USD follow through

Written by Research | 30 January 2010

USD Price and Trend Reversal from Dec. 22, 2009

As reported, the US economy grew at its fastest pace in more than six years in the fourth quarter of 2009, as businesses and investors have managed their aggressive position reduction in stocks and stepped up spending in the belief that the US financial crisis is tamed with the positive reports that recently came out.

The reported growth resuscinated to a sustainable recovery in a pivotal time before government stimulus plans slows down and this was good news for the Obama administration despite political difficulties in the administration and a much divided senatorial seats. From healthcare issues and government stricter banking regulations. As the US administrations theme and thrust in leverage trading reforms for banks to avoid such a financial repeat of the crisis that rippled through out the major trading partners of the United States not to mention worldwide ill-effects.

As the US " Gross Domestic Product " expanded at a 5.7 percent annual rate, the Commerce Department statement in its first quarter estimate report. It was a strong end for the year in which the economy slowed by 2.4 percent -- the worst performance comparing it since 1946.

This was the much needed fuel on a fundamental stand point to re-confirm our speculative outlook since we posted our market analysis " USD Price and Trend Reversal " dated last December 22, 2009 in this website, blogspot and our Forex articles on Hubpages dated last december as well. Our forex trading sentiment gauge continues to forecast further US Dollar gains.

However, some other investors who happens to think otherwise by persistently selling into USD rallies and giving contrarian signal to go long. Making them more perplexed with their situation as a result. But please take a serious consideration that we emphasized that the USDX directional movement to go higher would be in a ladder-like formation as indicated in the USDX chart below. the probable cyclical behavior may change only in between the end of the 1st qrt. and the opening weeks of the 2nd quarter specifically the month of April 2010.

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From a registered low of 74.31 last December 2009 and currently working at 79.50 on the closing of January 29, 2010  was the first successful attempt from the initial resistance of 78.80 which is now the tentative support. We should see a whip-lash that would occur from hereunto. The above report was indeed the trigger mechanism that was needed to support the technical outlook that showed some price signals from the price page indicator and the FX Analytics. This price signal analysis are based without refering to much of the technical charts as it provides us the basic market psychology in determining the price behavior, directional trend by trend following strategy. It is more of a combined fundamental and technical analysis that led to the conclusion since December; that the 1st quarter of the year will be where the USD would make its higher directional  movement as supported with the recent news report.

Direct Effect on Major Pairs:

As for the Aussie Dollar, there was already a technical warning that signaled a probable price reversal. There will always be significant price signals mostly on a technical basis before an actual trend reversal could happen. And the Aussie and Kiwi are just two of the major pairs that showed this price behavior and a price reversal set-up was in the making since the past few weeks. As it was trailing its prices higher to 0.9328 dated the 14th of January and comparing it to 0.9332 high movement last Nov 2009. Of course, its easy to say after the fact; however, a significant speculative trade was implemented when it broke the previous support. As indicated in the daily chart of the AUD/USD below and the New Zealand Dollar respectedly including the CHF and the JPY.

A subsequent " Direct Conversion " starategy to sell the AUD/USD from our account conversion holdings after this move on the closest possible price levels. And it has enjoyed the higher rate differential between interest on both sides of the coin. The fluctuation on the specualtive trade have significantly saved and earned the price differential between price changes as of this writing.

This was further supported with the fundamental report from the GDP that was real fuel for the USDX to penetrate its resistance price level of 78.80 and currently closed at 79.50 dated January 29, 2010. Such trade can be only authenticated with an order that was placed on the charts that reflected, that such positions are still in place until such time a signal would show otherwise.

Percentage trading has always been the best form of speculative trading with a combination of hedging strategies utilizing the cross rates. However, there was only one major cross-rate that was used to spread hedge and arbitrage the trades with which happens to be the EUR/GBP. When it also broke its major support at the 0.8850 price level that was registered last the week of the 24th Dec. before Christmas 2009. However, that trade was settled prior to the end of the week as presented in our 2nd video. 

Meanwhile, the correlation between the USD/CHF and the USD/JPY going contrary movements with each other was no surprise at all. As we also presented from our previous article on " USD/CHF contrary to USD/JPY the previous day. Whenever the SNB will try to play a significant role in managing the pace of the strength or weakness of the Swiss Francs vs. the USD whenever possible and the Japanese Yen. Except the Bank of Japan's policy sicne 2004 is not to make any forex interventions, but simply to try to talk it lower or higher at times. Now the USD/JPY is trailing higher closing at the 90.25 from alow price of 89.77

Pls. visit our Video in Youtube URL : http://www.youtube.com/watch?v=NFPktYOyJtE

These strategies has worked more often than not; as long as due diligence, proper research and studies are made. But the choices made were pre-calulated rather than speculative. So spread trading and proper allocation of funds should always be excercised as a precautionary measure while trading the Foreign Exchange Market. It does not happen all the time; as such there are " NO " guarantees in trading the Forex Market that it will have the same valid results as others. Always consider the risk and tolerance levels when you do decide to trade this volatile market. Please excersice sound financial management decisions.