Euro Posting New Record Highs against the Greenback

There is no doubt as of this writing that the US Dollar is continuing to fall to new lows. The Euro is approaching the 1.50 mark and the British Sterling Pound is gaining back over 120 pips for the current session, posting a high of 2.0764.

However this might be about to change - read below for an interesting look at candlestick charting reversal patterns. It could be that the weekly charts are pointing to a rebound for the US dollar.

China Looming Large - Yuan Float Coming Soon?

Before we get to the charts - There is extreme noise focused on China coming from the EU.  Market News International reports that Jean-Claude Trichet - the European Central Bank President is traveling  to China for face to face discussions to  express the G7’s  wishes that “China should accelerate the appreciation” (of the Yuan).  

US Dollar Policy - Indeed…

Addressing the US Dollar, Trichet stated that he notes with interest   US Treasury Secretary Paulson and Ben Bernanke’s ” strong US Dollar Policy!

Candlestick Charting Reversal Patterns - Morning and Evening Stars

As the US Dollar continues to get hammered, the Weekly charts may be showing the worst is over. Candlestick charting techniques are now widely recognized as a solid trading tool. Used properly by technical analysts, they are best used for detecting reversals of trends, and retracements within a longer trend.

Submitted for educational purposes only are the following two weekly charts displaying classic evening and morning star formations on the British Pound vs the US Dollar and the Canadian Loonie vs the US Dollar. These formations must be at the top or bottom of a trend. If current prices are consolidating - sideways, then the pattern does not qualify.

Dragonfly Doji Printed At The Top

When price opens and closes at the same point on a candlestick chart, it creates a line that crosses the wick above the low and below the high. During the week of Nov 9th,  The British Pound Sterling posted a high of 2.1161 only to close at 2.0895. When there is a long wick, it created what is called a “dragonfly Doji”. 

Then the Move Down - Indicating a Reversal?

The following week of Nov 16th posted a long black down candle that has completely engulfed the impressive move up during the week of Nov 2 when price closed just below the high of the week at 2.0898.

A Three Component Star Pattern - Putting It Together

Think of “evening stars” as an indication that the sun is going down, bringing more more darkness is coming. (translation = down trend). Here is the current weekly chart for GBP-USD.

Evening Star Pattern - (Click to Enlarge)

The Opposite of Evening is….. Morning

The US Dollar vs the Canadian Loonie Weekly chart is showing the opposite of the “Evening Star” pattern with a “Morning Star” Pattern. In this case think of morning as bringing more light as the sun rises (translation = up trend)

Instead of a “Dragonfly Doji”, we have a a long wick down creating a classic “Hammer” pattern as the Nov 9th weekly low of 0.9059 is printed. The key here is that the hammer is at the end of the run down, and the week of Nov 16th not only penetrated but closed at 0.9717, well above the week of November 2nd’s opening price of 0.9622.

Here is the current weekly chart for USD-CAD.

Morning Star Pattern - (Click to Enlarge)

 Not sure what to do with this information? Want to learn how to trade better with more proficiency, more successfully - Quickly? Click Here to Get a Free Checkup on Your Trading Skills and Get a Free 30 Minute Consultation with IEN Sr. Technical Analyst and Trader Jerry Furst.

Jerry Furst  broadcasts weekly on FX Street with “1stonForex the Week Ahead” and facilitates and presents his own live educational workshops. Jerry is an active trader, educator, and Founder of Investors Education Network (IEN), he is also a mentor and trading coach to select clients.

Dilemma for the Dollar

As the US Dollar continues to deteriorate, Front page headlines suggest to seasoned traders that the worst may be over for now. But last Friday while panic seemed to run rampant over comments from China that they may be moving their US Dollar Reserves into other assets - US Secretary Paulson was adding fuel to the bonfire of the greenbacks pleading for  China to float the Yuan.

US Treasury Secretary Paulson Speaks with Forked Tongue

Lets analyze this for a moment: The US has a strong Dollar Policy?? Who’s dollar is he talking about? This is as ludicrous as the propaganda that importing illegal immigrants and shipping US jobs overseas is good for US workers! But I digress… the concept is that if  China floats the Yuan - the US Dollar falls through to basement level 13. Add to that the fact that imports from China will become more expensive. That makes holiday shopping for poison toys more expensive!

What’s Bernanke and the Fed To Do?

Because inflation has supposedly been the primary concern of the FOMC, any further increase in inflationary numbers will make the "data dependent" Bernanke team less likely to want to lower rates. That is until the consumer sentiment numbers come in weak and pressure is added to lubricate a slowing economy - especially as the US election cycle heats up through primary season.

Question of the Week

If you were going to accept a job at an international company with a huge salary - What currency would you want to be paid in? Which country would you like to have your money parked in? You can Answer by clicking on the link below.

Will Pound Rebound After Giving Back Over 640 Pips?

From the Friday Nov 9th London Open through Monday the US Dollar staged a slight comeback. The Pound fell from 2.1161 to 2.0519. However, this may be short lived as Candlestick "Tweezers Bottom" on the 4 hour chart may currently signal a rebound.

Euro Gives Back 233 Pips and Bouncing…

Testing 25% Retracement on 30 minute chart

While Dollar Crumbles Against Yen Loses Over 560 Pips

Carry Traders Threatened or Sliced and Diced?

Not sure what to do with this information? Want to learn how to trade better with more proficiency, more successfully - Quickly? Click Here to Get a Free Checkup on Your Trading Skills and Get a Free 30 Minute Consultation with IEN Sr. Technical Analyst and Trader Jerry Furst.

Jerry Furst  broadcasts weekly on FX Street with "1stonForex the Week Ahead" and facilitates and presents his own live educational workshops. Jerry is an active trader, educator, and Founder of Investors Education Network (IEN), he is also a mentor and trading coach to select clients.

News Spikes Can Show Support Resistance Zones

The Non Farm Payroll came in strong today posting at over 166,000 more jobs created in the US last month - more than twice the expectations…. Woooopeee! Now let’s look at the Charts!

Often times news spikes can be quite useful in seeing Support and Resistance zones. Why these spikes are hammered out to the North and South is a debate that can fill another column. But the charts do not lie. This is where money changes hands in the heat of battle for all to see.

Sometimes News Spikes = High Low Water Marks

The following are Highs and Lows posted on the 30 min charts after NFP Nov 2-2007. I sometimes use these as Support and Resistance Zones. Note: All posts in this blog and web broadcasts are strictly for educational purposes only and never meant to be considered as, or implied as trading advice!

(Source eSignal Composite)

Not sure what to do with this information? Want to learn how to trade better with more proficiency, more successfully - Quickly? Click Here to Get a Free Checkup on Your Trading Skills and Get a Free 30 Minute Consultation with Sr. Technical Analyst and Trader Jerry Furst.

Jerry Furst  broadcasts weekly on FX Street with “1stonForex the Week Ahead” and facilitates and presents his own live educational workshops. Jerry is an active trader, educator, and Founder of Investors Education Network (IEN), he is also a mentor and trading coach to select clients.

Retracement Over Due - Even If Short Lived?

The US  Non Farm Payroll data came in much higher than expected. The numbers look good for the US economy. Add to that two quarters of decent growth in GDP. But does anyone really care? Merrill Lynch and the banking sectors are keeping Credit Crunch worries alive - making good economic numbers null and void of reassurance.