Chart Comparative Analysis: USD Tech FLAG Before & After the Fact

DXY As of Aug 10, 2016

Fig. A Before the Fact

Fundamental / Market Driven Support
With the upcoming Thanksgiving holiday, market expectations would be limited to a few reports on US Durable Goods, FOMC minutes (Wed) and UK GDP on (Fri). Although, the market has already established a greater probability of a rate hike, this may have been priced-in from the re-pricing  done from the recent rally, where the USD Index have extended its run above the 101.00 levels. The market driven by bullish USD sentiment aims the 102.20 levels but the shorten activity may try to attempt a run due to the vulnerable thin market conditions that may also derive its fuel from the up coming data.

On the tech angle of the #USD -DXY; after establishing a defined Flag pattern after the consolidation period which we have anticipated to form since August 10, 2016 ( fig. A) to be precise have finally bear fruit with a completed formation and justified with its recent move above 101.00 that penetrated the projected resistance line as of Nov. 11, 2016 (Fig. B).  It's the ability to go beyond charting analysis by being able to anticipate a probable formation/s in the making or even before its completion simply based on market / price behavior.

DXY As of Nov. 21, 2016

Fig B After the Fact

The prices traded through the 98.00 handle trend line resistance level well supported by market driven sentiments and volumes from the positive reports including Chairperson Janet Yellen testimony. Which became the catalyst and the fuel for the USD to go beyond expectations. Any price above the 101.00 is an extension of such velocity.

However, the upcoming Thanksgiving holiday will also provide a thin and vulnerable market and certain price swings should not be discounted especially Wednesday and Friday's report

Meanwhile, across the currency markets, the closing prices among the major pairs have provided the calm condition and a recent price relief seen in the early Asian market's opening levels.  

Market Insight: Majors & Crosses 3

USD AUD GBPJPY EURGBP
With the economic c0nsumer confidence figures at its lowest will continue to dampen market sentiments for a USD recovery. However, this issue has been overshadowed with market talk on the US government addressing the probability to increase its debt ceiling to avoid any posible default and a government shutdown.

The political dysfunction in Washington has not really helped these issues. Thus creating more uncertainty and even fear in the market place maing it difficult for the USD to recover inspite of Federal Housing Finance Agency's (FHFA) report that residential home prices have risen at the strongest pace since March. But this only provided some momentary relief for the USD as it stayed on a narrow range for the past few days since the opening in Asia.

Market Insight: Majors & Crosses 3

A Structured Trading Strategy: Classic Set-ups

 Where Price Action, Trend & Proper Market Timing delivers an effective trade

The continuing market set-up that built a structured trading strategy for the EURGBP have started from the consolidation period since April 2013, towards the first week of May to the current corrective movement of the USD today the 24th of May, that provided the additional lift that can best be described as a follow-through registering a 0.8595 High.

As the USDx declined before the North American trading session to as low as 83.50 where its support level would stall its decline since its resting just above its rising secondary channel. Pullbacks such as this is very typical and healthy during the end of a Friday trading activity; but not necessarily a trend reversal that can only best described as a temporary price reversal which would very well finish at the support levels. The weekly closing and candlestick bar configuration is always critical as it would dictate the outlook for the trading week ahead. For now, the weekly bar is within the previous week's higher band signifying an intra-week bar suggesting a pause for some fresh incentives.

Watch for the opening price in the Asian trading session for a glimpse of the first 3 days of trading activity. So far the chosen currency pair for the EURGBP cross rate has delivered the necessary gains to stay within a structured trading strategy.Click to continue

Reconcile: DXY vs. DX-FXCM

As a matter of due diligence, we have decided to reconcile the DX-FXCM price chart and its significance in market analysis which we have identified has distinct markings of trend price signals that may be quite useful. Especially for those who trades the US dollar Index on the FXCM platform with relative comparison in our most recent article on the USDx- traded in the Inter-Continental Exchange and the New York Board of Trade respectively.

Spot and Futures do have a direct & indirect relationship when trading the currency market. However, at this point we would like to show the relative distinction simply based on the current chart below; where we find the similar trading pattern of the USD opening higher from their previous daily closing prices that likewise have directed the price trend of its directional move higher. Please review candlestick bar chart paying attention to the daily opening prices which have been extended higher. Although, the current opening in the European market have been quite cautiously making some daily corrective moves lower.

The previous daily formation

A Constructive Approach

Forex Trading: The USD is the best trade even before & after the fact.

The responsibility of a currency strategist through the course of trading the currency market is to establish a well constructive analysis to overcome a certain degree of trading difficulty during market uncertainty. In addition, coming up with a rational and conclusive market outlook to spot a high probability trade potential or where a price range breakout could possibly occur before the fact.

The latest scheduled economic reports ending the weeks of the 3rd & 10th of May can be considered as a classic example. Where market conditions have squeezed price action between currency pairs contrary to market sentiments that have caused a mix price reaction before and after the reports. A string of data followed during the release of a negative Chicago PMI figure have initially drove the USD lower, which in turn then was contradicted by a more positive Non-Farms Payroll followed by the 5-1/2 year low for the Jobless claims report that fueled a price reversal for the USD to move higher. The sequence of reports have kept most analyst at bay and tried to dissect the full effects of these reports while monitoring price action.

However, with the USDx retesting its primary resistance @83.50; the threat for higher risk aversion comes into play whenever trades made after the event of a price breakout and a subsequent follow-through has been made.

Therefore, a constructive approach can be followed in the event that such trade set-ups could be identified not only on a fundamental or technical stand point, but by comparing price activity among majors and crosses with actual market sentiments before and after a major event.

Click to continue.

Technical Perspective: USDCHF

USDCHF:

Remains to be well insync with the directional trend of the USDx as it remains within the higher trend. And currently @0.9404 with probable daily extensions @0.9450/65; which happens to be 50% retracement levels from the previous decline.

A convincing higher trend moving forward while momentum gradual build-up with the right amount of price movement is a healthy bull market as of today's market action. Price behavior relative to the USDx shows that there is still a good potential for the USDCHF to move higher moving forward in the coming week even after the end of the months trading. With minor pullback from the daily price highs relative to the closing of the week. This will be well in line with the month's closing adjustments for the end of the third quarter of the year. While the opening price levels and the near election period would more likely lend some credible support for the USD with minor price adjustments lower on a daily session to session closing.