Forex Recommendations for the next week

Saturday, November 8, 2008


As we all expected, the EURUSD range continues to tighten. A break (likely lower) from the range (triangle) is expected next week. The upper end of the triangle line is in the 1.29-12950 zone today and Monday and is resistance in the event of an advance.


The larger USDJPY trend is down so strength should be sold. Evidence that favors a new low is the momentum extreme (RSI) at 90.86. As I've mentioned many times before, price extremes (highs and lows) rarely correlate with momentum extremes. Instead, price extremes occur with momentum divergence. Support begins at 96.


"The GBPUSD is supported by a long term trendline that dates to 1985. I expect a larger bounce off of this line; regardless of the larger trend…the result would be a volatile range over the next several weeks before a break to a new low." The range to this point looks like the first two legs of a triangle with price now at the lower end of the triangle. A rally is expected to exceed 1.62 by next week.


The USDCHF is testing a resistance line from late 2005 as well as a shorter term upward sloping resistance line. These lines combined with overbought and divergent RSI on the weekly and daily should lead to a drop that lasts at least a number of weeks.


A wave 4 low may be in place for the USDCAD. A line drawn off of highs from late 2007 / early 2008 has probided support ahead of 1.13, which is the 4th wave of one less degree as well as the 50% retracement of the rally from .9817 (low of wave 2). If a low is in place, then price should remain above 1.16.


Adoption of a bullish bias is warranted on a rally above .7022 or a drop below .6544. Until then, the AUDUSD is in no-man's land." The AUDUSD dropped below .6544 today, triggering the bullish bias. Price is expected to exceed .7022 next week.


Kiwi is in a similar position (when compared to the AUDUSD). The rally to .6037 is either wave a or i within a larger rally sequence. Wave b or ii may be complete at .5742 but there is risk that the pair drops below .5742 before a solid base is in place that will lead to a larger rally.


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