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Currency Charts Net Bullish After Intervention by Global Central Bankers


It's always a good idea to try to understand what the puppet masters wishes are. In this case the puppet masters in question are the US Fed and the Bank of Japan.


The long EURGBP trade mentioned here recently seems to be working out! Is there more to go or take profits?

Before I move on to the Aussie crosses, I wanted to check in on the bullish call I had on the EURGBP in recent articles. As you can see on the chart below, it's "so far, so good." The EURGBP broke out above the 0.81641 horizontal line resistance level to set a new short-term high. This bullish behavior confirms for me that the cross is headed up to at least the 0.83373 level before any major selling pressure should occur. It's not as attractive an entry point here at 0.82012 as it was on the recent pullback to 0.805, but it's still pretty nice for the bulls.

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The AUDUSD is in serious breakdown mode after failing to break out to the upside.

Now, we move on to the Aussie currency crosses. Are they displaying the same bullish patterns as the euro crosses?

The chart below of the Aussie dollar / US dollar cross (AUDUSD) looks downright ugly and answers the previous question with a resounding "No!" The AUDUSD has been highlighted here recently as "almost" breaking out or being "on the verge" of a nice upside run. As we learn through experience in these situations, it's always best to wait for the breakout to occur and then buy on a pullback to the new support. In this case, that type of patience would have saved you some money.

The AUDUSD obviously failed to hold the one-day breakout attempt in the middle of December. Since then, it has been nothing but ugly downside trading in the cross. Now, the AUDUSD has convincingly broken below the lower edge of the long-term pennant formation that we were monitoring.

So, let's assume now that the AUDUSD is in "sell the rip" mode. In this case, I would be looking to sell any rally attempts up to the broken uptrend line (blue). Such a rally attempt might terminate at around 1.05 based on what I'm seeing on this chart.

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Where might it go on the downside once you enter that trade? Let's look at the next chart for answers. The chart below shows the same AUDUSD daily chart, but this time with Fibonacci extension lines that can help show us the potential stopping points on the downside trade. Assuming the AUDUSD is in a wave ((iii)) lower currently, the two most likely downside targets are the 138.2% and 161.8% Fibonacci price extension lines at 0.99665 and 0.98610 respectively. If, on the other hand, the wave count is off and this is merely a correction lower instead of a primary move lower, the 100% Fibonacci projection line at 1.01374 would be the downside target ("correction support"). So, from an entry at around 1.05 (for those willing to wait), even the "correction support" level would offer over 3,500 pips of potential for your trading pleasure.

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No positions in stocks mentioned.

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