......http://fxtrends2010.blogspot.com/201...y-support.html

    The US Dollar Index continues to feel the pain, but relief may soon be in sight. According to the Daily Sentiment Index, the Dollar is at an extreme with only 5% of participants bullish. The Greenback’s oversold condition is evident against its major counterparts when looking at most daily indicators and is now approaching a net $20 billion short position among large speculators (CFTC). More importantly, risk aversion looks like it may be rearing its ugly head again, as seen in recent activity in credit-default swaps, the VIX and bond price-action. While this may not bode well for most traders, the “risk-off” trade tends to benefit the DXY. And with Japan’s recent commitment to weaken the Yen, the USD/JPY is expected to remain well-bid ahead of the 83 handle. Since intervening, the trade-weighted Yen has slowly grinded higher, doubling the amount of time it took to fall from recent highs. As such, a higher low for the USD/JPY is sought near the intersection of a key Fibonacci retracement and a former trendline at 83.50. Meanwhile, the big picture downtrend remains firmly intact while trading below 85.87, the 25% retracement of the entire move off 2010 high.

    STRATEGY: BUY USD/JPY at 83.50, risking 82.70, targeting 85.15

  5. #5
    fxtrends2010 is offline Junior Member
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    Default Carry Trade Comeback?

    It was nearly 25 years ago in which the United States pleaded with the Japanese to strengthen their currency by intervening in the currency markets. The Plaza Accord was seen then as a measure to help the U.S. economy to emerge from a serious recession that began in the early 80’s and alleviate the trade deficit with Japan. It failed miserably because the trade deficit was due to structural issues rather than monetary conditions. While this marked Japan’s emergence as a real player in managing the international monetary system, the recessionary effects of the strengthened yen created an incentive for expansionary monetary policies that led to the Japanese asset price bubble of the late 80’s.

    As a result, since the mid-90's, the Bank of Japan has set interest rates at very low levels to fight deflationary affects of an ongoing multi-decade long recession. Due to Japan's export-dependent economy, in order to maintain a weaker currency, the Ministry of Finance intervened selling 35 trillion yen over a 15-month period up to March 2004. This birthed the infamous carry trade, in which investors borrowed at low interest rates in yen and used the proceeds to buy higher yielding assets. Conservative estimates valued the carry trade between $80 billion and $160 billion, but a better estimate of the size of the carry trade was the record of net short positions in yen futures on the Chicago Mercantile Exchange. This put the total size of the carry trade as high as $1 trillion before the so called “trade of the decade” began to unwind.

    All good things must come to an end and in the early days of the financial crisis, the carry trade which had flourished is less volatile times began to unravel. As risk aversion increased in 2007, market volatility prompted traders to deleverage and sell their most profitable trades. Another factor that caused the unwinding of the carry trade was the shrinking interest rate differential between Japan and other economies. With most global economies in jeopardy due to the strain of the financial crisis, central banks were forced to cut interest rates. Although, the Bank of Japan had also lowered interest rates, the shrinking differential became too small for the carry trade to compensate against increasing losses as high-yielding assets began to weaken.
    Even on the most conservative estimates, the yen's steep rally probably left carry-trading hedge funds with losses of $3.1 billion to $6.2 billion. While the trade-weighted yen remains near all-time highs, risk appetite seems to be making a comeback of sorts. In fact, this past month was the best September for equity markets in the last 70 years. The strong correlation between the S&P 500 and the USD/JPY, which began to decouple towards the end of 2009, looks to have been resolved according to a weekly correlation study (see chart above). This suggests that if equity markets continue to advance, the yen should revert to weakness.

    While there are overwhelming expectations for global interest rates to remain low, as long as market volatility remains low there is some evidence that the yen carry trade could soon make a comeback. With Japan’s recent commitment to weaken the yen, the USD/JPY is expected to remain well-bid ahead of the 83 handle. Since intervening two weeks ago, the trade-weighted yen has slowly grinded higher, doubling the amount of time it took to fall from recent highs. As such, a higher low for the USD/JPY is sought near current levels. Meanwhile, the long-term downtrend remains firmly intact while below the 85.87 level, the 25% retracement of the entire move off the 2010 high.

    STRATEGY: BUY USD/JPY at current levels, risking 82.70, targeting 85.15

  6. #6
    fxtrends2010 is offline Junior Member
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    Default The BOJ Sends Wrong Message

    (for corresponding chart & daily updates.....http://fxtrends2010.blogspot.com)

    The Bank of Japan cut interest rates overnight producing a short-lived rally for the USD/JPY. The announcement of a temporary fund to mop up Japanese government bonds and other short-term securities not only disappointed markets, but also sent bond yields lower worldwide.

    The diminishing yield differential once again caused speculators to dump the US Dollar, which has been under constant pressure stemming from the Fed’s QE 2 talk. The Greenback’s strong inverse correlation with risk appetite has provided certainty in uncertain markets, leading investors to buy equities and commodities with confidence.

    Japan is sending the wrong message. While the yen has been somewhat of an exception to the recent bout of dollar weakness, the Ministry of Finance’s intervention and the BOJ’s announcement are not viewed as a strong enough commitment. As a result, speculators have continued to buy the yen on any dip.

    The Japanese should take a page out of Hank Paulson’s playbook, when he got the approval to set up an emergency fund to save Fannie & Freddie. He assured Congress that setting up a sizeable fund was like a bazooka and as long as the market knew one had it, one wouldn’t need to take it out and use it. Paulson’s ploy worked and market nerves were calmed.

    The BOJ would also need to adopt a more powerful message in order to weaken their currency. A pledge to provide more QE than any other central bank would provide a well-needed psychological ceiling for the yen. Meanwhile, speculators will continue to nibble at the yen until the Fed hints of reversing its multi-trillion dollar portfolio. This suggests it will take a much more costly intervention until the current Japanese regime learns how to communicate properly with the market.

    From a technical perspective, the USD/JPY remains firmly entrenched within a bear market. While the DXY & USD/JPY remain highly correlated since the intervention peak, the yen has not appreciated to the same extent as other foreign currencies vs. the Greenback. While there is a possibility that a marginal test of the pre-intervention low could eventually mark a USD/JPY double bottom, only back above the 86 handle will suggest that a material low is in place.

  7. #7
    fxtrends2010 is offline Junior Member
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    Default 10/14: Chart of the day

    In this quarterly chart, the EUR/USD's previous midpoint has consistently influenced price-action. The 50% retracement of the 2008 range is 1.4186 and should play a role in the last quarter of the 2010.

    Key technical developments to keep an eye on are the USD/JPY's 4-hour bullish hammer formed earlier today and whether the Dow Jones Industrial Average and S&P 500 will close below yesterday's opening levels and mark daily bearish engulfment patterns. In the meantime, I'm focused on buying GOLD at the 1364 region, where a former swing high intersects a 38.2% retracement level.

    To view the corresponding chart & for daily updates go to http://fxtrends2010.blogspot.com

  8. #8
    fxtrends2010 is offline Junior Member
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    Default Dollar Foms Key Reversal Pattern

    Often when risk appetite flourishes such as it has recently, investors tend to sell low yielding assets such as bonds, and buy higher yielding assets such as stocks. However, since Goldman Sachs ignited the quantitative easing or “QE 2” debate in mid-September, normal market correlations have decoupled. As a result, this has left most market participants glued to movements of the US Dollar.

    The Greenback has suffered mightily due to the Federal Reserve’s intent on reviving inflation expectations. Meanwhile, since the last Tuesday’s FOMC minutes, the long-end of the curve has sold-off quite dramatically. This temporary correction in bond yields suggests that the bond market may have fully discounted QE 2.

    The Greenback continued to trade lower going into the Bernanke’s speech, despite subsequent stabilization of yield differentials. Shortly after the release of Bernanke’s text on Friday, the dollar briefly reached fresh 2010 lows. The ensuing false-break recovery of the dollar recovery suggests that the currency market may have fully priced-in QE 2 as well.

    Simply put, the dollar’s correction was long overdue. Yet, with the largest speculative net-short position in years and bullish sentiment near all-time lows, speculators continue to ignore the fundamentals. In fact, dollar bears began the week accumulating fresh short positions on the back of renewed risk appetite.

    Not only was Monday’s sell-off of the dollar short-lived, but China’s decision to raise interest rates caught many traders off-guard. While technically the DXY’s (US Dollar Index) recovery is still considered corrective (while below the 79 handle), there is sufficient evidence that the correction could continue into next week.

    The dollar’s rebound has already retraced a quarter of its losses since late August. While this is considered a typical correction within a bear market move, the follow-through move early in Tuesday’s North American session has confirmed the formation of a secondary swing pivot within the EUR/USD, AUD/USD, USD/JPY and Gold.

    A secondary swing pivot is characterized as a lower high within an uptrend or a higher low within a downtrend. Most turning points require the formation of a secondary swing to complete or consolidate the trend. While it often takes a series of swing pivots to confirm a trend reversal, the latest price-action is a promising sign for dollar bulls.

    According to Elliot wave analysis, the DXY has completed the third wave and has now entered the corrective fourth wave. The second wave was a simple three-wave correction, thus due to alternation there is a high probability that that the current correction could be complex. Meanwhile, only above the 80 threshold alters the wave count and will indicate that a more meaningful rally is in store.

    Due to the lack of counter-moves or corrective price-action within the recent move, key retracement levels now become extremely important levels to watch. Oversold dips that exhibit bullish hourly divergence near the 38.2% retracement at EUR1.3560 will likely offer support.

    STRATEGY: BUY EUR/USD at 1.3560, risking 1.3505, targeting 1.4186

    To view the corresponding chart & for daily updates go to http://fxtrends2010.blogspot.com

  9. #9
    fxtrends2010 is offline Junior Member
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    Default 10/25: Chart of the day

    EUR/USD has stalled at the 78.6% retracement of the October 15th/19th correction. This suggests the completion of wave b within the ongoing wave 4 correction. Wave c is anticipated to test the 1.3773/1.3824 region before giving way to the formation of wave d. Watch for bullish hourly diverging studies to hint of the completion of wave c. Meanwhile, the DXY (US Dollar Index) remains shielded from key long-term trendline support near the 76 handle while trading above shoulder support of a possible inverse head & shoulders pattern.

    http://fxtrends2010.blogspot.com/

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    Default Daily DXY Roundup: 11/03

    The DXY’s (US Dollar Index) rally faded after the FOMC (Federal Open Market Committee). Closing price-action confirmed follow-through from Tuesday’s bearish engulfment pattern. The latest consolidation break-down has now directed dollar bears towards key trendline support near the 76 handle. A decisive close above the 20-day MA at 77.20 is required to stabilize the current bout of selling pressure.

    The Yen was the clear loser of the day, prompting intervention rumors by the MOF (Ministry of Finance). The USD/JPY accelerated through stops after confirming a higher low above Tuesday’s high. Clearing the 20-day MA is the next obstacle and doing so would expose the key JPY82 region. Only above this key pivot suggests a more meaningful rally is in store.

    The EUR/USD continues to extend gains since breaking out of a triangular consolidation pattern. From an Elliot wave perspective, the completion of the corrective fourth wave has now triggered the terminal fifth wave. While EUR1.4186 is a significant technical level, it is too early to determine whether the fifth wave extension will be a mere throw-over.

    In the meantime, the currency markets will have to keep an eye on the S&P 500. The index is nearing a confluence of Fibonacci levels in the 1202/1203 region. A rejection at this pivot could set the stage for the DXY to complete impulsive weakness.

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