Hello Everyone, and Happy New Year! I will be back to updating this blog in full force next week (Monday, January 5th, 2009). Until then, I would like to wish everyone a safe New Year’s and a happy, healthy, and successful 2009!

- James Chen

Approaching the New Year, a trading range consolidation has settled in for most of the majors. This includes the EUR/USD (a daily chart of which is shown), which, after pulling back to and bouncing up off a key 38.2% retracement level within the overall uptrend, has wavered in a rough sideways trading range for the past week. For the beginning of 2009, a strong break above the 1.4700 level should presage a potential uptrend continuation off the pullback. A substantial drop below the 1.3800 region, on the other hand, would invalidate the pullback and could be a sign of a long-awaited dollar recovery.

To start off the New Year right, I will be giving an open FX Street webinar entitled “The World of Forex Breakout Trading” on Thursday, January 8, 2009 at 14:00 GMT (9:00 AM U.S. Eastern Time).

This free webinar will demonstrate the intricacies of high-probability breakout trading (and fading) in the forex market. Breakouts can be remarkably effective opportunities to take advantage of potentially profitable currency price action. But in order to maximize these opportunities while minimizing potential losses, the right tools, criteria, and mindset must be utilized. This webinar will cover the best methods for approaching forex breakouts.

It will be a very useful and informative session for traders of all levels. For more details and to pre-register, please click on the following link: http://www.fxstreet.com/live/sessions/session.aspx?id=e5d635cb-3910-4625-900d-57157cd72013 . Thanks!

- James Chen

USD/JPY has just pulled back up to a well-established downtrend resistance line. This move could represent just a retracement within a continuing downtrend. For more details on this pair, please click here for Monday’s (12/29/2008) Chart of the Day.

Approaching the New Year, substantial dollar-weakening price action on the USD/CHF pair (a daily chart of which is shown) has reached support around the 1.0400 region, as of early Monday morning in New York. This level was mentioned as significant support on last Tuesday’s Chart of the Day (12/23/2008). This support represents the last major swing low in the current downtrend. A strong breakdown of this level should confirm a downtrend continuation in the pair after a 38.2% pullback retracement. In the event of this breakdown, price could target further key support in the 1.0000 region, with intermediate support in the 1.0300 region.

Hello everyone, and Happy Holidays! I will be taking a short break for Christmas, but will be back on Monday with blog updates right before the New Year. Hope everyone has a great holiday season!

- James Chen

From a technical perspective, the USD/CHF chart appears to have tentatively formed what looks like a classic 38.2% pullback within the context of the current downtrend. For a look at the chart and more details on this formation, please click here for Tuesday’s (12/23/2008) Chart of the Day.

Price action on the EUR/USD (a daily chart of which is shown) has indeed stalled near a key 38.2% retracement level as of early Tuesday morning in New York. This level could possibly be the launching pad for a move back up in a continuing uptrend. If this is indeed the case, the 1.4300 level is a major resistance level to the upside. A fall back down in a larger downside correction, on the other hand, would be confirmed with a drop below the 1.3825 region, in which case price could target further support in the 1.3650 region.

As of noon on Monday in New York, price action on the EUR/USD has retraced to a key support level. For more details and to view the chart, please click here for Monday’s Chart of the Day.

Price action on the GBP/USD daily chart, as shown, appears to be in the midst of forming a tentative inverted head-and-shoulders/triple bottom base formation, as of early Monday morning in New York. If this is indeed the case, we are currently on the rightmost shoulder. An H&S reversal formation would only be valid if price rose up to break the neckline, as shown on the accompanying chart. Therefore, the neckline should serve as a strong resistance target going forward. Of course, any significant break below the 1.4470-1.4500 support zone will invalidate this pattern and should subsequently confirm a continuation of the general downtrend.