Pairs Waiting To Break As Dollar Tumbles:


The GBP hit just south of 1.60 nearly 2 months ago and has not been back there since. The GBP closed Friday at the most recent highs, or near term Resistance at 1.5835. A close above Resistance should pave the way toward a retest of 1.60 and we believe it should get there as Friday’s candle completed a candle formation known as the Rising Three. The Rising Three involves a positive candle followed by three lower candles whose close does not fall lower than the positive candle open. The last candle in the formation then retraces the losses of the prior three losers to close at or above the original positive candle’s close. Essentially, the candles are telling us that three days of negative price action was ineffective in bringing prices down which means they are more likely to rise than fall. (Note: in forex the pattern has more flexibility than in other markets as there is one additional up candle present in the formation which can be ignored to to size and position)


After a period of extended volatility going back to May of this year, September has finally started to see a period of price consolidation. Price consolidation is typically a precursor for a breakout. The CAD’s 50 day MA is set to cross below the 200 day MA which should provide extra momentum for a CAD run at the Dollar. The CAD will need to take out Resistance at R1, or 1.0170 followed by a close below R2 or 1.01. If we see those levels taken out the CAD will likely try to push below Dollar parity once more.


The Kiwi closed at R1 or medium term Resistance at .7440. However, Friday’s candle closed above the 78.6% Fibonacci Retrace level generated from a high of .7650 set in October 09 to a low of .6550 set in May of this year. Additionally, the Fibonacci 38.2% Fan extension was taken out at the same time. This break above Fibonacci Resistance should propel the NZD to R2 at .7525 and R3 at .7650. Finally, the 100 day MA is poised to retake its position above the 200 day MA which will align all three major moving average in an order consistent with rising prices.

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