FX View Analysis for May 2005 and Beyond

Tuesday, September 27th 2005

Important Economic Data

08:00 GMT German Ifo Index for September
08:00 GMT Eurozone Money Supply (M3) for August
14:00 GMT US Consumer Confidence for September

While German Ifo index had lost its significance in recent years, US consumer confidence may be the star figure of the day, especially after hurricane Katrina hit New Orleans. Eurozone money supply may not be a market-moving data, but this figure is one of the main reasons why ECB persistently resisted a rate cut all this time.

EUR/USD closed higher at 1.2067 after hitting 1.2009 earlier on Monday, but it was not enough to alter the negative picture yet as signaled by in-neck candlestick pattern. Euro also breached 1.2040 (76.4% retracement level of 1.1871-1.2589), and this hinted that a visit of this year’s low may occur within a week or two.

Intraday, 60-min chart suggested that we’re in a corrective, zigzag pattern from 1.2009-1.2066-1.2016, with objectives: 1.2108 (1.618x) and 1.2165 (2.618x). This zigzag move retraces the fall from 1.2269 to 1.2009, which then set retracement levels at 1.2096 (33.3%), 1.2108 (38.2%), 1.2139 (50%), 1.2170 (61.8%), 1.2182 (66.6%), and 1.2208 (76.4%). Additionally, turning points at 1.2099, 1.2164, 1.2183, and 1.2269 also serve as resistances.

Resistances for today lie at 1.2096/99, 1.2108, 1.2164/65/70, supports at 1.2042, 1.2016, 1.2009, and 1.1950/60, en route to 1.1866/71.

For today, stay cautiously bearish for the resumption of the slide, aiming at twin bottoms at 1.1950/60 first. Above 1.2108 will indicate the bearish pressure is weakened, but only above 1.2183 will suggest that a low has been in place as euro moves back towards 1.2269.

GBP/USD also formed an in-neck pattern on the daily chart, which is rather bearish. So far, cable had lost more than 61.8% of its gains off 1.7269, and this set the downside objective at 1.7679 (66.6%) and 1.7559 (76.4%). Other key chart levels are 1.7615 and 1.7269.
On 60-minute chart, the bounce off 1.7704 was considered as an a-b-c move, with 1.618x objective attained at 1.7797 (Monday’s high was 1.7796). Calculating the retracement levels of the fall from 1.7928, resistances lie at 1.7816 (50%), 1.7842 (61.8%), 1.7853 (66.6%), and 1.7875 (76.4%). Note that 1.7853 is also the 2.618x projection of the zigzag (1.7704-1.7761-1.7704) and thus considered significant. Additional resistance is at 1.7835 (prior wave 1 (of a lesser degree) terminus).

As bearish outlook remains intact despite the bounce, for today look for the resumption of the fall, setting the course to 1.7679 upon the breach of 1.7704 double bottom. Near-term supports at 1.7745 and 1.7708, while only above 1.7853 may alter the bearish outlook.

Note: My view may be wrong, so do not consider it 100% accurate.
 
Wednesday, September 28th 2005

Important Economic Data

06:00 GMT German GfK Index for October
07:30 GMT UK Current Account for Q2
08:30 GMT UK GDP, final estimate for Q2
09:00 GMT CBI Distributive Trade for September
09:30 GMT Swiss KOF Indicator for September
12:30 GMT US Durable Goods for August
15:00 GMT Kansas City Fed Manufacturing Survey for September
23:50 GMT Japan Retail Sales (Y/Y) for August

Brief Review of Tuesday Session

On the economic data front, US consumer confidence plummeted to 86.6 in September from 105.5, while present situation index and expectations index also fell to 108.9 (from 123.8) and 71.7 (from 93.3), respectively. In Germany, Ifo index improved to 96.0 (vs. 94.6) in September. Current conditions index rose to 96.4 from 93.8, and expectations index edged up to 95.5 (vs. 95.4). Despite the data, dollar firmed across the board on Tuesday, hitting 1.1978 vs. euro, 1.7639 vs. cable, and rallied against yen towards 113.51. Against swissie and aussie, it touched 1.2996 and 0.7529, respectively. Even the mighty loonie eased up towards 1.1806. Perhaps, the biggest contributors to the dollar’s rally were comments from Fed officials. Janet Yellen and Susan Bies both reiterated that inflation seemingly remained Fed’s greatest concern. This signaled that the Committee remained on track for further tightening. But then again, wasn’t it too obvious that the rates will move up to 4.25% by the end of 2005?

Chart Analysis

EURUSD completed its a-b-c pattern mentioned yesterday at 1.2081 and subsequently fell near chart objective (1.1950/60) at 1.1978 following the in-neck candle pattern set on Monday. It bounced afterwards, but the outlook remains negative as indicated by the bearish engulfing candle on Tuesday. The downside pressure remains in force while below 1.2099, above it will open the way for bigger correction. Objectives below are 1.1950/60, en route to 1.1866/71. Near-term, 1.1978 will provide support, while 1.2026, 1.2047, and 1.2081 will provide resistance below 1.2099.

GBPUSD also fell after a bearish in-neck pattern formed on Monday. It touched 1.7639, just above the 1.7615 key Elliot support. The outlook remains bearish as indicated by the bearish engulfing candle. Cable has eroded its 61.8% fibo support, and its 66.6% retracement level. The next on the list is 1.7615, followed by 1.7559 (76.4%). Near-term, resistances lie at 1.7704, 1.7713, and 1.7797. The chart pattern indicates the current phase is likely to be consolidative/corrective. Assuming that 1.7639 holds, retracement-based resistances lie at: 1.7676 (23.6%), 1.7692 (33.3%), 1.7699 (38.2%), 1.7718 (50%), 1.7737 (61.8%), 1.7744 (66.6%), and 1.7760 (76.4%). Thus, remain bearish for today while holding below 1.7704. Above 1.7713/18 will signal that the bottom has been in place as cable bound to push upwards, re-testing 1.7797 and possibly higher.

Note: Do not consider a 100% accuracy of my analysis, as any forecast may miss the reality.
 
Jerry,

I'm confused.

Textbook interpretation indicates that three black crows pattern is bearish, so it should be a sell signal, not a buy signal.

The pattern on the weekly chart didn't seem to be a three black crows pattern. Each of the openings wasn't within the prior session's real body. Instead, it gapped one to another.

However, this week's candle, if turns out to be white, may form a morning star pattern or other bullish pattern. If this week's closing could reach above the mid-point of the prior week's real body, then it would be a significant bullish sign.

Of course, what I mentioned was based on strictly textbook principles.

Cheers!
 
Quote from eternalfuture:

Jerry,

I'm confused.

Textbook interpretation indicates that three black crows pattern is bearish, so it should be a sell signal, not a buy signal.

The pattern on the weekly chart didn't seem to be a three black crows pattern. Each of the openings wasn't within the prior session's real body. Instead, it gapped one to another.

However, this week's candle, if turns out to be white, may form a morning star pattern or other bullish pattern. If this week's closing could reach above the mid-point of the prior week's real body, then it would be a significant bullish sign.

Of course, what I mentioned was based on strictly textbook principles.

Cheers!
More...
Three black crows pattern is bearish?
:eek:
It works the other way for me,just look at the Three white soldiers and slide after them...
That gap is useless because broker who provides chart, opens (starts) week late comparing to others, and the gap is created…
 

Attachments

Jerry, the three advancing white soldiers pattern has three variations.
The first is the three advancing white soldiers itself, which consists of
three balanced white candles. That is, the rise is steady and gradual.
The second is the advance block, where the second and the third candles show
signs of weakened rally.
The third is just like what you have boxed on the attached chart, the stalled pattern.
The third candle shows an exhaustion, while the first and second show strength.
If you look at your attached chart closely, the next candle was an evening star candle,
which of course, warned that a turning point was near. The next candle after the
evening star was a bearish engulfing candle. This time, it would be hard to deny
a top might have been in place.
Why didn't it work? According to textbook interpretation/theory (read Steve Nison's book),
if a three white soldiers pattern occurs at the low price area after a period of
consolidation, it is a sign of an upcoming strength. In his book, Nison warned that
although the pattern is a continuation pattern, one should be wary if it happens at
the time when the market is overbought. Look at the corresponding stochastics indicator.
Wasn't it being overbought at the time the third soldier was completed?
Also, three black crows, as its phrase suggests, bring ill omen, and thus supposed to be bearish,
unless, of course, it happened at the low price area and at oversold market condition.
Cheers!
 
Hello everyone,

Regrettably, I haven't been able to secure enough time to write the weekly analysis. However, I hope next week I will be able to work on it again as usual.

Good luck and good trade!
 
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