(Please click on the accompanying chart to enlarge.)

As of early Tuesday morning (New York session), price on the GBP/USD daily chart, as shown, has just made some forceful strides in continuing the bear run that has been in place since late July (and that was interrupted by an upside correction during the latter part of September). Within the current downside continuation, if the pair breaks down below the significant 1.7900 support/resistance region (which coincides approximately with a key 61.8% Fib retracement level), price could ultimately target major support down in the 1.7450-1.7500 zone.

UPDATE: As of noon on Tuesday (New York session), price has indeed broken down swiftly and strongly below the 1.7900 mark, and has reached an intermediate support level around the 1.7750 region. Further bearish momentum could eventually target the abovementioned 1.7450-1.7500 support zone.

It turns out that the dollar weakening that occurred late Monday (New York session) was just a temporary respite before the dollar bulls came out in force once again early Tuesday morning. The momentum from this bullish sentiment continues to be strong. Analyses on specific dollar-based pair(s) are forthcoming.

- James

During the afternoon (New York session) on Monday, the dollar erased much of the gains made earlier in the day. This occurred via sharp, erratic dollar-weakening moves. Further details to come as the primary directional bias settles in.

- James

(Please click on the accompanying chart to enlarge.)

As of early Monday morning in New York, price action on the USD/JPY daily chart, as shown, has reached up to an established downtrend resistance line once again, and then respected it by bouncing sharply back down. This downtrend resistance line should continue to serve as resistance going forward, while the strong horizontal level around the 103.75-104.00 region should act as a significant support level to the downside.

- James

(Please click on the accompanying chart to enlarge.)

As of early Friday morning (New York session), price on the USD/CAD daily chart, as shown, is still stuck in a tight consolidation zone after a deep drop stalled several days ago. Price is now ripe for a directional move. A continuation break of the consolidation to the downside should meet immediate support at or near the uptrend support line (currently around 1.0250), a strong breakdown of which could ultimately target the key psychological 1.0000 region. Any significant break above the current consolidation, on the other hand, should eventually target key resistance around 1.0550.

- James

James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading (John Wiley & Sons), will be released in early 2009.

As of Thursday morning (New York session), after a prolonged period of major directional volatility, the majors currently appear to be in a general state of consolidation. Distinct continuation patterns of consolidation like flags and pennants are appearing on many of these charts, suggesting that the next major breakout moves could potentially be a continuation in the direction of dollar-weakening. Watch for any strong potential breaks out of these consolidation areas, which could presage major directional moves.

- James

James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading (John Wiley & Sons), will be released in early 2009.

A quick note about the important role of the “self-fulfilling prophecy” in forex trading and technical analysis. One of the key reasons that many aspects of technical analysis, especially such important concepts as support and resistance, often seem to work remarkably well has to do with this phenomenon. A self-fulfilling prophecy is a forecast that causes itself to become true. In the case of forex trading and technical analysis, a certain support/resistance level may be valid and respected to a significant extent simply because that level is well-known, and is therefore watched and acted upon by a critical mass of traders. So, for example, a 38.2% Fibonacci level, an R1 pivot point, and a key uptrend support line do not in themselves really have magical predictive properties. It is more the fact these these levels are so universally accepted and therefore so closely watched and traded by so many traders, that they often take on considerable price action significance. The role of the self-fulfilling prophecy is one of the keys to effective technical analysis in the forex market as well as all other financial trading markets.

- James

James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading (John Wiley & Sons), will be released in early 2009.

(Please click on the accompanying chart to enlarge.)

As seen on this EUR/USD 4-Hour chart (early Wednesday morning, New York session), price has formed a rough flag formation, which hints that price has pulled back in preparation for a possible upside continuation run. Watch for any strong break of this flag. In this event, significant resistance to the upside resides around the top of the flag, around the 1.4865 region.

- James

James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading (John Wiley & Sons), will be released in early 2009.

(Please click on the accompanying chart to enlarge.)

Recent price action on GBP/USD (a daily chart of which is shown) has been continuing its climb to progressively higher levels. Having broken out solidly above the key 1.8500 support/resistance level, the big question is whether or not price currently carries enough bullish strength to reach another key resistance level around the 1.8800 region. Not only does 1.8800 represent a recently double-tested resistance level, but it also represents a major 50% Fibonacci retracement level (the high-to-low retracement span being measured from the high reached on 7/15/2008 to the low hit on 9/11/2008). A forceful fall back down below 1.8500, on the other hand, should meet initial support around the 1.8400 region.

- James

James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading (John Wiley & Sons), will be released in early 2009.

(Please click on the accompanying chart to enlarge.)

As of around the New York session close on Monday, price action on USD/JPY (a 4-hour chart of which is shown) has dropped dramatically since the beginning of the day. This drop comes shortly after bouncing down off of a significant downtrend resistance line (represented by the long black line). Further bearish action should target intermediate support around the 104.00 region, which is the level of the last significant swing low.

- James

James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading (John Wiley & Sons), will be released in early 2009.