Forex-90

Price action on EUR/USD, a 4-hour chart of which is shown, has consolidated once again within the context of a strong downside move. After the uptrend breakdown that occurred in the beginning of the month, this currency pair has been characterized by repeated consolidations and then breakdowns of those consolidations. The bearish bias in the pair continues to dominate as price continues to make lower highs and lower lows. For more technical analysis on this currency pair,

Within the month of December, the dramatic bearish correction in spot gold (a daily chart of which is shown) has brought price action severely off the all-time high around 1225 hit early in the month. This month-long bearishness has thus far corrected the steep, and subsequently overbought, run-up in Gold that had occurred for several months prior to that all-time high being reached. Despite this current bearish correction, gold is still very much within the bounds of overall uptrending mode. The drop that occurred this month has brought price down to a 61.8% Fibonacci retracement level of the run from the 985 low in early October to the 1225 all-time high. For more technical analysis on Gold,

Price action on USD/CAD, a daily chart of which is shown, on the first trading day of the New Year has displayed a marked bearishness that has brought the currency pair back down to dip below strong recent support in the 1.0400 price region. This tentative bearishness exists within the context of both a long-term general downtrend extending from the March 2009 high, as well as a flatter medium-term downtrend extending from at least August of 2009. For more technical analysis on this currency pair,

Price action on EUR/USD, a daily chart of which is shown, has consolidated in an inverted flag-like formation since late December. This occurs after price dropped substantially starting in the beginning of December, breaking down below a key uptrend that had been in place since the March lows. In the process of dropping, EUR/USD also broke down below several key support levels, most recent of which was the approximate 1.4450 price region. After breaking down below this level in mid-December, price has repeatedly attempted but failed to breakout above it once again, forming the noted flag consolidation in the process. For more technical analysis on this currency pair,

Despite the deep bearish correction that occurred in spot gold (a daily chart of which is shown) in the month of December, price action has begun what could turn out to be a significant rebound as of the beginning of 2010. This occurs within the context of an overall, continuing uptrend. The December bearish correction brought price down to a key 61.8% Fibonacci retracement level at around 1074 (the low-to-high retracement span being measured from the low on 10/2/2009 to the all-time high on 12/3/2009), before bouncing up off this support region. For more technical analysis on Gold,

Price action on USD/CHF (a daily chart of which is shown) has, much like its EUR/USD counterpart, formed a solid flag pattern. In the case of USD/CHF, this potentially bullish flag formation occurs after a tentative bottom was established just below parity. The top of this flag conforms approximately to a downtrend resistance line extending from the March 2009 high. For more technical analysis on this currency pair,

Price action on USD/CHF (a daily chart of which is shown) has, much like its EUR/USD counterpart, formed a solid flag pattern. In the case of USD/CHF, this potentially bullish flag formation occurs after a tentative bottom was established just below parity. The top of this flag conforms approximately to a downtrend resistance line extending from the March 2009 high. For more technical analysis on this currency pair,

After having hit a 4-month high at the top of a medium-term downtrend channel extending from the April 2009 high, price action on USD/JPY (a daily chart of which is shown) has respected that downtrend resistance by tentatively retreating. This medium-term downtrend channel resides within a larger, long-term downtrend channel extending from the June 2007 high. Currently, a key bearish event to watch for would be a significant breakdown below the steep intra-channel uptrend support line. For more technical analysis on this currency pair,

Price action on AUD/USD, a daily chart of which is shown, has made a swift rebound after breaking down below a long-term uptrend in late November. This rebound has brought the pair close to the 15-month high around 0.9400 that was hit in mid-November. In the course of the recent bullishness price has broken out above several resistance levels, including a short-term downtrend resistance line extending from the 0.9400 high, and has tentatively defied speculation that a new downtrend is in the making. For more technical analysis on this currency pair,

Price action on AUD/USD, a daily chart of which is shown, continues to display some robust bullishness on its sustained rebound off the late-December low. This rebound has broken out above several resistance levels, including a short-term downtrend resistance line extending from the 15-month high around 0.9400 that was hit in mid-November. Currently, price has once again revisited strong resistance in the 0.9325 price region, just short of the noted 0.9400 long-term high. For more technical analysis on this currency pair,

Price action on USD/CAD, a daily chart of which is shown, has approached a strong support area in the 1.0200 price region, which represents the long-term 14-month low hit in October 2009. This approach of key support occurs within the context of an overall downtrend in the pair. As of early Friday (1/15/2010) New York session, price has tentatively made a bounce up off this support. For more technical analysis on this currency pair,

Price action on spot gold, a daily chart of which is shown, has formed a potentially bullish pennant consolidation pattern within the context of its rebound off December lows. This rebound is represented by a short-term uptrend support line extending from the December 22 support low around 1074. This all occurs within the context of an overall, continuing uptrend. For more technical analysis on gold,

Price action on USD/JPY, a daily chart of which is shown, has displayed marked bearishness for more than a week, since the top of a parallel downtrend channel was reached and respected in early January. In the course of this bearishness, price broke down below a key intra-channel uptrend support line extending from the late November lows. After that breakdown, price has continued to descend down to a key support region around the 90.50 area. For more technical analysis on this currency pair,

Price action on EUR/USD, a daily chart of which is shown, has made a marked breakdown of a bearish continuation flag pattern that previously appeared to be on the verge of becoming invalidated. After the false upside tests of last week (which reached up to the key 38.2% Fibonacci retracement level of the initial downtrend run), price dropped substantially to break the flag to the downside, fulfilling the pattern’s customary role as a trend continuation formation. For more technical analysis on this currency pair,

After rebounding off support in the 1.0200 price region late last week, USD/CAD (a daily chart of which is shown) has reflected strong dollar-strengthening in the past couple of days by breaking out above several key resistance areas. This includes the 1.0400 price region that was just broken on Wednesday. Currently, as of early Thursday (1/21/2010) New York session, the pair is still experiencing some bullishness, possibly targeting a key downtrend resistance line extending from at least August of 2009. For more technical analysis on this currency pair,

Price action on EUR/JPY, a daily chart of which is shown, has descended all the way down to reach and dip below key support around the 127.00 price region. This occurs within the context of a prolonged sideways trading range that the pair has been entrenched in since at least mid-2009. Currently, bearishness in the euro against the yen has been a prevailing theme for more than a week. In the process, price has just hit a fresh 9-month low with even further bearishness likely. For more technical analysis on this currency pair,

Price action on spot silver, a daily chart of which is shown, took a steep dive for most of last week after reaching resistance around the 18.80 price region. Price at that level approached, but fell short of, the 19.40 region long-term high that was reached in early December 2009. Currently, the price decline of last week has brought silver down to approach key support in the 16.70 price region. In the process, it has also formed the rough pattern of a head-and-shoulders formation, with price currently around the region of the neckline. For more technical analysis on this currency pair,

Price action on AUD/USD, a daily chart of which is shown, has descended back down to hit key support around the 0.8950 price region before retreating back up. This occurs within the context of an overall sideways consolidation, after price reached strong resistance around 0.9325 in mid-January (just shy of the 15-month high around 0.9400 that was hit in mid-November 2009). Currently, U.S. dollar strength appears to be exerting some general downside pressure on this currency pair, pushing it towards a potential new downtrend, much like what currently appears to be occurring with EUR/USD. For more technical analysis on this currency pair,

Price action on USD/JPY, a daily chart of which is shown, has recently displayed a clear continuation of the overall downtrend that has been in place since April 2009. This downtrend has manifested itself as a well-formed parallel downtrend channel. After reaching the top of the channel in early January, and then reversing and breaking down below an important intra-channel uptrend support line extending from the late November lows, price stalled just above key support in the 90.50 price region. After breaking down below this support late last week, the pair has continued its bearish stance into this week. For more technical analysis on this currency pair,

I am often asked my opinion on the best ways to capitalize upon trends in the forex market. My general philosophy for taking advantage of the frequently occurring trends in the forex market on any timeframe is very simple. When there is a clear trend, especially one that is relatively strong, the best method for exploiting the directional bias is to trade breakouts of both consolidations and counter-trend retracements, all in the direction of the prevailing trend.

How does one know that a trend is in place for the chart timeframe one is viewing? There are many methods, including: trendlines, slopes of moving averages, correct order of multiple moving averages, ADX, visual estimation of relative highs and lows, higher timeframes, etc.

Once the existence and strength of a trend are established, the trader can then watch for price consolidation areas within the trend. This could be a chart pattern like a triangle, flag, pennant, rectangle, wedge, or similar. Or it could just be an instance where price is moving up and down in a tight range-like situation. The bounds for any consolidation can be established using chart drawing tools. This creates support and resistance lines that can be used as triggers for trade entry. Trades can then be placed if price breaks out of consolidation in the direction of the prevailing trend.

Similarly, even strongly trending currency pairs will have instances of counter-trend retracement. When price makes a counter-trend retracement, a counter-trend trendline can be drawn. Any breakout of the trendline in the direction of the prevailing trend can be used as a trade entry trigger.

In order to be truly effective, this simple philosophy for trend trading in the forex market should be accompanied by strong risk and money management principles, along with dynamic profit-taking practices. Trading in this manner, one may properly take advantage of the many substantial trend moves that occur frequently in the forex market.

Price action on EUR/USD, a daily chart of which is shown, has finally made a tentative breakdown below the 1.4000 support/resistance and psychological barrier, establishing a new 6-month low for the pair. This occurs after a slight bullish retracement that occurred several days ago which formed a small flag-like consolidation pattern. The current tentative bearish breakdown indicates a potential continuation in the new overall downtrend that began after the previous long-term uptrend was broken to the downside in early December. For more technical analysis on this currency pair,