Tuesday, December 2, 2008

Compressing currencies

Hi all,

JB3 here with an update on some possibly interesting action in the currencies. I trade them, but also keep an eye on them as they can sometimes tip me off to action developing in the major indices.

And recently in some of the currencies there seems to be a bit of compressing going on.

Checkout the EUR/USD....


The bottom line is that I think there's some brisk moves in store in the near future. Unfortunately the tape is unclear (to my eyes at least) about which direction they will go - there's solid arguments supporting either direction.

Unfortunately there's the potential that an ending diagonal (bullish wedge) ended in a truncated fashion (see circled area), indicating that the EUR/USD could break out to the upside. The channel I've drawn might be further evidence - but I'm not convinced and am hoping the market will tip it's hand somehow before the breakout.

Furthermore, the notion that an ending diagonal (bearish rising wedge) recently terminated in the US dollar index (not shown) is all the rage at the moment - if that's the case, then this would further support a bullish breakout scenario for the EUR/USD.

Uh-oh... I hear my wife screaming my name and it's not for sex.... I'm pushing my luck spending all this time on the markets right now... but before I go, here's a juicy cross rate that has compression in spades - the AUD/CAD. Check it out:

Bye for now....
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