US Dollar Index 4 Hour Chart

 

Here is my Ending Diagonal count for the USDX. I think there is one more leg up left to go before a big retracement happens in line with overall US Dollar weakness. As the price of the EUR/USD comprises of 57.6% of the USDX, I expect the final move up will correlate with a spike down in the pair.

NZD/USD 4 Hour Chart

 
 

Here is my take on the NZD/USD. The pair has been consolidating in a complex correction, range bound between 0.68 and 0.71 for several weeks now. The move down from the top at 0.7080 definitely does not look impulsive, so it is likely this correction still had yet to complete. I think the final Z leg will likely break above the recent high to test the 50% Fibonacci and possibly even the 61.8%. I will be looking to short from this area.

Another USD/CAD Possibility

 

That last move up in the US Dollar may not be the wave 5 everyone was expecting. It divides up too well into 3 waves for me not to consider this possibility. Wave 4 may be a complex correction and may still be yet to complete. Price should still be contained within the Elliott Channel, look to buy on a pullback to near the line.

USD/CAD 15 Minute Chart

 

Price action in the USD/CAD has been clearly confined to within an Elliott Channel so far. As you can see wave 2 has retraced more than 61.8% of wave 1, so it is likely that the wave 4 retracement will be very shallow. I am not expecting price to reach the 38.2% retracement line, as it will likely be turned around by the Elliott Channel resistance if it even makes it to that level. If price manages to touch on the lower channel line, this would be the ideal place to get long, however if you aren't able to sit at your computer and watch every minute, 1.0520 would be a good place to put your buy order. Keep stops at 1.0440.

If wave 5 is equal to wave 1 than the price target should be about 1.0585, however it is possible that wave 5 will extend. The US Dollar has been strongest against the Canadian Dollar compared to all the other majors over the last few sessions, and this may continue into the coming session.

USD/JPY 15 Minute Chart

 

Here is what I think is going on in USD/JPY. The sharp drop the broke through support has the look of a third of a third wave, so some follow through is likely. The black wave 2 retracement was extremely shallow, so I expect a larger correction from black wave 4, which is completing as I write this. Wave 3 is approximately equal to 1.618 x wave 1. I would not be surprised if the former trend line support is re-tested. I will be looking to take a short position near this line at 90.50, with a stop at 91.05. Target is still yet to be determined.

AUD/USD Update

 

Here is an update of my AUD/USD chart from today. The pair has bounced from near the 61.8% level of the A of Z move. The beginning of the third wave has probably begun and we should see a sharp fall from these levels very soon. Look to get short with stop above the recent high.

AUD/USD Hourly Chart Update

 

I have revised my corrective count for the AUD/USD pair. I now think price is forming a triple 3 and is about to complete its final C leg up to the 0.9130 level. As you can see price has just completed a B leg triangle. I have drawn in the Fibonacci levels to show where A of Z will equal C of Z. This is where I expect Z to complete. I will be looking to short from around 0.9125 with a stop above the high at 0.9330. From my larger count you can see that this is a 2nd wave so it is likely there is a lot of downside to come. If my count is correct I will be holding this position for the several month at a minimum, as the AUD falls to below 0.80.

EUR/GBP In Depth Analysis

Trade Idea Summary
Sell EUR/GBP at 0.8810
Stop at 0.8860
Target 0.8580
Risk:Reward 1:4.6

Analysis Follows
Today I have spend a considerable amount of time analyzing the EUR/GBP pair. While some of the finer details of the recent consolidation elude me, longer time frame charts seem to be paint a clearer picture. Below is a weekly chart of the pair, showing what I suspect to be an impulse move to the upside carving out it's final wave.

 

As you can see the second wave was very shallow and took quite some time, while the fourth wave was sharp and deep, following the guidelines for alternation. While it is possible that wave 4 is not yet complete, the following charts are based on the assumption that 0.84 will not be broken during the next 6 months at a minimum.

The two charts below are daily charts from the end of the above wave 3 onwards. As you can see the move so far has been quite complex. Below is my favoured count, which shows red wave 2 of 5 nearing completion, before a sharp move up in a wave 3. You can see that all the moves up seem much sharper than the moves sideways/down, which can often be a good indicator of trend direction. Click images to zoom.

My next chart is also a daily chart, offering an alternate scenario to the above count. Here I have drawn in the possibility of a triangle forming which will cause the pair to consolidate for much longer with minimal price movement.

Either way I think there are some good opportunities presenting themselves in this pair coming up in the very near future. Below is an hourly chart of the consolidation that has unfolded over the past month. As you can see this correction is also extremely complex. I have spend a long time trying to work out a count for it, however the part in the black box that I have marked out doesn't seem to fit within the rules of EW. 

Ignoring the part I could not define, I have attempted to work backwards to try and explain what is happening. The moves after the peak at 0.8842 seem to count in a 3-3-5 pattern, which is possibly an unorthodox B wave and I have labelled the chart based on this conjecture. Whether or not this count is correct, a correction will always finish in a motive C wave in the opposite direction to the prevailing trend, and I think this may be it. 

A clear impulse from the 0.8665 can clearly be seen, which I expect to complete aroung the 0.8820 Fibonacci confluence zone. The orange Fib levels are from wave 1 of C, and the blue Fib levels are from the the move I have labelled as A?. Wave A being equal to wave C and wave 1 being equal to wave 5 are both very common Fibonacci relationships.

I will be looking to short EUR/GBP from 0.8810 with my stop loss at 0.8860. If price moves above 0.8856 then my above counts are all invalid and I will have to reassess my charts. I expect a move down to around 0.8580 at least. This is just above where wave A from 0.9412 to 0.8834 is equal to wave C from 0.9154, and only just beneath the wave 3 of C extreme at 0.8603. The risk to reward ratio here is 50:230. or 1:4.6.

The Market can be a Hard Teacher

February has so far been a very bad month for me, not only because I have had an overall net loss, but also because my losses were compounded by overconfidence in my analysis following an exceptionally profitable January. Several of the mistakes I made through the month (moving my stops back when things didn't go my way, investing too high a percent of my overall bankroll per trade, overexposure to a particular currency, making too many trades etc.) I knew were the wrong things to do, yet my emotions; greed, arrogance (is stupidity an emotion?) etc. got the better of me and I made the trades anyway. This is not the first time this has happened to me. Any seasoned trader will likely understand what I am going through.

As I am only relatively new to this game, I still have many skills I need to develop. Money Management is definitely first on my list and I will endeavour to better understand the psychology behind trading and ways to control emotions and rash decision making. I am have just begun reading Inside the Investor’s Brain - The Power of Mind Over Money by Richard L. Peterson, on the advice from Greg a follower of my blog. As I continue to learn my analysis will also improve, and so will the profitability of my trades.

Thank you for following my blog, your continued support inspires me to be a better trader. I hope all of you have something to learn from what I have to offer, and wish you all a profitable 2010.

Gold Update

 

Above is a 4 Hour Chart of Spot Gold (XAU/USD). This was the second possibility I posted over a week ago. I was expecting gold to drop lower initially but since then price has moved above 1125, invalidating my other count. From here I expect gold to move higher to complete and irregular flat. As you can see in the chart above black wave B completed near the 138.20 Fibonacci, which is fairly common. I expect wave C to complete near the end point of wave A at around 1160, however it is possible that wave C will form equal to wave A, forming a truncated flat, and finishing at around 1132.

Below is an hourly of the recent price action. A channel up is clearly present and I have drawn in a possible path the pair may take to complete the move. If you look closely you can see the wave 2 retracement are (in ascending order) shallow (38.2%), deep (>61.8%), and deep (61.8%). Therefore based on the rules of alternation I expect that the wave 4 retracements (in ascending order) will be shallow, very shallow, and then deep.

AUD/USD

 

Here is a 4 Hour Chart of the AUD/USD pair. Wave 1 down was complete at 0.8580 and wave 2 looks like it will retrace back to around the 61.8% Fibonacci level, which is common for second waves. I actually expect the AUD/USD to pull back to slightly beyond the 61.8% level at 0.9045, closer to the 0.91 level. A of wave 2 will will be equal to C of wave 2 at around 0.9130, and if my count so far for wave C is correct, wave 1 of C will equal wave 5 of C at around 0.9105. 

I think the confluence zone will be the place to short, and I will be putting my order in at 0.91, with a stop at the high at 0.9330. Although this stop may seem large, there is the possibility that wave 2 will retrace even further to the 78.6% Fib at 0.9170, as second waves often retrace back to within the wave area of first waves one degree down, and the AUD has been very strong over the past week on the back of positive data, so it is best to play it safe. Good luck!

Money Management

I've taken a few big losses over the past few days in Gold and x/JPY. Investing too much in certain trades and being far too overconfident in my analysis, has taken away much of my profit from earlier this year. Always make sure you have enough money in your account to cover your trades and don't be greedy/emotional and overextend yourself. I'm going to read up on money management over the coming days, it is definitely my biggest weakness. If anyone has any good money management ideas or knows any good books to read on the topic please let me know. I truly hope that you are all far more disciplined than myself..

GBP/USD

Moving my stop loss to break even on this trade. If price breaks back above 1.57 the triangle scenario I expect may be incorrect, and I don't want to allow my profit to turn into a loss.

USD/JPY Sitting at Support

 

The 61.8% Fibonacci of the last drop has so far held back the USD retracement and the pair is once again testing the support line which has held the pair for the last 2 weeks. Expect some momentum if price manages to break through the line. If you are not short already look to do so on a pullback after a breakout of the consolidation zone.

GBP/USD Wedge

 

The GBP/USD pair is forming a solid wedge pattern, with an eventual break to the downside expected. I am going to attempt a short from the top of the wedge at 1.5710 with a stop above 1.5750. More conservative traders may want to wait for a breakout below support before going short.

Getting out of my EUR/GBP Short Position

I'm getting out of my EUR/GBP short at 0.8680. Since the sharp fall from 0.8842 price movement has been stagnant. I expect the Euro will bounce back against the Pound somewhat when the EUR/USD pulls back from being so oversold. This is where I will look to get short again.

USD/CAD Sitting at Support

 

Here is a daily chart of the USD/CAD pair showing a very important line of resistance which is now acting as support. I do not expect this line to break easily. Look for a bounce from these levels over the coming sessions and further upside from here. Some of you may even notice a possible inverted head and shoulders pattern which has formed with price now testing the neckline. Keep stops at 1.0225.

Gold Update

 

Gold has been consolidating in a clearly defined channel for the past week or so. Price has just bounced off the 61.8% Fibonacci level, and I expect channel support to fail over the coming session. Wait for a breakout then a retest of the bottom channel line to take a short trade with your stop above the recent high.

USD/JPY Update

 

Here is a chart of the USD/JPY showing Fibonacci levels and wedged shaped, seemingly corrective price action. The chart below shows a zoom of the last few sessions. You can see price looks to be carving out a 5 wave move, which I expect will be a C leg and probably the final move in this correction before price drops further. As you can see the resistance line runs very close to the 61.8% Fib level. I will be looking to short from around this area with a stop at 91.30.

Getting out of my USD Long Positions

I got out of most of my long USD positions at break even and my short Gold position for a small profit. The wave counts do not look impulsive to the downside so I expect another wave up to make a new high in most of the markets.

USDX Channel about to break?

 

Here is a chart of the channel that has played such an important role containing the USDX over the past 4 days. Price movement has just bounced sharply off the bottom of the channel and I am hoping it may push through resistance from here. A break above 8020 will take price above the resistance line. If this is the case it is a good indication that the correction is over and there will be more upside to come. Look to short the NZD, AUD, EUR and GBP against the USD if price breaks above the channel.

USDX Possibilities

 

Above is a bullish USDX Chart. A break above the downward sloping resistance line will be a very bullish sign, and will likely signal the end of the correction.

Above is a short term bearish chart. Price has stalled at the 61.8% Fib of the sharp move down and the intensity of the rebound from 7966 has shown little follow through. It is possible the USDX will fall to another low before continuing with the longer term trend.

USDX at Resistance

 

A break about resistance in the USDX should confirm the end of the correction. Look to get short on the EUR. GBP, NZD and AUD vs the USD and JPY. I expect US dollar weakness against the Yen over the coming sessions so shorting JPY pairs may pay to be even more lucrative than USD pairs. I have also taken a short in Gold which is going to be a longer term hold.

*** EDIT *** Seems I spoke too soon. Seconds after I posted this rumours of a possible bailout for Greece were leaked sparking a wave of USD and JPY selling. I have already taken positions in several trades and I am going to hold them. I do not expect this rally to last.

USDX 15 Minute Chart - Is the Correction Over?

 

Here is a possible count in the USDX which shows that the correction may be complete and price is about to head higher. As you can see price is bouncing off support and has not broken through it. I am going to start looking for opportunities to short in the AUD, NZD, GBP and EUR against the USD and JPY.

USD/CAD 5 Minute Chart

 

Keep an eye out for a buying opportunity in USD/CAD. I expect 5 waves down to complete the second ABC and then price to continue higher. Watch the count unfold to pick the best entry point. I estimate it will be around 1.064.

Attempting a Gold Scalp

I'm going to take a long position in Gold at 1066, targeting 1090. There are a clear 5 waves up and 3 waves down so I expect a 5 wave C leg to follow. Wave A - wave C at 1092. My stop is at 1062, so risk is minimal.

EUR/GBP

The EUR/GBP Ending Diagonal looks like it may be complete at 0.8799. I'm going to attempt to get short on a pullback to the 0.8775 area. Stop loss remains at 0.8855.

GBP/JPY Trade Idea

 

The GBP/JPY pair is sitting just above a very strong support line that has held back price on several occasions before. If price is able to break through this line, expect some follow through. I am going to take a small short position at 140.30, however those of you who like to trade more conservatively may want to wait for a confirmed break of the line before initiating a trade. Keep stops at 143.

EUR/GBP Hourly Chart Update

 

Here is an update of my EUR/GBP chart from last week. The consolidation continues and I am expecting one more bounce higher in the Euro in line with a push back from the oversold zone in the EUR/USD. Once this C leg is complete expect another sharp impulse wave down. Look to sell between 0.8795 and 0.8820. Wave 2 of the larger move on the daily from 0.8850 retraced to near the 61.8% Fib, so according to the rule of alternation this retracement should only reach around the 38.2% Fib, which is a few pips below on 0.88. Keep stops at above the start of wave 2 at 0.8855.

Alternate Gold Count

 

Here is an alternate Gold count. This is not my favoured count but it is possible nonetheless. It is always important to keep multiple patterns in cognition and to never be cemented to the one pattern.

Gold 4 Hour Chart

 

I am fairly confident the top is in for Gold and price is about to drop off sharply in a 3rd wave of a 3rd wave down. As you can see black wave 2 almost reached the 61.8% Fib level which is typical, and another 5 waves down to 1045.5 looks to be complete. Look to sell on a pullback to around the 1090 area with a stop at 1125.

The EUR/USD is Oversold. Time for a pullback?

 

Here is a chart of the EUR/USD pair showing daily RSI. The pair is currently oversold and a pullback from these levels seems likely. Coincidentally Fibonacci levels at present for the two moves from the '09 top are approximately equal. The chart below is a 4 hour zoom of the second move down from 1.4580. I have drawn in the Fibonacci levels for each significant pullback, and as you can see they have been getting progressively larger each time, as the pair moves more and more into oversold territory. 

I have labeled in a possible count, similar to Jamie's clck here to view, which fits in well with the pattern of an increasing percentage pullback each time. If this count is correct then the outlook for the Euro is very grim, based upon the incredibly weak red wave 2 retracement; as second waves usually retrace 61.8% of first waves, and in this instance not even 38.2% of the entirety of red wave 1 was retraced. The black wave 2, however, is more likely to retrace to its 61.8% level due to the presently oversold nature of the pair. The strength of the last candle during Friday's last session also gives weight to this scenario.

USD/JPY Update

 

The X of the expected double zig-zag correction in USD/JPY is nearing completion. I expect price to fall further over the coming week and reverse sharply from around the 88/88.20 area. If price does breach this zone and the down trending support line expect further resistance at around 87.40-87.60 which is both former support and former resistance.

EUR/GBP Still Consolidating

Recent price action in the EUR/GBP pair from the high at 0.877 still looks to be corrective (there is no clear impulse or LD), so I will be looking to get out of my short trade at break even or for a minimal loss. Another push above 0.877 is likely before further downside.

USD/JPY Breakdown

 

USD/JPY has dropped sharply in what appears to be a sharp Z leg of an X. I am expecting another zigzag to push higher once this drop has completed, which I am expecting at around the 61.8% Fib of the entire move at around 88.20. Look to get long from here.

USD/JPY WTF?

 

While I remain bullish on the USD against the Yen, recent price action in the pair has me confused. The rally from 84.80 to 93.80 is an obvious ABC, and the move down to 89.15 looks like a complete X (WXY), but the price action since 89.15 does not look like a motive way of any sort (either an impulse or a leading diagonal). Even though I was hoping, and somewhat expecting for price to skyrocket from these levels in line with the Cmellon's Delta Count, it seems more likely that another low will form before price head further upward. My trade was stopped out at break-even. I am going to take a short position on a break of the rising trend line support. Stay tuned for updates.

EUR/GBP Flat Looks Complete

Here is an update of my EUR/GBP chart. The flat the pair was forming may be complete at 0.8770 and a leading diagonal looks to have formed, beginning a new trend downwards. I have just taken a short position with a stop at 0.8760.

USD/JPY Consolidation Still in Play

 

Here is a possible scenario for USD/JPY (15 Minute Chart). Unfortunately the pair did not confirm the breakout as I was hoping and has since dropped back to the 90.40 area. There is a fair amount of support at the 90.20 area from an upwards trending support line. a downward sloping resistance turned support line and also the 38.2% Fibonacci of the entire move up from 89.15. USD Bulls should look to increase their long exposure at this level if the patten plays out as predicted.

USD/JPY Breakout

The pair has surged higher on positive ISM Survey data and looks to be about to break above the downward sloping resistance line. I have taken a long position again at 90.65.

USD/JPY

The majority of USD/JPY short term counts look decidedly bearish so I have decided to sell my long positions and wait for a better entry position for my long trade. Price action has been moving in what appears to be a series of 3 wave moves. I will post more charts when the pattern is clearer. Keep an eye on the upward sloping support line off the recent lows.