Pivotal Price Reversal

Written by JS T Alexander | 09 June 2010

Technical Perspective 2

The market's reactions after reaching their inital extensions on extreme US dollar strength at the index for spot and June contract months before expiration has reached its objective at the 88.55 and 88.78 respectively.

This prices has been confirmed on the way higher with the American opening sessions for the USD daily charts have shown a probable exhaustion gap that retrieves its prices lower as of this writing. That reaction has prompted the rest of the European currencies to make its corrective movement as a relief market has investors risk for appetite have slightly increased. Cautious as traders maybe, the pace of the recovery for the EURUSD at the 1.2035 and the GBPUSD at the 1.4563 as of this writing have made some traders take long positions as a matter of risk calculating that the lower price of both pairs have diminshed and is now quite stable. Although, our contentions of this scenario is too early to say; but the pivotal point of taking positions with risk factored in may well be worth taking for investors and other major players to take. The inital move after the lows on the EURUSD and the GBPUSD have made it a pivotal price reaction moving higher. Some reluctancy among others are still in a wait and see attitude.

However, with the USDX June contract month about to expire this month would trigger some repositioning for the USDX to move lower which is in fact quite appropriate to do. Remember, there is no such thing as a straight up or down in any market as other factors are considered. So short-lived as they may be for the time being the correlative pair of the cross rate of the EURGBP has been more favorable to trade as the directional movement is stil intact with minor trending higher could be considered a correction in line with the EURUSD movement as this time.

As for the USDJPY, a considerable formation is actually in the making. Although, the significance of this formation tends to be a long consolidation with variable trading ranges for prices to move in between the 93.00 and 89.00 price range. A narrowing band shall only prevail whenever the a particular breakout of the formation would hold true within the next few weeks of June as the end of the quarter would also be fast approaching. And the underlying stance of the new Japanese Prime Minister more favoraable of a weaker yen from his previous counterpart. However, this is more on the political and fundamental stand point as we may also consider on top of our technical outlook.

The total opposite for the USDCHF is in fact more in line with the USDX contrary with the AUDUSD which may also provide a mirror image of both charts in a technical perspective. Being able to use both pairs as an arbitrary hedge strategy may prove to be favorable to minimize risk exposure. Althogh, timing the pairs on a variable hourly chart on entry and exits may not be as easy as some would think. However, the Aussie and the Kiwi may still have room to move lower moving forward for the week.

These price movements is what we call a privotal price reversal but not necessarily a trend reversal. that is also the reason that we carefully watch and study the behavioral market movements and market pyschology behind these prices. this way we would be able to analyze the next best probable route to take in making the next trade. But the cross rates are still favorable to consider more than the straight pairs where the risk factors may seem to be greater than the cross rates.