Friday May 20, 2005 - 12:30:40 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Fx-Thoughts for the day - Evening - 20-05-05 ...1215 GMT
MARKET IN A DELIMNA
The market is not moving because it is in a delimna and does not know
WHERE to move. The delimna is, "Is the Dollar downtrend over? Or not?"
The follow-up question to that is, "Which downtrend are we talking
Let's take a look at the Euro Weekly Candles chart since, say, Jul-01.
The uptrend line joining the Lows of Mar-02 and Sep-04 has been
violated near 1.29 at the end of Apr-05, and we may say that the three year
old Euro uptrend has come to an end.
Similarly, look at the Weekly Close in Dollar-Yen since Dec-01. The
downtrend line joining the peaks of Jan-02, May-04 and Oct-04 has been
violated near 106.30 (circa 25-Mar-05). As such, it may be said that the
Dollar downtrend is over and an uptrend has started.
BUT, in both currencies, the Dollar is still in a downtrend if we look
at shorter periods. In EUR-USD, an uptrend line starting from the
1.1377 Low (week ended 07-Nov-03) on Weekly Candles and joining the troughs
of Apr-May-04 and Sep-04, has still not been broken and provides
Support above 1.25.
Similarly, on the Weekly Close chart in Dollar-Yen, the downtrend line
joining the peaks of Jul-04 and Oct-04 meets the 108.19 peak of
08-Apr-05 and provides Resistance now near 108.00. So, once again, while the
longer term downtrend is over, the shorter term downtrend is still in
THESE are the cross currents the market is caught between. People
giving credence to the longer term charts are likely to buy Dollars, while
those swearing by the shorter period might be looking to sell Dollars.
Eventually the longer term may prevail, but the Dollar might need to
retreat a bit over the next couple of weeks, pleasing the short-term
chart watchers in the process and catching them off-guard and to build
enough strength and recoil to break its short term Resistances in the
middle of June, maybe.
The Cross has been in a 134.36-136.31 range for the last 15 days (three
trading weeks). Its now come to a point where the market will probably
HAVE to move sometime next week - either up towards 137.35 or back down
towards 134.30. Even a fall to 134.30 would still keep the Cross within
IN SHORT, it WAIT AND WATCH time. No trades/ orders tonight.
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