09/29 - Has the Pound found a bottom?

The British Pound rebounded on Tuesday after a suprise gain in the CBI survey. The UK currency was dragged down by the GBP/JPY on Monday, as the Yen initially surged on the back of Japan's Finance Minister's comments regarding currency intervention. The comments were eventually toned down and the Yen eased off its highs, allowing the Pound to rebound vs the Yen, as well as the Euro & Dollar. The GBP/USD, which found support near a key Fibonacci level(38.2% retracement of the March low to the 2009 high) was buoyed by a severly oversold daily RSI. The GBP/JPY also held up at key retracement (50% of the entire 2009 recovery). And after marking a fresh 24-year low on Tuesday, the beleagured GBP/AUD broke out of a bullish falling wedge to finish up 130 pips for the day. While the oversold nature of the Pound merits a temporary recovery, a retest of the recent lows may be required to build a formidable accumulation pattern. If a weak (slow-moving) counter-rally pauses at the 38.2, 50, 61.8 or 78.6% retracement level (from this week's recovery high to the swing low), a possible higher low could be in the cards. In the event of a marginal breach of this week's low, a possible double bottom pattern could be in store and the GBP should be accumulated. If, however, the current recovery begins to stall and is followed by an aggressive drive towards the low, caution is advised and suggests a broader correction is in place.

09/28 - Key moving averages to watch

The US Dollar Index & EUR/USD are trading between their 10 & 20-day moving average's. Look for new lows in the Greenback if the 10-day MA fails to support. If the EUR/USD breaks below it's 20-day MA, then look for a retest of the key 50-day MA. Meanwhile, commodities are not participating in the overall pick-up in risk appetite today and could be a hint that a broader correction is required before resuming strength.

The long USD/JPY position was stopped out overnight by comments made by the new Japanese Fin Min, who later realized his mistake and attempted to tone down his previous remarks.

09/25 - CHART OF THE WEEK

09/24 - SHORT EUR/USD POSITION ADJUSTED

09/23 - EUR/USD & USD/CHF help reverse the risk trade

The US Dollar Index managed to claw back despite making a fresh 52-week low. The false-break of the September 2008 low (75.89) triggered a reversal that could possibly mark a short-term double bottom base. A sustainable rebound above the 77 handle would confirm the accumulation pattern and refocus the 78 region, where a previous Fibonacci retracement lies (61.8% of 70.70-89.62). The EUR/USD & USD/CHF made an intraday double top & bottom (respectively) just after the FOMC announcement. This helped to complete the reversal in the so-called risk trade that was initiated by the turn-around in Treasury yields & Crude oil. Moreover, 4-hourly bearish MACD divergence has allowed the EUR/USD to stall near a 50% extension target at 1.4830. While, the overall outlook for risk appetite continues to be optimistic, Wednesday's price action suggests that the trend may be temporarily exhausted. This would be a positive development for the Greenback, which is already overwhelming net-short by large speculators (according to recent CFTC IMM data). As a result, the EUR/USD could quickly retest 1.4618 again (Fibonacci retracement). Meanwhile, reclaiming 1.4830/45 will immediately expose 1.4867 (September 2008 high).

09/22 - EUR/USD rebounds off key Fibonacci pivot

The EUR/USD reached a fresh 52-week high after rebounding Monday off a key Fibonacci retracement at 1.4618 (61.8% of the 2008 high to the 2009 low). The US Dollar Index, which failed to clear the 10-day MA has fallen back to the September 2008 pivot located near the 76 handle. While daily studies remain at oversold levels, momentum is clearly against the Greenback. A close below 75.89 (September 2008 swing low) immediately exposes 74.75, where a Fibonacci retracement (78.6% of 70.70 - 89.62) and weekly pivot (Q4 2007/Q1 2008 low) reside. Meanwhile, the EUR/USD's bullish structure remains firmly intact while above the upward sloping 50-day MA and will attempt to clear 1.4867 (September 2008 swing high) on it's way towards the 1.50 region.

09/16 - EUR/USD probes December swing high

The EUR/USD has extended strength through the key (61.8%) Fibonacci retracement near 1.46 to probe the December swing high at 1.4722. This pivot is also a 1.236% extension of the 50% & 61.8% retracement levels of the 2008 high-2009 low range. Daily RSI is at severly overbought levels and is above 77 (9-period) for only the fifth time in two years. Meanwhile, the DXY (US Dollar Index) is now 7.5% below its 200-day moving average, the most since carving out a bottom 17 months ago. A sustainable move above 1.4722 will next expose the September swing high at 1.4867. Beyond this pivot, however, there lacks any substantial resistance until the 1.53 region, indicating the potential for a fast market or exhaustive-type move. Although, the EUR/USD's bullish structure remains intact (while above the upward sloping 50-day MA), a pullback is anticipated back towards the key Fibonacci retracement at 1.4618.

09/09 - EUR/USD tests key Fibonacci retracement

The US Dollar dropped to fresh 11-month lows as Gold crossed above the key psychological 1000 threshold on Tuesday. The DXY lost key trendline support as the EUR/USD broke above trendline resistance and the formerly resistant June swing pivot high at 1.4338. The subsequent dollar weakness has led to a test of a key Fibonacci retracement near 1.46 (61.8% of the 2008 highs to the 2009 lows). This key pivot should provide decent resistance as the other key retracement levels (38.2% & 50%) were previously respected by the market. Moreover, the DXY remains comfortably within a large falling wedge which tend to be bullish and while Gold continues to struggle with the 1000 level, the dollar should be able to withstand the current bout of weakness.

09/03 - DXY remains supported by key trendline

The US Dollar Index probed out of a 6-month downward sloping trendline, but failed to follow-through by rejecting at the stubborn 35-day exponential moving average. Ensuing weakness was contained, however, by corrective trendline support originating from the early August lows. Meanwhile, the EUR/USD, which managed to pare overnight losses, rejected once again at the June swing pivot at 1.4338. If these two pivots, DXY trendline support (now at 78.00) & EUR/USD's June swing high, manage to contain expected volatility from Friday's jobs report on a closing basis, then the Greenback should recover through the 35-day EMA towards the psychological 80 handle. This would allow the EUR/USD to break below the supportive 50-day MA towards the August low at 1.4046. An eye should be kept on US Treasury Yields and USD/JPY, as both are severly oversold. A solid US employment report could trigger a rebound in yields and allow the USDJPY to rally back towards the mid-90's.

Our second attempt to capitalize on a recovering Greenback was foiled once again. Generally speaking, stop-losses are trailed to cost once the position has gained nearly 50 pips. Another sell position has been added, this time at the June pivot.

09/02 - Chart of the week

To avoid a conflict of interest, I am unable to post during work hours. I trailed the short position to cost earlier in the day on the EUR/USD's failure to break below 1.4194 and was stopped at cost. I have reinitiated a short position with a stop-loss above the June swing pivot.

09/01 - DXY breaks out of a 6-month downtrend

The US Dollar Index managed to bottom out near the key Fib at 77.93 (61.8% of 70.69-89.62). The failure of capital markets to capitilize on the better than expected manufacturing numbers triggered a reversal that helped buoy the Greenback through a 6-month trendline at 78.66. The EUR/USD's failure to overcome the 60 level on daily RSI hinted of weakness that could now potentially break below the supportive 50-day MA (now at 1.4160). Meanwhile, the major US equity indices have finally sustained a correction of more than just 2 days, breaking the string of couter-trend rejections seen since the July low. This suggest a broader correction is in store and could be the tailwind that guides the DXY back towards the psychological 80 handle. If, however, the EUR/USD 's 50-day MA and 40 level (daily RSI) are maintained on a closing basis, then market bulls could reassert for a move back towards 1.4338 (June's swing pivot).