Sunday, 31 October 2010

USDX & Euro$- Where from here?

Anyone who has followed this blog knows that using reaction line theory and reaction reverse/forward counts (as per John Cranes book) (plus a general mix of all reaction line methods out there) i came up with the chart of the DX below back in September . I have been trying to look for a bottom on the USD. Ironically I originally started this blog last winter because i thought the USD was too strong and was this time last year i was looking for a potential reversal area and thought i saw the first signs of a top then. Please understand i do not really care if the USD goes up or down as long i can see a strong and healthy trend to trade and it is no problem to be wrong, and i am often wrong but have spotted many of these reversals before and found this case and evidence quite compelling. I have followed the USDX down just through the first supporting RL until what i thought was the logical reversal date last Monday . After a bizarre candle in the DX last Sunday evening (which is cause of some concern to me- remember USDJPY and USDCHF last spring? we seem to get these type of bars during periods before sharp moves and increased volatility and volume) price rallied over the reaction line that has done such a good job at restraining any upward movement for months. Then we saw price peak at 78.50 with a possible double top formation. This was not what i expected from a freshly reversed market and also Fridays Euro strength took me by surprise. So i have been asking myself where are we now going? Is this really a reversal or is this a correction before further USD weakness? ie the Elliot 'Ravers' A-B-C before a continuation in trend. If it is a correction/ retracement then its not much of a correction since we have come almost vertically up from 1.2650 this September with no really serious setbacks and even the drop back down from the high at 1.41 back to 1.37 is well under a 38.2% Fib RT .
After spending time this weekend pouring over charts i have gone back to basic forks in the charts below and looked at market behavior. Any further price rises and new highs for the Euro$ or falls for the USDX back below the RL would put my reversal theory in doubt and we are sitting bang on the RL and the grey LMLP. Fridays close was on the highs for the Euro at 1.3945 and earlier that day we saw price fail to get below 1.3800. It is beginning to look like a sideways range to me.
It maybe that i am impetuous and always expecting price to reveal its 'secrets' immediately and this is one of my weaknesses- however it could be that we will see price now move sideways in cyclic waves before a break down (or up)....Do you remember USDCHF at 1.1500 earlier this year? It had a similar pattern and behavior before it broke down- very sharply (actually it was a CL faulure on the daily chart). What really alarmed me on Friday was when i looked at the E-Signal Euro$ 60 min chart and saw the bounce off the mauve modified Schiff fork. That's what i call a "Touch 'n Bounce".....which it certainly has done. Maybe we will fill the previous 'mountain'? Maybe we will make a new (recent) high above 1.4080. One possible trade coming up would be a short position upon price touching the area of confluence of the blue CL and the two UMLP's of the mauve and black down sloping forks. However i never consider any position unless there is a RL setup and i am always wary of any position contrary to the trend especially if price is moving rapidly with big long bars/candles. This area of confluence would be the 1.4000 level which also has psychological importance as well. Further price falls in the DX would take price back under the down sloping RL. Of course it is not impossible that it could make it up through the RL again and maybe i expect too much to happen too quickly. However, I am concerned that if we see continued USD weakness early this week and if the DX goes down to the 76.50 level then i would not be surprised to see price collapse below the 76.00 and take out last Sunday/Mondays low. If that happened then it would be the end of any possible reversal from the upsloping RL in daily DX chart.
Lastly, look at the USDX 5min chart. In the other charts it appears price has fallen through the grey LMLP but actually it has closed bang on this line. Surely for a fork of this size we should see the price bounce from the first attempt to go down through it? Thats normally what happens and i have found the larger the fork ,the bigger the bounce. So maybe tonight Asia will open with the DX up off the lower grey parallel and the Euro down from Friday's close.

Euro USD- Two views

Friday, 29 October 2010

Are they paid for this at Morgan Stanley?

"1232 GMT [Dow Jones] Morgan Stanley has revised its currency forecasts with a weaker profile for the USD over the forecast horizon. It now sees EUR/USD peaking at 1.46 at year-end. "We think that the euro offers the best risk-reward for investors looking to short USD, with the likes of AUD and JPY close to their all-time strongest levels versus the dollar," Morgan Stanley says. ( "

Euro$ continued

Heres my short entry area against the RL shown in thicker red/brown- It's from a much higher TF fork so more powerful -Plus the usual USA tradition of moving the market upon the opening for the first hour then a change in direction- usually sharp- all eyes now on GDP


Price failed get under the reaction line at lower 1.3810 and after repeated efforts down to the 1.3805 area it became apparent that the RL would hold and penetration of 1.3800 would not occur on the first attempt. We had reg divergence in the Maccy-d and using simple forks ( green) could see that a breakout upwards might occur. I had a buy stop at 1.3816 which was filled the first bar closing higher after the long 'poke' bar. Each RL worked a treat and it is a good example of why sometimes the 'reaction' is on the opposite side of the RL as in the case of the first RL in the MT chart. I was out at 1.3857 bang on the 3rd RL and under another RL that was/is almost horizontal above price and i expect may hold any further upside movement. It all ties in nicely with the E signal chart as a bounce of the new mauve mod Schiffed CL. Now i expect this go higher upon the US opening and then be sold off- but i am flat and will wait for the market to show me where the topside is.

USDX & €$

This is a continuation of yesterdays evenings post....So it was a CL failure in the EurUsd. Should go lower today and take out 1.38 figure again- price looks very weak this morning in the Euro session but i am waiting to sell at 1.3860-70 level ie: back up on the 1st or 2nd RL- Maybe optomistic but we will see and i think there is a chance of coming down in the same frenzied manner we went up yesterday but with luck making a lower low.

Thursday, 28 October 2010

€$ retracement or something more?

We are at the Fib .618% RT level. A handful of reaction lines(see below) opposing further price rises and also a few median lines -but wow -that was a strong market today! We have a potential CL failure (mauve) but it's too early to say this is over but the daily chart looks encouraging re the downside but i would not want to be short the Euro yet, especially as we did not make a lower low at 1.3730 level.

Wednesday, 27 October 2010


30 min and lower TF detail.The power of the 50% & 100% RL can be seen clearly and these are only the supporting lines against a falling market. Can you guess where the opposing RL's are which are stopping price rise? Charts to follow.


That was excruciating! Will it get through the RL underneath or will price rally? This is starting to look like a repeated failure here to get convincingly below 1.38 so we may have another cycle up before another try.

USDX & Euro$- Where from here?

So, Whats going on now? What sort of move is this and of what magnitude? Is this a correction before the USD continues south or is this a key reversal. Personally i favour the latter and if you look at the E-signal 60 min chart of €$ i can see that the euro has had a good run since late Spring/summer but then had been relentlessly whipped all the way down from 1.50 this time last year and the recent high last week was just over the Fib .618% from 1.50 back to just under 1.20. Price had been trending strongly and hit all the long term centre lines at critical levels ( 1.40 €$ & 1.60 £$) and we have not seen a serious RT since August. I think we must make a lower low than 1.3700 in the forseable near future (next few days) and when you look at the poor old DX which has been really bashed i can't now see it falling below the reaction line it has put on such a great fight to get above. Also if you trade a market daily and watch the bar by bar action you get a feel for the atmosphere/character of a particular currency pair and price action seems still weak for the Euro. Often i look at the long term charts and try to continue the wave pattern as a single line with the same frequency and to me price looks as though we must at least go back to the low 1.30's and above 80.00 on the DX. Today the battle is for 1.38 figure and price plays out it's merry dance bouncing off it over 3 times already but seems intent on coming back as it has struggled to make it over my gold & mauve median lines at 1.3830 level and the last attempt ended as a double top. Now we are heading back down and it seems highly probable that we will test it and go lower before the end of the US session. I am going to post some reversal dates and also some long term reaction lines on daily charts and thereby have some idea of critical support levels where this may all end but as i write this am reminded that often the trend changes at this time of year and previous trends have lasted until Jan/Feb and even uptil late spring. Only a fool would look for a bottom so soon anyway and the only way to be in this market is short for the time being at least. Maybe the New Home Sales will provide the fundamentals to push the technical onwards and down.
PS: That massive bar in the DX is not an error and was a Sunday evening freak-out re: G20 hysterics.
PPS: in the small 1 min TF chart above you can see a RL running parallel with the LMLP- ideal

Tuesday, 26 October 2010


EurGbp- reaction line trade ( plus €$)

Here is one of my chart for EurGbp- This has been a great market today with a break in up trend supplied not only by the Euros weakness but also by the UK growth figures out AM today. The obvious short trade i am out of but now look at the modified Schiff green fork. The reaction lines provided my entry this morning where i sold on a break of the first RL. Then we saw almost a continuous falling market and as we approach the second RL everything about it is screaming 'oversold'. The blue dotted line is simply a continuation of the RL from a RL in the green upsloping fork in the top LHS of the highest time frame chart that price long ago left
(but never ignore them). Underneath and to the right hand side we have the second up sloping RL and we know there is a high prob that price will interact with this line because the market is now exhausted after it's move down ( this does not mean i do not think it will continue down but i suspect retrace first before doing so and going down to the green CL). and also price was effected by the first RL in this fork and then we have the indicators to which i pay attention ( but not so much as to complicate the whole simple idea of reaction after price-action). In addition we also have a median line (white) from a 240 min fork not seen here (except a LMLP).

Below €$

Touch Down! DX & €$

Eur Usd

Is this a CL touch? in the 5 min it appears not but in the 1min yes. This is the same in Ensign & Metatrader but the wise man would remember that this could be the cause of sharp up move if we see one .I suspect price to make a lower low but it may just want to visit 1.4000 first. See the red fork below.

USDX & Euro$- Has the 'vibe' has changed?

Ok, well i was too busy yesterday but i think we can agree that the reverse forward count was one day out as the Euro cracked yesterday Monday 25th October as opposed to Friday last week as i expected but i am not brilliant at the count and it was a difficult one as per my posts weeks ago ( here)
This is the time to make money/pips and simple forks drawn in all time frames and using the break of a reaction lines with indicators based trade entries such as the EurGbp below this morning. I use the B-line template with Macd & fast/slow stoch but also other setups as they present themselves(eg: see1 & see 2). However the most important single thing for me is the money management. If you read the market right and manage to get 60% of your trades as winners then you are performing better than many UK pension fund managers.
Next stop for Eur USD 1.3850 but watch the USDX to tailor your view and trade as i expect to see price accelerate up through the reaction line i have talked about for months.

Friday, 22 October 2010

USDX So far so good?

So far so good and price approaches the downsloping reaction line for the third time- Persistence usually pays off. The EurUsd is an absolute pig today and despite being right about going short the market whipsaws around and i have been stopped out on my trade but the day is not over and we may still see clearer defined down movement before the end. Volume seems below average for a Friday even without data but maybe G20 comments may provide some stimulus for price to kick off and get below 1.3900 but like the DX with its battle to get through the RL do not expect the euro to drop through on the first attempt as it usually takes 2-3 for a big number.

USDX & Euro$- Is today's the big day ?

Today is the day we are supposed to see a break-out re the reverse/ Forward reaction count as per in John Cranes book. Sometimes these reversal dates can be spectacular and sometimes they are like a wet firework- However anyone following this blog knows that i watch the reaction lines after i identify what R-line is responsible for what price action. In this case the Rl is a parallel BC line from distance from swing low at 74.00 last Dec to the blue fork BC and then a forward distance projection (not a bar count) see link for chart.
In the USDX you can clearly see the second attempt at the line that has caused all the problems. I am bullish the US$ and have seen the cracks in the Euro vs US$ and will be looking today to get short in the Euro and long USD in the expectation of seeing price action whizz through this RL and upto79.00 where the next reaction line is now above price and will need to be dealt with by retracements and various attempts etc. Euro charts to come if i have time plus my short euro entry- as yet undecided but my two critical levels and ideal entry points are 1.3940-50 limit sell and 1.3890-95 sell stop. I think we will see the euro higher before any southbound journey so must watch price before any trade plan develops.

Here is Euro$...The only thing to watch is the CL failure in the orange d/sloping fork which would see price higher but also in the light blue up/s fork also a CL failure? Puzzling?