Market Analysis1.26

Written by JS T Alexander | 26 January 2012

UPDATE: US DOLLAR INDEX As of 1.26

The FOMC dovish report has placed the USD under similar pressure that resulted in moving back lower below the 80.00 basis levels. Sentiments and commitment by the Fed members in keeping rates at its low levels for an extended period of time has been quite definitive.

Investor's concern on inflationary pressures are seen even on the movement of the yellow metal as it moves higher for the week at the levels of USD 1728.00 per troy oz. That resulted to the USDX registering a 79.10 slightly above the more important 78.85 bp technical support.

Moreover, the technical perspective for the USDX have been established as a major corrective bearish move within a major uptrend. Recognizing the initial topping out formation in line with two of the major currency pairs in addition with the correlated cross rates, have signified that such a significant corrective move would extend further than most would actually expect. The USDX candlestick chart in Fig.1 shows that the continuation of a decline with daily pullbacks would be seen moving forward as the Tug of war between major players are in play. These movements were seen accordingly for the past couple of days with the Euro, Japanese Yen and the EURGBP cross in particular.

USDX Fig.1

Applying the three(3) methods of the FIBONACCI would explain further the analysis in more details. Where the Price reversal of the USDX after reaching 81.78 high finished with cross hair bar for the week ending the 9th of January. Followed by a bearish cloud formation and an opening gap higher from the closing price on January 20th. Thus penetrating a trend line support line thereafter and currently at the 79.23 nearing the 38.2% Fib as of this writing.

The FIB time zone interval have been applied from the week of Aug 29, 2011 as a reference starting point which extends to the week ending as of January 13 cross hair bar that shows a probable correction set-up in the making. Thus making the succeeding engulfing bearish bar thereafter as the next price reversal signal.If you apply the same technical approach on the historical price chart from the week of April 25, 2011; the same cyclical time pattern can be derived. A further move lower is expected before a serious consideration of a resumption could be made for the next upturn for the USD. Although, one thing would be certain for now and that is the USDX would have to find a higher bottom for the next leg higher supported by renewed interest and higher volumes alongside momentum.

In totality, the basin formation of the weekly USDX chart is complete from the January 03, 2011 starting point. This is as technical as we have presented the USDX and would remain until such time it shows otherwise with fundamental factors to consider especially both in the US and the Euro zone. A similar presentation and analysis is in the works for the EURGBP for our next market view report update.   

EUR-GBP-AUD- CHFJPY CROSS : Market Analysis 1.23

The highlights would weigh more on investors risk appetite and market sentiments on the US Dollar that would likewise be based on the coming 4th qtr. GDP report or even a mere hint of the Federal Reserve QE3 may really be a game changer for the Forex market.

The recent relief rally of the EURUSD last week from an impending debt crisis has dissipated for now until such time a more definitive answer for a solution is made. And this may find some pressure for the USD to continue its trend higher for the time being as evidence from its corrective downtrend. The higher opening price has provided room for the correction to continue in the European session.

However, after registering an 81.78bp high, the USDX has drifted lower to 80.00 and is confined to its lower support at 80.31 as of this writing. The critical price to watch for would be the 78.85-80.05 trading range and the shift in market sentiments are the key considerations moving forward.

EURUSD DAILY

Meanwhile, the Euro has enjoyed for now the decline of the USD in lieu of the dissiminating reports from the Euro zone. It is currently at the 1.2931 in the European opening showing signs of relief alongside the EURGBP cross rate still above its pivotal price at 0.8329 that a 2nd attempt is being set-up. Do expect a wider swing at the start of the trading week with some daily pullbacks from the daily highs.

The earlier signs of this corrective move higher were ever present even before when the opening price gap occurred for the second time on January 15, 2012. Again, two considerations could be interpreted as an exhaustion gap or a second attempt for a run away which obviously didn't occur the following couple of trading days.

Please take note that the price behavior would never show when exactly such a price reversal would occur but can provide the insights only for those who has the due diligence of carefully studying the market from a series of events taking place and not merely on a per set-up basis. That is also why MegaTrade101 form of market analysis presentation is based on a continuing market condition as they occur quite different from others.