Today was a pretty directionless day in the FX market, and besides the strong bullish move in the USD/CAD, the rest of the majors were just frustratingly chopping around.

We saw quite a few weekend price gaps but many of them have been filled already. One such gap was on the AUD/USD which opened lower, but traded higher through the day to fill the gap. Although price managed to advance from the opening level, it was only a minor upward move, and the technical picture on the Aussie still looks very negative. Let’s jump to a few charts.

AUD/USD

AUD/USD Daily Chart

Here we can see that the Australian dollar is trying its best to hold on to support, and we might even see a close above the 20 EMA today. Nevertheless, it would take a lot of energy to push the pair back into the red resistance zone marked on the chart above. To break through this level will require even more force, and the path of least resistance looks like the bearish route lower. The first notable support zone (besides the blue one marked on the chart above) is about 150 pips away. Look at the green box in the following chart:

AUD/USD Daily Chart With Support and Resistance Zones

Look at one of the trade ideas I posted yesterday:

AUD/USD Daily Chart – Conservative Entry

You can see that this entry targets the lowest support zone marked on the chart with support and resistance zones. Here is a weekly chart with the same trade setup:

AUD/USD Weekly Chart – Conservative Entry

Notice the beautiful pinbar candles of last week and the week before last week. We still have to see whether this trade will be triggered, but of course, there is a more aggressive way to play this setup. It is basically a lower entry at about where the price is now (0.76310). For more information about stop loss and take profit distances, please look at yesterday’s article ‘Commodity Currencies are Showing Some Weakness – The Australian Dollar in Focus’.

USD/CHF

Another pair I’m eyeing at the moment is the USD/CHF. I like the steep decline we’ve seen lately and the way that the waves are unfolding. First, we see an impulsive wave 1 followed by a corrective wave 2, which is once again followed by an impulsive wave, the third wave. Look at the following chart:

USD/CHF Daily Chart

Now to be very critical, in Elliot Wave theory the third wave is supposed to be the longest wave of the three impulse or motive waves (waves 1, 3, and 5). In the chart above the first wave is a few pips longer than the current third wave. I say ‘current’ because the third wave might not be completed yet. I entered a short position today at 0.96383. This entry was taken at a previous support level with the idea that it would turn into resistance once price had broken through it. Look at the following chart:

USD/CHF Daily Chart

As you can see, the price bounced into this new resistance level abruptly, only to be pushed back down by the sellers again. Now this doesn’t mean that the pair will decline straight down from here, but at least we can see that the bearish market players have some sell orders stacked at this level. We might get several tests of this level, or the level might not even hold after all. Traders looking for short opportunities might even be lucky enough to get an entry closer to the 20 EMA than I did. It should be noted however that today’s candle formed a wick to the upside which could be indicative of near-term decline in the exchange rate.

Other Major Pairs

The EUR/USD is coming up against resistance and the bears might consider fading the recent bounce. Perhaps price will fall into the old range again which could be profitable for traders who sell the pair at current levels or even a bit higher.

The GBP/USD is pretty sideways – not very exciting.

The USD/CAD might be nearing levels at which to sell it again. Just be careful of the current strong bullish momentum and the oil price which is correcting lower.

Economic Data

Once again we don’t have a lot of important news scheduled for tomorrow. Two releases that might have an impact on the market are the German manufacturing PMI numbers at 07:30 GMT and the US New Home Sales numbers at 14:00 GMT.

Good luck trading!