Pure Guesswork

The market is still conforming to the downward impulsive pattern shown in charts yesterday.

Daily:

Once the 1.618 level around 1.5720 became support yesterday morning, it became very likely that the next Fibonacci level up, 1.272, would be visited again. This level is around 1.5940, and has proven to be an equilibrium level around which the market has oscillated since late September.

Seen on a 4 hour chart:

Having overshot that level overnight, it has now come down below it again.

A 1 hour chart:

We could play tag with this level for a bit.
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Posted by Pure Guesswork at 10:23 AM | Permalink | Comments (0) | TrackBacks (0)

A Fibonacci pattern seems to be taking shape in the GBPUSD bear move. Taking the low near the beginning of September and the high on September 11 as the alpha-beta base for a downward impulsive move, the initial 1.618 extended target would be approximately 1.5725. Below that would be the 2.618 extended target around 1.5095.

Daily chart:

Notice how, once the initial impulsive thrust was made below the alpha level towards the 1.618 initial target, the market oscillated for days around the 1.272 Fibonacci level, failing twice to rally above the alpha level and then today bounced off the 1.618 level.

Seen in more detail on a 4 hour chart:

Posted by Pure Guesswork at 10:13 AM | Permalink | Comments (0) | TrackBacks (0)

Two weeks ago I posted a few charts showing a downward impulsive pattern with a 2.618 Fibonacci target at 75.77. We came within a few pips of that level on September 23. The pattern seemed to have some validity since, despite the overwhelming bearish dollar sentiment displayed in the financial press and blogosphere since that time, the index has continued to trade sideways since that low. Yesterday we bounced off it again.

A level like this (2.618 extension from a base pattern) is not some iimpenetrable barrier; it should rather be seen as an area of instablitlity, where a trend can suddenly find itself without the energy to continue. For the last two weeks that is what has happened with the decline of the dollar index. To call the reaction of the market to this level a "bounce" is being rather generous--it has been rather a listless sideways action. That raises the odds that this is a pause in the dollar's decline rather than a turning point. Yet what should be emphasized is the disconnect between the sentiment expressed vocally these last few weeks and the lack of corresponding movement in the dollar index itself.

Here are the weekly and daily charts as of this morning, showing the extended Fibonacci pattern first explored 2 weeks ago:--

Weekly:

And daily:

And then, just for the entertainment of USD uber-bears, a chart showing the next downward target in this pattern, one which is extended downard 4.236 times the base pattern.

68.91. Happy now?

Posted by Pure Guesswork at 7:32 AM | Permalink | Comments (0) | TrackBacks (0)

An update of the impulsive Fibonacci pattern which I have been following since mid-September when the pair was trading around 0.8950. The initial upside target was circa 09075 to 0.9095, which was hit on September 22nd. There was a small sell-off, but then the pair shot through the (2.618) target level. Since that time the initial resistance level around the 2.618 extension has become support. Currently a minor Fibonacci level (3.33) is providing resistance (around 0.9260).

A daily chart:

And seen in more detail on two 8 hour charts:

As can be seen, if this pattern continues to be operative, the next big target for the EURGBP would be somewhere around 0.9500.

Posted by Pure Guesswork at 7:25 AM | Permalink | Comments (0) | TrackBacks (0)

A comparision of the rate differential between 2 Year US Treasuries and Bunds. From June 2008 until March 2009 the spread narrowed. As this happened the euro topped out, and then declined. When that trend ended and we had a relatively flat relationship between the yields of the two, the euro began to rally. The question is how long this can continue if the spread does not begin to increase again. The rate advantage of the 2 year Bund now is scarcely 25 basis points. The last time the euro surged above 1.50, the rate advantage was well over 100 basis points and rising.

Posted by Pure Guesswork at 12:03 PM | Permalink | Comments (0) | TrackBacks (0)

Just to be contrary--are we at a significant point of resistance in AUDUSD?

We are right at a potential 2.618 Fibonacci extension of a base built at the beginning of the year.

And an interesting dog which did not bark today is the AUD yield curve. The reaction to the surprise rate hike of the RBA has been a big nothing. Whatever expectations the market had of future rates, today's hike has not seemed to change them. Some longer dated issues actually came down in yield.

Posted by Pure Guesswork at 10:44 AM | Permalink | Comments (0) | TrackBacks (0)