Dollar (and Yen) Bulls on Parade
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Written by Jamie Saettele, Senior Currency Strategist
All the talk of capitulation recently has been just that; talk. However, one specific indicator signals a warning.
What does capitulation look like on a chart? Plot a chart of any time frame with a 1 period ATR and you’ll see that the spikes in ATR almost always indicate turns (what capitulation looks like visually). This week (and it is not over yet) has produced one of the largest 1 week ranges in the EURUSD ever (using DM rates prior to 1999). I have indicated with vertical lines ranges of similar magnitude, which occurred at major turning points. Also, the EURUSD is nearing the 38.2% of the drop rally from the 2000 low and is right at the 2006 low. Both levels are potential support.
The USDJPY is the only pair that I have been correct on. The long term pattern strongly suggests that the all-time low will eventually be broken (below 80). Traders may wish to take some off the table or just move risk to the previous low, which should not be overlapped under the most bearish count.
Doing the same exercise with the GBPUSD as I did with the EURUSD, we see that this week’s ATR is one of the largest ever (the 1992 instance was the famous Soros ‘breaking the Bank of England trade’). ATR’s of similar magnitude led to significant turns in the 1990s and earlier this decade.
This Article continues HERE, and further looks at USD/CHF, USD/CAD, AUD/USD and NZD/USD
DailyFX.com provides free news, trading resources, and market analysis to the trading community.
DailyFX.com provides free news, trading resources, and market analysis to the trading community.
Written by Jamie Saettele, Senior Currency Strategist
All the talk of capitulation recently has been just that; talk. However, one specific indicator signals a warning.
What does capitulation look like on a chart? Plot a chart of any time frame with a 1 period ATR and you’ll see that the spikes in ATR almost always indicate turns (what capitulation looks like visually). This week (and it is not over yet) has produced one of the largest 1 week ranges in the EURUSD ever (using DM rates prior to 1999). I have indicated with vertical lines ranges of similar magnitude, which occurred at major turning points. Also, the EURUSD is nearing the 38.2% of the drop rally from the 2000 low and is right at the 2006 low. Both levels are potential support.
The USDJPY is the only pair that I have been correct on. The long term pattern strongly suggests that the all-time low will eventually be broken (below 80). Traders may wish to take some off the table or just move risk to the previous low, which should not be overlapped under the most bearish count.
Doing the same exercise with the GBPUSD as I did with the EURUSD, we see that this week’s ATR is one of the largest ever (the 1992 instance was the famous Soros ‘breaking the Bank of England trade’). ATR’s of similar magnitude led to significant turns in the 1990s and earlier this decade.
This Article continues HERE, and further looks at USD/CHF, USD/CAD, AUD/USD and NZD/USD
DailyFX.com provides free news, trading resources, and market analysis to the trading community.