Is it a Bull-Run, or a Buck-Run? The Relentless Dollar Bid Continues!
Eric Furstenberg • 3 min read
When the markets move, there is money to be made. The currency market reacted violently to the recent US presidential election. Since then, there have been powerful moves in the FX world. The great decline in the EUR/USD exchange rate has been one of them. For nine consecutive days, this pair has declined steadily. This is the first time in 23 years that this has occurred. Look at the following chart:
EUR/USD Daily Chart
What a massive decline! This pair is terribly oversold at the moment. Of course, this doesn’t mean that a retracement will take place right away. Currency pairs can remain in oversold or overbought conditions for extended periods of time. However, the probability is good that we’ll see some sort of a pullback soon, even if it’s just the formation of a blue daily candle.
On Tuesday I posted a USD/CAD daily chart with a buy-zone indicated on it. The price penetrated this zone on Wednesday and Thursday and then shot up again. Traders who entered long between these levels are currently in profit by about 80 to 115 pips, depending on where exactly they entered. Look at the following chart:
USD/CAD Daily Chart
The USD/CAD bull trend is still very healthy, and it could remain in this state for quite a long while. I will certainly be on the lookout for weak dips to buy, just like these splendid opportunities that came our way on Wednesday and Thursday. Long entries could have been taken where you see the red arrow’s point in the chart above.
If you don’t like trading off a daily chart, you can also use the hourly to trade from. Here is an hourly chart:
USD/CAD Hourly Chart
Under normal trading conditions, it is normal to encounter many pullbacks in an uptrend. If we see a corrective pullback tomorrow, it could offer a great opportunity to open new long positions. By “corrective pullback”, I refer to a decline that is not very sharp or aggressive.
In the chart above, the red circle indicates a possible location for a long entry. By the time the price reaches this red circle, the 20-EMA would have moved upward slightly, depending on how long it takes to reach this level (in case it retraces far enough). Perhaps the price might touch the 20-EMA in this area, which would add to the probability of this setup being profitable.
This pair has broken out of a range that has lasted for several months. Look at this daily chart:
USD/CHF Daily Chart
This has drastically changed the technical outlook for this pair from sideways to bullish. The recent bullish wave seems quite extended, however. Nevertheless, this wave could still break higher for yet a couple of days, although it’s not likely to happen. If we get a mild correction in the next week or two, there might be an opportunity to get long at a retest of the prior range’s top. You will see exactly what I mean on the following chart:
USD/CHF Daily Chart
USD/JPY Daily Chart
This pair has shattered all expectations with the magnificent breakout above the red resistance zone as displayed in the chart above. Not only did the pair break through this zone, but at the same time, it shattered the 200-day moving average which is a very important moving average indeed. This is a widely used trend gauge in the financial world. An instrument is normally considered to be in an uptrend when the price is above this moving average, and conversely in a downtrend when it is below this moving average.
In this chart, you’ll see a green circle which could possibly be a good level (and time) to enter into a long position on this pair. This would be a retest of the prior resistance zone through which the price has recently broken.
Tomorrow (Friday) offers little in terms of economic data releases. There is an event that could spark some volatility, however. This is a speech by ECB president Mario Draghi at 08:30 GMT.
Besides this, the only notable event is the Canadian Core CPI numbers which will be released at 13:30 GMT.