Thursday November 4, 2010 - 03:42:10 GMT
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Forex Hound - www.forexhound.com
U.S. Dollar Needs to Form Support Base
Sure there was volatility, but everyone expected that but
for the most part, the Fedâ€™s policy statement announcement in my opinion was a
non-event. Technically, shortly after the news was released, the Dollar Index plunged
to a new low, but the quick rebound to almost unchanged for the day indicates
to me that the move was most likely triggered by thin trading conditions.
Although the rebound did not produce a closing price
reversal bottom, it did come close, indicating that perhaps the shorts have run
out of gas or there are buyers out there. Spike moves are usually not good
indicators or major bottoms unless there is follow-through to the upside. This
makes Thursday an important day.
The U.S. Dollar may have hit support on Wednesday, but a
spike bottom is not a good sign of a major bottom. The Greenback needs to form
a support base because my technical works says that the height of the rally is
determined by the length of the base. Without good structure rallies are likely
to fail. This being said, continue to look for weakness in the Dollar until it
can establish a support base.
One other clue suggesting a possible bottom will be taking
out the last swing top on the daily chart at 78.51. Or better yet, the previous
main top at 78.61. Unless this market starts taking out shorts to attract the
buyers, continue to look for lower prices.
Another key indicator of a possible major bottom will be a
weekly closing price reversal. All the components are in place for a reversal.
We have a prolonged move down in terms of price and time. Now all we need is a
higher close, close above the weekâ€™s opening and a close above 50% of the
weekâ€™s range. Last weekâ€™s close was 77.46. Watch for the bears to defend this
area if tested, but donâ€™t get excited about the long side until the bulls can
regain this price.
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