We have now seen one more currency see its trend turn against the USD. The Euro has now made its first buy signal above the trend line against the US dollar since the beginning of the big decline in July of ‘08. You can see on the chart how it made a very strong attempt back in December of ‘08 but never made a buy signal above the trend line and then fell back down to almost the previous lows. However it got support just above that and was able to make a higher bottom.
Right now it is a wait and see moment. If the pair falls back down near support and the trend line we will be looking to go long this pair.
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AUDUSD, EURUSD, Forex Investment Blog, Forex Trading, GBPUSD, NZDUSD, US Dollar, USD, USDCAD, USDCHF, USDJPY
This week saw a one of the largest and fastest falls ever in the USD. There are many fundamental reasons people will quote as the reason but that is not our focus. Our focus is only on the charts and what they tells us. Below we will be taking a look at all the major currencies against the USD and the US dollar index. No matter what the news says this is all we need to focus on to tell us if the trend has changed.
So has the US Dollar trend changed? In short the answer is… No. However this next week will be very critical in giving us a better idea of things to come.
All Charts below will be 1% box size point and figure charts.
First lets look at the US Dollar index. This will give us a good idea how the USD is holding up across all the currencies. Looking at the chart we can see that it did give a sell signal but it is still clearly above the trend line. This chart shows that while the pull back in the dollar may have been very fast it is still in a bullish pattern.
Next we have the EURUSD which has been making news as the Euro had its biggest weekly rise since 1999 (Reuters). So the question is has the trend of the EURUSD now changed because of this big jump?
The chart shows us that the answer right now is no. It has managed to break above the trend line which is of course the first step in changing the trend but it will take a buy signal above the trend line to have officially changed trends. You can see back in December the Euro had a big rally going through the trend line but failed to ever have a buy signal and eventually continued its pattern down. It will be a very interesting next week or two to see if we eventually do have a buy signal above the trend line but as of now we have not.
The GBPUSD is a much easier chart to figure out. It does not take much to see that all signs still point down and it is actually looking like a good shorting opportunity as it has come back up to resistance forming a triple top. The chart is still very well below the trend line with no signs of the trend changing.
The USDCHF just recently gave us a buy signal above the trend line with a triple top break to confirm we are in an up trend on this chart. It has now quickly pulled back close to the trend line but so far has managed to hold. The trend of this currency pair is still up.
Next up is the USDJPY. We saw a massive rally from below 90 to above 99 before the recent pullback. The rally broke through the trend line that had been in place for well over a year. This chart is an example where it takes some skill in reading the chart as the buy signal was at the trend line. So does that count as a trend change? According to Jeremy Du Plessis author of The Definitive Guide to Point and Figure it is a valid break. Why? In his book on page 178 he says that if a buy signal is given within 1 box of the down trend line then that is a valid break.
I on the other hand think there are more factors than that that need to be taken into consideration and looking at the pattern previous to the trend break can tell you a lot. In my opinion the trend in this chart has not changed until we see a buy signal above the trend line. This would be different if we saw a nice wide base form and then a few higher tops and higher bottoms but this pattern is just a straight shot off the bottom. For now I will be waiting to let the pattern develop before taking any kind of position in the USDJPY.
The USDCAD is clearly above the trend line and has been making higher bottoms for many months now. However it has massive resistance at just above 1.30. It has now been pushed down 4 times at this level. If it can break that level of resistance then it should be ready to really shoot up and looking at the chart it looks more likely than not at this point that it will happen. However we will not take a position until the break is confirmed.
The AUDUSD looks like the most interesting to me and the one with the best argument for a trend change. There has been a large consolidation period in this currency pair and it looks as though it might have broken out of that. It recently broke a spread quadruple top at the 0.6920 mark and broke the trend line. So has this trend changed? This one it is not totally clear, it is in a wait and see formation. I suspect that we will see a strengthening of the AUD but to play it safe I will be waiting for a better formation to occur to enter a position.
Last we have the NZDUSD which has had a big bounce of its bottom to break through the trend line with some force. However like many of the other charts it has yet to have a buy signal above the trend line so it is still in a wait and see formation.
If you like my technical analysis be sure to check out the other post on the forex investment blog and find out more about the managed forex account.
