The USD Question: a Bear or Not?

Dear Readers,

After a good weekend’s rest I welcome you back to the charts and trading! I hope you had some time for relaxation and also some for learning. I continued, just like last week, with my memory course and read part of a book focused on trading.

Of course I took the opportunity to listen to Nathan’s wonderful daily analysis as well. Nobody should miss out on that! You can read here what others think of the Winners Edge Trading services!

Major USD weakness has hit the charts last week. Especially the Euro showed great strength across the board, but also the AUD, the NZD, and even the GBP are showing signs of bullish impulsiveness towards the USD.

For today’s trading I am looking for continuation of USD weakness. My primary focus at the start of today’s trading day is the AUDUSD and NZDUSD.

14.01.2013 AUDUSD WEEK

I have the following reasons why:

1)      The EURUSD has travelled quite a substantial amount last week and seems relatively (over?)extended. The Euro is in an uptrend so I am looking for buys. No way will I attempt a counter trend sell. But a buy is equally unappealing to me at the moment. Only after a substantial correction will I revisit this currency pair;

2)      The crosses, GBPNZD, GBPAUD, EURAUD and EURNZD are interesting setups as well due to the major reversal signals to the upside. Most of all, I am keen on trading the EURAUD and/or EURNZD north, however, only after a substantial correction takes place. I do not expect that to happen today. I am anticipating a trade on those pairs either on Tuesday or Wednesday but will monitor them regularly;

3)      Of course all Yen pairs are in my scope as well. However also in this case I am looking for a retracement followed by bullish price action signals for an uptrend continuation before touching these currency pairs;

4)      On all time frames both the AUD and NZD are in uptrends versus the USD. They built clear higher highs and higher lows. In the case of the AUDUSD, price has retraced to and bounced off a neat trend line. The bounce showed strength by creating engulfing 4 hour candles to the upside on both pairs;

5)      There are 2 warning signs for the AUDUSD. One is that the top of the week trend line coming from the tops has not been broken by a clear week candle close outside of that area. Also AUDUSD’s current price is close to previous tops. The NZDUSD has broken that week resistance, but is close the previous tops as well.

14.01.2013 NZDUSD 4 HOUR
Now it’s time for the battle plan!

Basically, the AUDUSD and NZDUSD are approaching significant resistance areas. Then again the same currencies are in uptrend as well. What would be the best approach?

Not trading these currencies and waiting for a break and hook back always has its value.

I myself will employ the same tactics as the USDJPY approach. I will buy the currency at the first sign of a bullish impulsive continuation on the 1 hour chart. A break of the correction would be an added benefit in the case of the AUDUSD.

A key advantage of this plan is that I am able to position myself in the trade before the currency actually approaches the top. Using a tight 1 hour stop will give me sufficient reward to risk to take some profit at the top and move the rest of the trade to break even. If the currency does indeed break, that is when I get the extra mileage and R:R.

For those of you how want more information on the Yen, please read this: Yen Weakness in the Forex market ASAP.

What currency pairs are you looking to trade today? Let us know by dropping a comment down below!

As always, Good Trading!

14.01.2013 AUDUSD 4 HOUR

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  • Thank you Summerset for your comment! It is appreciated!

    Yes for sure. The wave could very well turn out to be a Wave 1. And considering the fact that the currency is resisting to fall, I would say that the chances of a break are increasing. The pressure is building and a break to the upside seems more likely. Unfortunately the currency did not break towards the top and my trades got taken out for Break Even.

    Yes last week the EURAUD was moving down substantially but on Thursday and Friday we say huge up side move on that currency pair. Currently it is showing up side strength, but lets see if we get follow thro. XAUUSD is still in a down trend but we might see break of that down trend soon. That will be interesting.

    Thanks for sharing your views!! Please do so more often, much appreciated!

  • Summerset

    Very good count you have there in the Aussiedollar. What you have as wave-D, I tend to think is actually a wave-1, with a flat wave-2 completed on yr 4Hr chart. The market (again I think) is about to break into Wave-3, as shown by the strong support > the red line on yr 4Hr chart. It is therefore very worth while to be fully invested for the breakout without waiting for a wave-e correction. I think for this setup, one should buy the market or slightly below on a BB, with stops < the current week made. There is also a weak inverse correlation between the EUR/USD & AUD/USD. You will note through out the past week, that as the EUR/USD advances, the AUD/USD slightly corrects. I think this is because the market is currently discounting the AUD/USD as a risk adverse cross, by tying it with Gold. Any way, what this implies, is that if you are expecting a reasonable correction with the EUR/USD, then breakout is immenent in the AUD/USD. So its worthly to be positioned in it now. – Just my 2 cents. And Thanks for sharing your work