Trade view /
26 August 2016 at 7:40 GMT
USD Index – We are always looking for a bias to give an ‘indication’ of the next direction. Going into Janet Yellen’s speech today at Jackson Hole is always going to be high risk, but as noted on numerous occasions, these events offer the best rewards.
Three factors that offer a downward bias in the USD index:
1. Daily chart highlights a corrective channel formation. The bias is to break lower.
2. 30 minutes highlights a symmetrical triangle formation. Because the move into this
pattern was negative, it has a bias to break lower. Support seen at 94.36.
3. Descending triangle breaking to the downside. Measured move is 94.26, a break of the
USD Index Daily - Corrective Channel
USD Index Intraday - Symmetrical Triangle
I am long both EURUSD and AUDUSD and now have a protective stop on EURUSD close to entry. Here I explain why I have taken this trade.
Monthly – For 19 months we have been stuck in a range (1.7114-1.0461). There is no indication of an impending breakout. The eventual bias is to break to the downside.
Eventual bias to the downside
Weekly – We highlight a bullish Outside Bar from Ichimoku Cloud support. No clear indication of a change of trend. The triangle top is seen at 1.1570
Daily – Paused and corrected lower from the Fibonacci confluence area of 1.1348-1.1356. Because of the speed of the last rally, we look for this to be a bullish Elliott-Wave count. The last move lower was a fourth-wave correction that stalled and reversed at the trendline support of 1.1260 (where we took our long trade). The target ‘area’ is seen at 1.1570-1.1631.
Targetting beyond 1.15
Intraday (one hour) – Shows the AB=CD formation completed and we are starting to move higher. I don’t expect an impulsive move to the upside during the European hours as the market is waiting for Yellen. A break of the corrective fourth-wave channel at 1.1340 confirms the aggressive last wave higher is underway.
I have a stop at 1.1240 (25 pips) so the risk/reward is very substantial (if I can manage to hold on and don’t get taken out from market during the speech).
Potentially high-risk reward
Management and risk description
On a move through 1.1340 we move stop to entry.
Entry: long at 1.1265.
Target: 1.1570-1.1631 zone.
Time horizon: long from Wednesday - target estimated at 7-10 sessions depending on how strong the USD bias is
— Edited by Martin O'Rourke
Non-independent investment research disclaimer applies. Read more