More USD Strength Coming?
Sunday, October 26, 2008 0:25
For now it should have been known to you that the US Dollar performed its ultimate 2-day super jerk-off ever against its major counterpart (the Swiss, Euro, Pound, Au Dollar, NZ Dollar, Looney, Mickey Mouse Money etc). So where do we go from here? If there will be more selling and liquidation then we should see the USD gain more ground although a possibility of retracement is still in the offing.
The area that i was closely watching is the 1.30/31 levels as there is a strong confluence of EMA, trendline and horizontal support at these levels. The selling was so strong that the price cuts through it like a hot knife through butter. After a brief period of consolidation ( 1.2727/32 providing a very good support,100% fib expansion ), we saw another run where eventually it bounced off the 1.25 area. It did another retest of the 1.2727/32 support which was rejected. It is now stuck somewhere between 1.25 to 1.2727/34 area.
Based on the chart above, below will be my strategy for the coming week for this pair:
- (Bearish) Wait for a retest and failure of the 1.2727/34 area and go short in case the (red) trendline coincides near that level. Note that 1.2727/34 area is also the 100% FIB extension of the A-B-C move from the 1.60ish top.
- (Bullish) Go long for a break of that resistance, targeting 1.30(38.2 fib retrace) and 1.3140( 50 fib retrace- hitting the green trendline)
- (Bearish) A break of 1.25 – trend trade, targeting 1.1550/1.16 – 161.8% FIB expansion of the A-B-C move from the 1.60ish top.
- (A Bernanke and Greenspan speech on TV) – stay away from trading and watch some movies…
That’s all for now. I was planning to do some additional pairs (e.g. GBP/USD and USD/Mickey Mouse Money) but it would make this entry long and boooring!.
I’m planning to write about my trading strategy in the next entry so as others may have an idea of how I trade the currency market. Till then, HAPPY PIP HUNTING!.
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