Currency Pair Overview: Drip-Fed Dollar Declines Overnight Overall, the major pairs gained some pips in Friday morning trade, but the moves seen until now are rather fragile. The only exceptions are the pound and the yen, which experienced an active first part of the day. During the European session, the European GDP numbers disappointed most investors, but until now, this has not been reflected in currency valuations. Ahead, investors prepare for the Canadian and U.S. Trade Balances and for the U.S. Consumer Sentiment report. Dollar Index Technical View: TheLFB Member Charts 4 Hour Chart: Short. Main price points: 74.95, and 76.82. Looking for: Wave V) The dollar index found support over the past sessions, and revealed a possible structure of a completed five wave down move, from the 76.82 area to current lows. The blue wave V) may already be complete, which means that the dollar bottom may be in place just under the 74.50 area, in the near-term. The overall global market view (Equity and commodity futures) signals for at least another push higher, and as such the dollar may fall through the 74.95 area once again. If this is the case then we will be looking for a more complex blue wave V) than initially thought. The euro (Eur/Usd 1.4875) moved higher, at a very slow pace, throughout the overnight session, until it touched the 1.4890 area, where the neutral pivot point and the 20-day moving averages can be found. In order to break higher, the market will need much stronger overall momentum, one that might come if equity markets move deeply into the green. 4 Hour chart trend: Mixed. Main price points: 1.4625, and 1.5062. Looking for: Two possible scenarios The euro was lower in trade on Thursday and has reached our 1.4800 support area, after a five completed waves up, as discussed and posted here. The whole price action shown on the chart below now looks quite tricky since the moves are trapped between a 1.5062 top and the 1.4625 lows. As such, there are two possibilities at this point; that this just in a correction of an up-trend, and the other view that this is this fresh start of a new trend. A classic question of whether this is consolidation of yearly gains, waiting to add at a better price. or distribution of positions because a fundamental reason is now in place that forces a review of fair value on the current price. First scenario The first possible scenario is the truncated blue wave 5). A truncated fifth wave finds the top somewhere below the previous wave 3), which means that new highs are not reached. This is also shown in our case as the market did not break through the 1.5062 wave 3) highs over the past few days. We can also count five sub-waves up in a blue wave 5), which is also valid for a truncated fifth wave formation, (wave 5 is an impulse wave and that means it need to be made by a five smaller waves). If this scenario is the case then the market should trade lower with a five wave structure in the near-term, so that we can confirm a bearish reversal. Current highs around 1.5060 needs to then stay in place. Second scenario The second possible scenario is on a global market rise in valuations, and that would signal that the same blue wave 5) is not yet complete, and as such, a more complex and larger structure through the 1.5062 highs could easily happen. In this case, market has just finished a corrective pull-back of an up-trend. Swing Point Reduce exposure and expectancy until we get a better confirmation, it will be worth waiting for. The pound (Gbp/Usd 1.6675) gained 100 pips throughout the Asian and European sessions, even though the overall market was relatively calm. With this uptrend the pound broke above the 1.6600 level, which has been a critical swing point area lately. To the upside, the next two important resistance areas can be found in the 1.6750 and 1.6850 areas. The aussie (Aud/Usd 0.9280) advanced 50 pips since the session started, recovering an important part of the declines seen on Thursday. Right now, the aussie is being propelled by a strong economy and by a big rate differential. Since the year started, the aussie has surged approximately 32%. The cad (Usd/Cad 1.0550) fell 50 pips during the European session, to test the 1.0500 area. From there, the cad bounced back and is currently trading once again near the break-even line. On the daily chart, the cad is trading close to the 20-day moving average. The Trade Balance numbers at 08:30 EST may impact the outlook on this pair. The swissy (Usd/Chf 1.0150) had another tight range throughout the overnight session, as had happened a lot of the time recently. Since the session started, the swissy declined 30 pips, to test the neutral pivot point (1.0145). To the downside, the next important support area is in the 1.0040 area. The yen (Usd/Jpy 89.85) fell 60 pips in Friday morning trade, after it bounced from a resistance area formed by the 20 and by the 50-day moving averages. With these declines, the yen practically sheds every pip that it gained throughout the prior U.S. session. For now, the pair is trading in the 89.90 area, an important support price point that has held the market for almost a month. TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index.

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