Trade view /
12 October 2016 at 7:41 GMT
USD Index: A word of warning for USD bulls this morning... Although we have broken the bullish ascending triangle to the upside, we have stalled at the 161.8% extension level of 97.62 (from 94.06-96.26) so there is ample scope for a correction lower.
We should expect the move to be mixed and volatile. We also have Federal Open Market Committee minutes tonight that could push the dollar to the downside.
Source: Saxo Bank
One thing to note here is the daily chart. We are in a bullish channel but the inside waves are made up of three waves, highlighting that this move is corrective. We are close to the previous swing high so we could see a more aggressive correction.
It is for these reasons I am looking to take a USD short this morning and, with GBPUSD having a good rally overnight, dip buying looks promising. This is high risk but also offers great risk/reward if the formation holds.
Monthly: Not 100% sure where the selloff stalled but between 1.1900 and 1.1750 looks to be the range. The latter is close to the Fibonacci confluence area at 1.1593-1.1441.
Weekly: Highlights a solid bearish Elliott Wave count. The fifth wave extension is seen at 1.0320 (from 1.1798-1.4571). This wave (the fifth) is by far the hardest to trade as it can run short or play long.
Daily: With dips being bought under the 261.8% extension level there is scope for the first inside wave pattern to now be complete. We have inside days (indecision) but that is not surprising after Friday's strong selloff.
Intraday (30 minutes): The only reason I have attempted a small long this morning is this timeframe. We have scope for a reverse head and shoulders pattern that offers great risk/reward.
Signals are far from strong but we do have bespoke support at 1.2252, very close to the potential right shoulder. I have taken a small long (one unit) and will look to double up if we can break the neckline at 1.2325. Measured move target is at 1.2560. I need an hourly close above 1.2249 to keep this call alive
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Source: Saxo Bank
Management and risk description
It should be noted that this is a high-risk trade that offers good risk against reward.
Entry: long at 1.2274 (one unit) buying one unit on a break of 1.2325.
Stop: hard stop at 1.2150 or a close below 1.2249 .
Target: 1.2560 (measured move).
Time horizon: one or two sessions.
— Edited by Michael McKenna
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