Dollar High Likely In Place - By DailyFX

Dollar High Likely In Place

A significant USD top is in place. The EURUSD is expected to exceed 1.5817 in the next few weeks and the GBPUSD is expected to exceed 1.9850 and probably test 2.02 by mid-July. Regarding the USDJPY (which we have admittedly been wrong on for some time now), we are just as frustrated as many of you probably are... on the bright side, this is often the individual psychology that attends significant turns.

EUR/USD

The EURUSD has finally turned as we had been expecting for the last week. 1.5364 is viewed as a significant bottom and price is expected to exceed 1.5817 in the next few weeks. Regarding the bigger picture, it is possible that a push through 1.5817 will complete the second leg of a flat or the third leg of a triangle within a larger correction from 1.6018. The other possibility is that the EURUSD goes on to new highs before forming a significant multi year top. Either way, we are bullish against 1.5364.

STRATEGY: Bullish, against 1.5364, target above 1.5817

USD/JPY

There is no change to the USDJPY analysis (which we have admittedly been wrong on for some time now). We have tried catching this turn 3 times and each time the market has told us that we are wrong. Potential resistance extends to the 2/28 high; at 106.63. This is also a major congestion area. Ideally, a top forms before 107.20 (failure to do so would require us to reassess the longer term pattern).

Note: we are just as frustrated as many of you probably are... on the bright side, this is often the individual psychology that attends significant turns

GBP/USD

The GBPUSD story is the same as the EURUSD story. After breaking to multi-day lows, the larger bullish trend has resumed as expected. As long as 1.9461 is intact, the GBPUSD is expected to exceed 1.9850 and reach resistance from daily highs just shy of 2.0250. Risk on longs can be moved to 1.9461

STRATEGY: Bullish, against 1.9461, target above 1.9850

USD/CHF

Same story with the USDCHF as well (but as the inverse of the EURUSD and GBPUSD). "There is little doubt that the advance from .9647 is corrective because a triangle separates the two legs. The only question is whether or not the rally from .9647 is a complete 3 wave rally or just the first wave of a larger more complex correction. Regardless, a bearish bias is warranted against 1.0527."

Note: the CHF may be the outperformer (along with the Yen) as risk aversion is expected to return (as suggested by stock market wave structure)

STRATEGY: Bearish, against 1.0527, target TBD

USD/CAD

The minimum objective that we have cited for some time is above 1.0324. However, the alternate (in red) commands a good deal of respect in this case given the USD bearish bias in the other pairs (alternate here is a triangle). This is why we mentioned the last few days to "think about taking some longs off of the table near 1.02." There is no change to this strategy. In the case of the triangle, the rally from .9818 would be wave D of the triangle (to be followed by wave E lower and then a bullish breakout).

STRATEGY: Bullish, against .9967, target above 1.0324 (but lighten up on longs ahead of 1.0324 resistance)

AUD/USD

The AUDUSD continues to respect the supporting trendline and as a result, we remain bullish. The advance from .8952 is likely the final leg of a diagonal that will lead to the major top mentioned in the longer term chart. "The rally from .8952 is wave C of a large 5th wave diagonal that could extend to a measured objective just below 1.00 in coming weeks (.9936)." A bullish bias is warranted against .9290 although price ideally remains above .9486.

STRATEGY: Bullish, against .9486, target .9936

NZD/USD

From a price structure point of view, the decline since the March top at .8215 has been choppy and corrective. The drop counts well as a double flat (this is a complex correction). Moreover, the legs of the decline are roughly equal (a common characteristic among corrections). The leg up from .7536 is the closest thing to an impulse that the NZDUSD has shown since the March top. As such, a bullish bias is warranted against .7536 and the target is above .8215. Yesterday’s plummet may be wave C within the A-B-C decline from .7921.

STRATEGY: Bullish, against .7536, target above .8215

DailyFX

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FOREX : Foreign Exchange Market

FOREX is a word play on the term Foreign Exchange Market. It is a market for buying and selling of currencies from all over the world. Certainly, such transactions are bound to be voluminous. It is just an estimate that there are about transactions of $1.5 trillion USD on a daily basis in the FOREX. Now just compare this with the paltry $300 billion USD a day transactions for the US Treasury Bond and the $100 billion a day transactions for the US Stock Exchange.

The FOREX came into existence in 1971 when the fixed currency exchanges were abolished. Currencies no longer had fixed values after that; on the contrary, their rates (mostly taken in comparison with the USD) were fluctuating, and changed on a daily basis. Throughout the seventies and the eighties the FOREX grew steadily, showing more advancement in the later years. The market has stupendously grown from $70 billion USD a day to the staggering amount that it transacts today on a daily basis.

There are actually about five thousand trading institutions in the FOREX. These include international banks, central government banks such as the US Federal Reserve, and commercial companies and brokers for all types of foreign currency exchange. The best thing that shows the unbiased nature of the FOREX market is that it has no fixed headquarters anywhere – it operates primarily from all major cities like New York, Tokyo, London, Hong Kong, Singapore, Paris, Frankfurt, etc. One can even use the telephone or the internet to make the transactions. The major businesses at the FOREX are the buying and selling of products in other countries. Several transactions are also conducted from the currency brokers or traders who stand to make small profits with the daily fluctuations in the market.

Most of the FOREX business is centered on big banks and financial institutions, but it doesn’t mean that the FOREX is inaccessible to small investors. The recent changes in the financial regulations have effectuated this accessibility. Earlier, a minimum transaction size was required to conduct business with the FOREX. But the current rules have made it possible to break large inter-bank units into smaller bits. Each bit is worth as less as $100,000. This makes it possible to each individual investor through loans that are extended for trading, known as leverage. The ratio to control the lots is 100:1. This means, every $1000 USD will allow one to control $100,000 on the FOREX.

The benefits of trading with the FOREX are mentioned below:-

(1) Liquidity of Investments – As the FOREX is a huge market, the funds have a very high degree of liquidity. This is because of the presence of the international banks who provide their bids and carry out a large number of transactions on a daily basis. Therefore, there is always a buyer or seller for any type of currency.

(2) Highest Degree of Accessibility – The FOREX is open 24 hours a day for 5 days a week. Every Monday morning the exchange opens at Australian Standard Time and closes on Friday afternoon at New York time. Greater accessibility is provided because the transactions can be conducted from the person’s home or office.

(3) Open Market – At the FOREX, there are no secrets. All the fluctuations that occur in the market are made accessible to everyone at the same time. There is no insider trading in the FOREX.

(4) No Commission – There is no hassle of paying commission to the brokers in the FOREX. Here the brokers earn by setting up a difference between the buying price and the selling price of a currency, which is known as a spread.

It must be understood by now that for the FOREX to work effectively, the currencies must always be traded in pairs. For instance, the Japanese yen must be traded against the euro. When one kind of currency is sold, there should be another to be bought in its stead.

The profit happens because there is always mobility between the different currencies. Even if there is a miniscule change in the exchange rate, then it could mean substantial changes in the profits due to the large amount of money involved in the transactions. People are thronging to the FOREX and not any other institution due to the trust that they have in it. To add to the advantage, the market is absolutely well-advanced and uses sophisticated software for dealing out its transactions.

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