By Jerry Furst - Sr Analyst “1st on Forex” -  Investors Education Network.com

The Dollar Index and Gold

The Dollar Index has a history, and indeed the charts show we have been at and below current levels before. So now the question is, Will price “Bounce or Break” off of familiar levels?

Looking at the Charts of the US Dollar Index and Gold ETF

US Dollar Index (Symbol DX - eSignal) Monthly and Daily Charts

US - DX: The Monthly Chart (click to enlarge) gives us a text book lesson in Fibonacci retracements and extensions. The Trade Weighted Index made a double bottom which coincides at the 75% Fibonacci retracement level .

Drawing the Fibonacci retracements from the 1993 low to the 1994 high gives us a 38.2 retracement that held the March 2009 high of 89.60 and the 138.2 Extension 0f 70.70.

So this monthly chart looks ominous as a drop to the 1993 lows looks possible.

US - DX: The Daily Chart (click to enlarge) of the US Dollar Index shows  the decision point quite clearly. We have extremely strong support at the current level of 76 - which is a 75% retracement of July 2008’s low to the March 2009 high.

78 Would Be Great - 72 What Would You Do?

We can now Bounce or break off of this level - with targets of 78 for a bounce up to the 61.8 Retracement - OR - a drop down to retest the July 2008 low of about 72.

GOLD - GLD ETF - October 9, 2009 Makes Weekly All Time High

GLD - The Weekly Chart above (click to enlarge) shows the GLD Gold ETF shows some text book lessons for technical analysis. The GLD ETF hit a high of 104.15 while spot Gold traded at over $1,060 an ounce.  

 An inverse Head and Shoulder pattern with a broken resistance “Neck Line” and a Triangle Pattern at the Right Shoulder that is already in play is heading towards the 125% Fibonacci Extension of 108. This would correspond with Spot Gold prices of about $1,100

The Head and Shoulder Pattern has a target at approximately 120, that is convergent with a significant Fibonacci extension of 161.8%  This would correspond with Spot Gold prices of about $1,300

 The Headline Indicator - Explained

The front page of the Financial Times on Thursday Oct 8, 2009 featured the US Dollar Index “as fear grows over currency”.  There is a fundamental-news type indicator that is sometimes quite handy to keep in mind of, the concept being: “If it’s on the front page of the paper and on the lips of people that rarely speak about it… it’s probably over bought - or oversold.

My trading methodology is what I call 90% technical-charting and 20% Fundamental-News but exponentially weighted. (meaning that the fundamental news has a half life of 5-30 minutes for things like GDP reports,  and even Non Farm Payroll - Unemployment Numbers).

Headline Surprise - or Expected?

The Headline Indicator has different connotations that traders pick up on after a while. If there is an  unexpected event of either extreme negative or positive news that has no precedent, and no one knows just how bad the repercussions can be - then the Headline Indicator may be a catalyst for an extreme move yet to come. However, if Walmart (for example)  is picked to be the “Stock of the Year” and it is seen on the checkout line of your favorite shopping place - the likelihood is that it’s made a top.

US Dollar Down - But Not Out!

So, in conclusion: Yes - the US Dollar is being shed - but perhaps it has been punished enough for now, and a retracement is in order. As for Gold, well the paper money has to go somewhere - and hard commodities that are easily exchangeable might just be the new currency of choice for a little while.

The question really is….. Where would you park your money?

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

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By Jerry Furst - Sr Analyst: 1st on Forex -  Investors Education Network

Mind Your Head - Bank Stress Test Leaves No Pain!

The US equity markets continue to look bullish and some are calling the Bears out for their final slaughter - The long awaited, delayed, and leaked Bank “Stress Test” hit the market with a whimper on Thursday.

The results - 10 of the19 “Too Big to Fail” banks will need about $75 Billion USD to shore up an estimated total of $599 Billion in losses.

S&P 500 Daily - as the chart above shows the 200 MA on the S&P 500 within tagging range - also note the previous years “Sell in May and Go Away” working quite well. Who’s getting ready to clock their profits and take off for the summer?

The Euro has been trending higher and a review of my posts of last week show the Head and Shoulder Pattern in play with an ultimate pattern target of 1.3750 only 100 pips away as of this writing - May 10^th  - 22:30 EST

EUR-USD - The two charts above show last weeks post compared to where we are now. (click to enlarge charts) - Nice trend in play

Loonie Looms Large - Back to Parity?

The long consolidation on the USD-CAD that began back in October of 2008 is over! The Daily and 4 Hour charts posted here show a beautiful Head and Shoulder breakout with strong momentum to the downside.

USD-CAD The above charts from April 19 and Today May 11^th show that there is potentially another 300 pips to go before the Head and Shoulder pattern plays out at around the 1.1200 range. (click to enlarge charts)

The Week Ahead - Calendar and Webinar

US News to Watch for this week includes:

Tuesday - International Trade and Treasury Budget

Thursday - PPI - Weekly Jobless Claims

Friday - CPI - TICS Data - Consumer Sentiment

Tune in to the “1^st on Forex” Webinars on FX Street

Every Monday - The Week Ahead at 16:00 GMT (12 Noon Eastern)- Click Here

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Dec 9, 2008 - Pause Before The Storm?

“Show and Tell” on Chart Patterns

Lot’s of Chart Patterns are Currently Forming on the Currencies - A brief discussion and then a look at some good examples of Triangle Patterns all setting up at the same time on different time frames.  

Furst -  let me give you my “two Ameros” on chart patterns. I consider them all to be “consolidation patterns” and have no bias that - for example,  an “ascending triangle”  is a “bullish pattern” - to me,  it could go in any direction. What I look for is the strength of a well formed pattern.

Is it well formed? 

If I can show people a chart and everyone quickly recognizes a Head and Shoulder Pattern, that’s a strong signal. If there is lot’s of debate - then it’s weak.  Chart Pattern recognition gets fun when you see a pattern forming at the right edge, but not yet completed. Aggressive traders can take a position that the pattern will first form - and then if it does, prepare for the potential price targets.

Don’t Get Bogged Down In Statistics

I debate the statistics some apply to chart patterns. For example: Maybe someone tested 1085 head and shoulder patterns and determined that  83.7% have a probability of completion in a certain circumstance.  So what! The 16.3% chance is just another “50-50″ coin flip if you are only looking at statistics. Well - let’s just say that I can disprove anything with statistics..

US Dollar - Canadian - Dec 9, 2008 - 4 Hour Chart

USD-CADVery Strong Triangle Pattern forming on the Dollar - Loonie. Note the multiple areas where the upward trend Channel has held - and the Resistance forming a classic Triple Top. (click to enlarge)

Euro - US Dollar Daily Chart - Dec 9, 2008

EUR-USD: No Shortage of Chart Patterns Here as we have a pretty good triangle pattern, with a consolidation zone inside. Note the Upward Trend Channel that will be brought into focus on a 30 Min chart Below

EUR-USD: 30 Minute Chart of EUR-USD Shows the Upward Trend Channel and Resistance Levels  (Click to enlarge)

US Dollar - Swiss

USD-CHF: 2 Hour Chart Dec 9, 2008 - Nice Triangle to complement the Euro-USD Pattern (Click to enlarge)

Aussie - US Dollar - Dec 9, 2008 4 Hour Chart

AUD-USD - 4 Hour Chart - Yet Another Triangle! - (Click to enlarge)

The Week Ahead - Calendar and Webinars

 Summarized Scheduled Economic Calendar - Click Here

***  Attend A Free Live Market Coverage and Technical Analysis Webinar ***

Click Here to Register for this weeks “1st on Forex” The Week Ahead Webinar  - Every Monday at 12 Noon EDT -

FOMC Live Webinar Tue December 16  - Click Here to Register

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

The Week That Was: Nov 3 - 7 

Last Tuesday’s Historic US election of Barack Obama was followed by disappointing reaction from the markets, with ADP employment numbers confirming contraction on Wednesday. Thursday  got started with a monster 1.5% surprise interest rate cut by the Bank of England, and Friday closed the week with Non Farm Payrolls painting a bleak picture, and then to close out the week we had Consumer Credit jumping 6.9 Billion in September.

The Week Ahead Nov 10-14

This week gives us a breather in scheduled news until Thursday when International Trade numbers coe out with the Weekly Jobless Claims. Friday has import - Export prices, with Retail Sales at 8:30, followed by Consumer Sentiment and Business Inventories at 10:00pm. The equity markets may be tested as AIG and GM will be trying the patience of the media.

Currencies Look Paused For a Break Out

A look at the majors on a Daily or 4 Hour chart shows some triangle and consolidation patterns. Submitted for your approval Note the charts below.  

The Aussie - US Dollar looks Like Consolidation

The Euro Testing Support

US Dollar Approaching Resistance versus Swiiss Franc

Pound Sterling Approaches Support of Descending Triangle and has a Trend Channel to follow.

Click Here to Register for this weeks “1st on Forex” The Week Ahead Webinar  - Every Monday at 12 Noon EDT

If You Can’t Say Anything Good - Keep Your Mouth Shut!

Last week I was invited to the Federal Reserve in Miami for Dinner and a Seminar, The Filet was excellent! The subject matter made me uneasy as I came to realize that there is a bit of a disconnect between the realities on the ground and the knee jerk reactions taking place in Washington. 

I would like to report that the end is near for our economic troubles - however I think I will just let the Fed and the Treasury do what it does - they have some good ideas and they do seem to be taking action - although it all seems to be symptom based and observational in nature -  versus leadership based, and proactive. I was vocal about the need to address the root of the problems - Like getting people into real mfg jobs creating and installing solar panels and hydrogen-electric-propane vehicles… getting us off the oil and utility companies nipple, etc….

Retroacttive Tax Deductions - Stimulus Plan II

One suggestion I made at the Fed meeting was an idea to return the tax deduction for using credit - retroactively - for all those people teased into spending to keep the worlds economy humming? I heard Ben Bernanke today mention that he was in favor  of a second stimulus package.

Another Idea: Recall All Dollars - Before They Start The Printing!

Another Idea I blurted out (befoe they took the microphone away from me) was to recall all US paper currency and replace them with new certificates - this would have an immediate effect of temporarily flushing/wiping out the underground - unreported economy. Might as well create some new certificates as long as they are going to have to start printing a whole lot of them soon!

Technical Analysis - Dollar - Canadian Poised for a Triangle Break?

The US Dollar - Canadian - 4 Hour Chart shows a nice example of a Triangle pattern with a very strong supportive trend line and a well defined resistance line on top. The Fibonacci Retracements and Extensions are lining up with the Triangle Pattern’s potential projected price targets. 

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.