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US Dollar News Reversals Present Trading Opportunities

By , Sr. Technical Strategist
20 September 2013 16:10 GMT
  • USDJPY news reversal is consistent with larger bull
  • USDCAD reverses from a major support area
  • EM FX (ZAR and MXN) conditions are consistent with larger trend resumption

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Jamie is the author of Sentiment in the Forex Market.

USD/JPY

Daily

US_Dollar_News_Reversals_Present_Trading_Opportunities_body_usdjpy.png, US Dollar News Reversals Present Trading Opportunities

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-On Wednesday, USDJPY held a trendline confluence from the lines that extend off of the August lows and former resistance line off of the May and July highs. The quick reversal bodes well for bulls.

-Thursday’s USDJPY decline was accompanied by strong volume (95th percentile measured over 20 days for CME volume).

-21, 63, and 126 (1, 3 and 6 month) averages are bunched together. This condition indicates a ‘coiled’ market seen often prior to trend moves.

-The break from the multi-month triangle remains valid. A complex inverse head and shoulders may be underway, which also portends a significant advance (if confirmed on a breakout).

-The Nikkei is trending higher. See last week’s report for more on that market.

Trading Strategy: Expecting 98.85-99.00 to serve as support if reached. Buying dips into there with a stop under the Wednesday low. If not triggered, then will probably need to employ breakout tactics.

USD/CAD

Daily

US_Dollar_News_Reversals_Present_Trading_Opportunities_body_usdcad.png, US Dollar News Reversals Present Trading Opportunities

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-USDCAD made a key reversal on a larger than average range Thursday. Friday’s follow through confirms the tradeable low.

-More important, the reversal occurs at a huge support level defined by the line that extends off of the September 2012 and January 2013 lows as well as the 100% extension of the decline from the July high (2 equal legs) AND corrective channel support.

-The reversal occurred on heavy volume (20 day high in CME volume).

-Price has retraced the entire Fed move (USDCAD was at 1.0290 at 2 pm on Wednesday) to trigger a possible news reversal trade. USDJPY trade from Thursday exemplifies a successful news reversal trade.

Trading Strategy: Watch for an early week low to get long against Wednesday’s low. 1.0230/60 is support. Target half at 1.0400.

USD/MXN

Daily

US_Dollar_News_Reversals_Present_Trading_Opportunities_body_usdmxn.png, US Dollar News Reversals Present Trading Opportunities

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-USDMXN made a key reversal on a larger than average range. Friday’s follow through confirms a tradeable low.

-The reversal occurs at the 126 day average (6 month average). This average has pinpointed important support and resistance in the exchange rate for over a year.

-The reversal occurred on heavy volume; the third largest one day volume (CME) of the year in fact and most volume since 6/20/13 (high of the year).

-21 day RSI dropped into 40 and rebounded. The May and July lows were registered when RSI(21) was at or slightly below 40.

Trading Strategy: Order to go long at 12.72, stop 12.58 and target half at 13.04.

USD/ZAR

Daily

US_Dollar_News_Reversals_Present_Trading_Opportunities_body_usdzar.png, US Dollar News Reversals Present Trading Opportunities

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-USDZAR made a key reversal on a larger than average range Thursday. Friday’s follow through confirms the tradeable low.

-The reversal occurs near the 126 day average (6 month) and after a drop below the July low (false breakdown?). This is the biggest penetration of the 126 day average since April 2012 but price only closed below the average for 1 day.

-21 day RSI dipped below 40 and crossed back above after 1 day. This action is also consistent with a bottom.

Trading Strategy: Price has rallied nearly 3% in 2 days and is nearing last Friday’s close (uncovered close after the Sunday gap). A reaction (lower) from that level (9.91) will probably present a chance to buy a dip. Keep 9.75-9.78 in mind for support.

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele

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20 September 2013 16:10 GMT