Published On: Fri, Feb 17th, 2017

USD to move higher in CD leg — playing the commodity pairs

InstaForex

Background


USD index

We got the move down in the index yesterday in what we believe to be the BC leg of a larger AB=CD corrective formation. The prime support is at 100.25 and we have stopped short at a 100.40 low. There no clear signal that the upward move is underway (in some majors) and I would still buy USD dips to this level. 

USD Index (intraday) – Looking for a move higher in CD

Source: Saxo Bank

I prefer to look at commodity pairs when buying USD and I am starting to build positions in USDCAD and AUDUSD. AUDUSD charts explained below: 

AUDUSD

Monthly – after posting a bullish outside month in January, we have had to review our medium-term forecast. We have seen mixed trading for the last sixteen months as we hold onto the base of the expanding-wedge formation. We could say that we have completed a 5-wave pattern, but the fact that waves three and one overlap makes this forecast unclear. Last month’s Marabuzo is seen at 0.7395. 

Source: Saxo Bank 

Weekly – just holding on to the trend of lower highs. Are we forming a bullish reverse head and shoulders? We’d need a clear break of this week’s high (and close) to call that. Dips are likely to find buyers. 

Source: Saxo Bank 

Daily – moved higher in a very impulsive 5 rally. We have now completed the 5-wave pattern and stalled close to the trend of lower highs (at 0.7747). The four-hour chart has posted a DeMark 13 exhaustion. 

 Source: Saxo Bank

Intraday (two-hours) – posting an ending-wedge formation. A break of 0.7680 and the measured move target is 0.7618. With the previous swing low and 261.8% extension in the vicinity, this is our target area (today). I would then look to sell rallies back up towards the 0.7680 area as this choppy USD correction plays out. 

Source: Saxo Bank 

USDCAD charts, target and stop posted on the squawk. 

Management and risk description

Only looking to short down to 0.7615-05 then sell into rallies close to 0.7680 as this corrective formation plays out. 

Parameters

Entry: short at 0.7696

Stop: 0.7735

Target: 0.7615-0.7605 area

Time horizon: today 

— Edited by Jack Davies

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