I discussed how rough it was to trade the FX market past 2 weeks, which was also echoed by other traders. It is normal for markets to be in such conditions, and it is normal for breakouts to occur when they get out of a such condition. A catalyst was needed.
Would it be Egypt (as expected by some traders Friday)?
Would it be economic figures/central bank announcements?
It is looking like the later & the turmoil in Egypt has had little negative effect in the FX market, besides the turmoil was not as bad as expected, after the weekend.
I figured Friday was the start of breaking out of the rough conditions, as risk was swiftly taken off the table, and expected it to continue. Wrong!
US Dollar Index – I noted the chart was bearish, but individual pairs said a different story. It is currently below the 61.8 fib level I pointed out previously.
EURUSD – This pair had to get above the 61.8 fib of the 1.4284 high/1.2869 low, which also a support/resistance level, which has been accomplished. Next level in sight is 1.3950.
Catalyst: Germany unemployment the lowest since 1992.
GBPUSD – This pair is off to the races as it broke out of a symmetrical triangle that has been formed since November 2010. It was also in consolidation for 2 weeks below the upper trendline. The consolidation could break above was noted on the previous entry, although it was not necessarily endorsed. Next level is 1.6770 resistance.
Catalyst: Bank of England is expected to raise interest rates 3 times this year, to curb inflation, per National Institute of Economic & Social Research.
AUDUSD – The big mover in the waiting. The pair broke out of it’s symmetrical triangle. Watch out though, it is approaching highs though.
Catalyst: The RBA did not change interest rates & provided a robust outlook.
Note of the story, as I repeat time after time on Stocktwits;
- Confirmation is needed on moves, as I emphasized we needed on my previous entry.
- Trade what you see. Trade with the price action. Assessment is one thing, price action is another.