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CCI for Reversals and Trend Continuations
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Knowing when the market is going to reverse or continue is one of the most critical elements to trading successfully. In this class, we will explore the CCI (Commodity Channel Index) and discover some simple yet powerful techniques for detecting exactly when a pair is likely to continue trending or reverse.

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Today’s US Dollar Trading

• USD remains two-way after early strength
• Some pairs reverse to flirt with highs
• Large stops still out of range


Overnight Preview

• Look for USD to remain two-way
• Likely quiet ahead of CB rate announcements


Looking Ahead to Wednesday
All times Eastern (-4 GMT)
• 8:30am USD Core CPI m/m
• 8:30am USD CPI m/m
• 8:30am USD Current Account
• 10:30am USD Crude Oil Inventories
• 2:15pm USD FOMC Statement
• 2:15pm USD Federal Funds Rate


Summary
The USD continued to consolidate today reaching highs against the majors in early New York but failing to advance into key bullish levels. The majors recovered after the London fix rising off lows and in some pairs flirting with highs into the close. Today’s PPI and Housing Data was benign helping to underpin the possibility that inflation is not a problem and housing is beginning to recover but more data will be needed according to most analysts. Aggressive traders are suggesting that a positive response for Wall Street today signals that investor confidence is beginning to turn positive from neutral or negative. Should that be the case moving forward the “flight-to-quality” buying of USD will likely end and underlying fundamentals will probably begin to weaken the USD into the end of month at least. Forex traders are suggesting that the possibility of China reducing its holdings of US debt and curtailing their purchase of US debt moving forward works against the USD near-term; time will tell if a larger fall in the USD is likely but for now sentiment is turning neutral for the Greenback. GBP fell to a low print at 1.3963 missing large stops said to be resting under the 1.3940 area and the rate recovers t the 1.4050 area into the close. Lifting EURO with it, EURO has regained the 1.3000 handle and is pressuring highs at 1.3034 into the close with a positive tone noted by traders. Overnight action will likely see a test of the weekly highs at 1.3070 area and traders note stops from large shorts likely in the 1.3080 and above areas. A push to 1.3120 will likely result in short-covering adding to the underlying positive tone; traders note RHS interest in both EURO and GBP into the London fix. USD/CHF is flirting with lows on the day at 1.1811 and a late break would likely trigger close-in stops into the start of Asia tonight; traders note that volumes have remained subdued as large players have already likely sold into the rally this week and are sitting tight leaving only small time frame traders on the bid. USD/CAD has failed at the 1.2700 handle into the close after making highs at 1.2766 early; the rate is still within striking distance of the stops said to be resting in the 1.2660 area and 1.2620 area. The only rate to hold gains on the day of any size is USD JPY trading to a high print at 98.98 before dropping back to the 98.40 area late in the day. Exporters remain on the offer above the 98.50 area and the failure to score the 99.0 handle today is likely a psychological negative to the bulls. Expect stops to be rolled-up closer to the 98.10 area overnight increasing the possibility of a stop-driven long-liquidation break. With the strong bullish sentiment combined with a failure at the recent highs a one-way liquidating break is increasingly likely. Look for the USD to continue in two-way trade with a weaker bias. Tomorrow’s data will likely be overshadowed by the FOMC announcement and the BOJ rate decision overnight.


GBP USD Daily

Resistance 3: 1.4350
Resistance 2: 1.4320
Resistance 1: 1.4250
Latest New York: 1.4050
Support 1: 1.3860
Support 2: 1.3780
Support 3: 1.3720


Comments
Rate two-way, holds gains and has inside range day overnight; stops seen above weekly highs around the 1.4250 area. Tests support on pullback and holds for now. Lows likely remain secure. Reversal off weekly lows a positive technical but the volume needs to come up and I think the shorts have yet to bail as a group. Traders report stops in-range adding for two-way action. Long-term tech resistance now at 1.5000 area likely to cap near term but stops are building above 1.4400 and the 1.5000 handle is a big psychological number. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom. Short squeeze back on the board I think. Next upside target is 1.4400 area
Data due Wednesday: All times EASTERN (-4 GMT)
5:30am GBP Claimant Count Change
5:30am GBP MPC Meeting Minutes
5:30am GBP Average Earnings Index 3m/y
5:30am GBP Unemployment Rate


EUR USD Daily

Resistance 3: 1.3100
Resistance 2: 1.3080
Resistance 1: 1.3050
Latest New York: 1.3008
Support 1: 1.2850
Support 2: 1.2720
Support 3: 1.2680


Comments
Rate follows GBP in two-way action, holding support now above the 1.2950 area. Upside stops likely now in-range around 1.3040/50 area. Overhead resistance is thick up to 1.3100 area so a pullback might be in the works. Aggressive traders can liquidate some longs above 1.3000 area and hold base positions. Traders note big names on the buy side on dips overnight; semi-officials buying 1.2900 area. Close above key 1.3030 area needed for further upside until then rallies likely to be sold so expect more two-way action. Bulls are still attempting to find a bottom. Forex signals around the 1.2920/50 area now likely to offer support on further weakness so expect two-way action and consolidation underneath.
Data due Wednesday: All times EASTERN (-4 GMT)
5:00am EUR Italian Industrial Production m/m

Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)

Analysis Provided by: Forexpros.com - Written by Jason Alan Jankovsky

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