Thursday, July 14, 2011


The USD/CHF daily chart to our left by request. This pair has been in a very well formed downtrend for quite a while. So the chart on the left at first glance is confusing but I will try to clear it up, I wanted to show how well formed this trend has been. The light blue retracement starts us out as this downtrend starts in early-mid Feb. After selling off to .9 we retrace almost exactly to the 50% level (shown in light blue). Drawing an extension of that move off of the 50% retrace, our next move lands between the 78% and 100% extension levels. We then retrace exactly 50% of this down move (shown in purple). Drawing an extension off this retracement level, we see that we land almost exactly on the 78% extension. After that we pull back almost exactly to the 38.2% retracement (shown in yellow). We go sideways for just a while which was a little unusual but finally break new lows just a couple days ago. With all this being said, I could see this most recent hammer off nearly the 78% level being a reasonable entry spot. On the other hand if the hammer is not confirmed, I would look for a signal between the 78% and 100% extensions, right around the .80 psychological level. I would think a signal there would produce a retracement of at least 38% or maybe more as it seems this trend is compressing slowly.


By request I have the GBP/NZD daily chart to our left. We are currently breaking new all time lows as it goes and I dont see a whole lot of support anywhere. I've drawn a fib extension from the last time there was any momentum upwards, and we are close to approaching the 100% extension. This also is very close to a psychological support level at 1.9000. This whole down trend since early May has been done with the MACD sloping generally upward creating some divergence (outlined in green). It looks like it is just slowly drifting off with no where to settle or bounce off. We seemed to have formed a nice hammer today and possibly this is a sign we might get a retrace, but I would wait for it to validate by breaking the highs of the hammer.