Price action on EUR/GBP has formed yet another triangle consolidation pattern. This currency pair has recently been relatively reliable with regard to forming and breaking these types of consolidations. For more technical analysis on this key currency cross, please click here for Tuesday’s Chart of the Day.

Below is the link to the recording of the recent (March) Monthly Webinar that I conducted here at FXstreet.com. It is entitled: “Trading Forex on a Daily Basis Using Daily Charts.” Hope you enjoy it!

http://transcripts.fxstreet.com/2009/03/trading-forex-on-a-daily-basis-using-daily-charts.html

James Chen, CTA, CMT

Price action on AUD/USD has tentatively broken down below both a short-term uptrend support line extending from the 3/10/2009 low, as well as a key horizontal support/resistance level around 0.6850. For more technical analysis on this currency pair, please click here for Monday’s (3/30/2009) Chart of the Day.

UPDATE: As of Tuesday morning, price has turned back up after breaking down below horizontal support. To the upside, a major resistance target resides just below 0.7100.

Monday morning price action on GBP/USD, a daily chart of which is shown, has extended its bearishness of last week, and currently appears to be targeting key support in the 1.4000 region. This price region combines a confluence of technical factors including: prior horizontal support/resistance; a key psychological level; short-term parallel uptrend channel support; and long-term downtrend line support. Therefore, any substantial breakdown below this level should carry a significant bearish bias that could subsequently target a re-test of 1.3655 support (the last major swing low). In the event of a bounce at or above 1.4000, the last major swing high around 1.4775 should serve as strong resistance to the upside.

UPDATE: As of Monday late afternoon, price has retraced much of the bearishness from the morning. Price is currently rising towards strong resistance in the 1.4300 region after respecting the support offered by both the short-term uptrend line and the long-term downtrend line.

EUR/USD (a daily chart of which is shown) consolidated for most of last week after rising dramatically during the prior week. But on this past Friday (3/27/2009), the consolidation was unexpectedly broken to the downside with a forceful 300-pip plunge. Originally, a well-defined bullish pennant pattern was in the making, but Friday’s drop invalidated the pennant as a continuation pattern, and transformed it into a potential reversal pattern. This pattern also occurred around an important downtrend resistance line extending from the second test of 1.6 back in July. Price has, for the time being, respected this trendline and settled down to end the past week around major support in the key 1.3300 support/resistance region, which represents a critical juncture. The beginning of the upcoming week of March 30 to April 3 should provide indications as to the pair’s directional bias going forward. Any substantial move below 1.3300 should head straight toward 1.3000, a critical price region from a trend perspective. Any move below that level could invalidate the recent double-bottom trend reversal. Conversely, a subsequent breakout above the noted long-term downtrend resistance line would help confirm a new uptrend targeting immediate further resistance around 1.3850.

James Chen, CTA, CMT

For more information on my newly-released book, Essentials of Foreign Exchange Trading (Wiley), please click here.

USD/JPY (a daily chart of which is shown) recovered this past week from most of the drop that it experienced during the prior week. The key resistance level to target on this recovery was 99.65, a re-test or break of which would have had significant bullish ramifications. Instead, price fell short, double-testing 98.85 towards the end of this past week before failing and retreating. This currency pair, however, can still be considered to be within the normal bounds of a new uptrend. Currently, there is at least a 300-pip cushion to the downside (to around 94.50) before the uptrend can confidently be considered invalidated. To the upside, any breakout above the double-tested 98.85 should work its way towards the key 100.00 mark, passing the recent 99.65 high along the way. And any break above 100.00 could target further major resistance around the 102.50 price region.

James Chen, CTA, CMT

For more information on my newly-released book, Essentials of Foreign Exchange Trading (Wiley), please click here.

Just some thoughts on point & figure (p&f) charting in the forex market. Some may characterize point & figure charting as trading based upon pure price action. This is because only price, which is undeniably the most important aspect of technical analysis, is customarily included on this type of chart (in the form of X’s and O’s). Other data that can readily be found on bar and candlestick charts, like time and period opens/closes, are generally excluded on p&f charts. This leaves only the uncluttered purity of price action.

Trading from a p&f chart, like the historical EUR/USD chart shown here, generally involves a good amount of looking for breakouts. For example, whereas double and triple tops on bar charts are usually thought of as reversal patterns, they are considered breakout patterns on p&f charts. There are some intricacies to learning how to use point & figure, but they offer a whole new technical viewpoint to the typical foreign exchange trader.

I will be conducting an FXstreet.com open webinar next month devoted entirely to trading forex using point & figure charts. Please click here for more information and to pre-register.

James Chen, CTA, CMT

For more information on my newly-released book, Essentials of Foreign Exchange Trading (Wiley), please click here.

Yen weakness this week has translated into a USD/JPY recovery that currently appears to be targeting a potential uptrend continuation. For more technical analysis on this currency pair, please click here for Thursday’s Chart of the Day.

UPDATE: As of early Friday morning (3/27/2009), dollar-bearish price action has made a tentative reversal back down below the downtrend resistance line, hinting at a possible false break scenario. There was a clear double-test failure at around 98.85.

Similar to other dollar-based pairs, USD/CAD (a daily chart of which is shown) is displaying a clear inverted pennant consolidation. This occurs after coming down off the fourth test of 1.3 resistance. In the event that this pennant is broken convincingly to the downside to confirm a continuation pattern, price should likely assume a significantly bearish stance, which should meet initial support in the 1.2100 price region.

UPDATE: As of early Friday morning (3/27/2009), price action on USD/CAD has invalidated the inverted pennant as a consolidation pattern, breaking instead in the opposite direction. This patterns appears now to be acting tentatively as a reversal consolidation.