USDOLLAR Former Channel Resistance is Now Estimated Support
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
FOREXAnalysis: I’ve been looking for a pullback in recent days, noting that “the larger trend is bullish against 10133 but slowing momentum is typical of at least several days of corrective activity. The 20 day average, trendline, and topside of former channel resistance may help us identify the next low.” The USDOLLAR instead made a large range up day today. Large range days that occur after an extended move are usually exhaustive in nature. The index has been influenced heavily in recent months by the Yen move as well. Any USDJPY mean reversion likely has the opposite effect. Looking just at price behavior however, upside must be respected (especially in the year of the breakout) above today’s low of 10300. The logic here is the same as that used in trailing the GBPUSD short to today’s high (use the price extreme of the large range day as the pivot).
FOREX Trading Strategy: Upside is valid above 10300 – near term support is 10360/75. Objectives are the 100% and 161.8% extensions of the August 2011 rally-June 2012 rally, at 10732 and 11344. The latter is close to the 2010 high of 11249 (synthetic). 10468 (synthetic 2004 low) and 10673 (synthetic February 2004 low) could get in the way of progress.
LEVELS: 10274 10308 10364 10437 10500 10608
--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
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Jamie is the author of Sentiment in the Forex Market.