04/14/2009 Forex Market Comments

After good Friday's narrow range bar (NR20), yen chose to heading south. On the point and figure charts, yen made a bearish triple bottom breakdown at 99.50. The nearest downward target could be the 61.8% fib retracement level 98.03. The former swing low, also the 38.2% fib ret level 99.31 becomes resistance.



Yesterday British pound made a triple top breakout at 1.4766, a very bullish sign and beautiful up trending day for pound. The up thrust is not ready to challenge the former swing high 1.4956 yet. Pound formed a double top pattern.



Euro cooled off today, and remained below pivot point 1.3294 and 10-day ema 1.3300. There is no signal from point and figure charts. It's still an opportunity - an opportunity no to trade as stated in one of my day trading rules.

Day Trading Rules - Trade What You See Not What You Think

Thursday for euro was a NR7/ID (narrow range 7 & insider day). Since euro already stayed in a top range for 5 days, such kind of volatility dried up would indicate a high probability trending day on Friday. For a NR7/ID, there is no need to predict which direction market will breakout, cause either direction is possible. We just need to follow what the market is leading us.

The first short signal was given at breakdown Thursday's low. On hourly point and figure chart, it's a double bottom breakdown at 1.3500 confluence with the break of support trend line. The second short signal was given at breakdown the bottom of the top range, on hourly point and figure chart, this was a breakdown at major support at 1.3433.


1st downward target: 3356 (average daily range)
2nd downward target: 3265 (average daily range + 1std)
3rd downward target: 3174 (average daily range + 2std)

The major downward movement happened in London session. In US session, euro found support at its daily 2nd downward target. By the way, Friday formed a WS7. This was a classical NR7 setup. Detail information about NR7 setup can be found in Linda Raschke's Street Smarts: High Probability Short-Term Trading Strategies or Toby Crabel's book.


Cable made a similar breakdown at the bottom of its top range. Before the breakdown, cable already made a series of lower highs and lower lows, on point and figure chart, cable formed a downward channel, the short signal was given at the double bottom breakdown at 1.4533, confirmed by the breakdown from the channel at 1.4433, then followed by the breakdown from the support at 1.4400.



Yen met the same resistance from 99. Last week on hourly point and figure chart, there was a triple top false breakout. This time we got a double top false breakout. History does repeat itself.

Apply Point and Figure Charts for Forex Day Trading

On hourly point and figure charts, yen made a double top pattern at 98.50, which is at the same level of the triple top before last week's slide. Then the double top breakout met the same resistance from 99. It would be interesting to watch whether this up thrust will challenge the key 100 level.

Euro met a double top resistance at 3633 in early US session. The slide ended with a higher low, which indicates buying interest.


On pound's candlestick chart, it's clear the lower highers indicate selling pressure.

On hourly point and figure chart, pound formed a downward channel. After met the overhead resistance from the top of channel, pound broke down from the pivot point (4598). The slide stopped right at the bottom of channel, which is also the 38.2% fib retracement level. The key support level 4392 is still intact.

After five days of top building, euro's daily range contract and today is a NR7/ID, we might have a trending day by the last trading day in March. Yen formed a NR7.

Inside Day for Three Major Currency Pairs

Friday was inside day (ID) for three major currency pairs. Since there was no reduced volatility, we should be on alert about false breakout.

At the beginning of London session, euro made a triple top on candlestick chart, just 2pips shy of Friday's swing high. Noticed the divergence given by the MACD, even if euro did breakout, we wouldn't take a long position. There was a strong support zone just above 1.3500 (swing high 3533, Friday's low 3516, and 23.6fib 3524.) 3500 is today's downward average daily range. Since the uptrend was already established, the probability for euro to reverse is slim. The downward movement took Friday's low by 32pips, then crawled back. That's a classical stop hunt. Now euro formed a perfect top range from 3736 to 3516.


Unlike euro, pound did breakout, but all three attempts failed, and formed a triple top.



Yen was staying in an upward channel, made a series of higher highs and higher lows. It retraced more than 61.8% of last week's slide. On hourly point and figure chart, yen made a double top breakout. Yen reached its upward average daily range 97.30.

03/17/09 Forex Market Comments

Yen did breakout but without much following through momentum, and met resistance from former swing high 98.91. If yen drop under 97.54, which will null the NR7/ID setup. Today's volatility dried up and formed a NR20 (narrowest range in 20 trading days). On hourly point and figure chart, yen formed a triple top. Today's trivial breakout only surpass the triple top formation by one box (25-pip). There is a perfect support line when yen edged up. I will post the point and figure charts tomorrow.

Pound formed a NR20/ID too. Watch out when market approaches today's high and low levels(4135-3963).