Pure Guesswork

A further update on a pattern noted last Wednesday, January 6, and yesterday.

Once again the AUDUSD has bumped up against resistance around the 0.9326 level, the high which was made in late October.

This is the second time this week that an attempt to break this level has found sellers. This can be seen in greater detail on an hourly chart:

I would suggest that this level around 0.9320 -- 0.9330 is a more important resistance level than the higher high which was made in mid-November around 0.9400. The November high, though higher by 70 pips or so than the October high, was part of an irregular correction. The October high was the culmination of an impulsive move which I believe leaves a deeper psychological imprint on the market. If today or tomorrow the AUDUSD succeeds in breaking through that 0.9326 level in a convincing way, I do not believe the 0.9400 level will provide serious resistance. If, however, we see more downside action today, the notion that we are forming a significiant head and shoulders pattern in the AUDUSD should be taken more seriously.

Posted by Pure Guesswork at 8:19 AM | Permalink | Comments (0) | TrackBacks (0)

Going back to a post from a week ago, there were these chart showing an impulsive move up and a 3 wave correction to this move.

And:
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Since that time the rally from the end of the 3 wave correction carried on rather convincingly until it got to the level of the initial impulsive top (from late October of last year). It found convincing resistance there.

Posted by Pure Guesswork at 8:44 AM | Permalink | Comments (0) | TrackBacks (0)

We find a 3 wave corrective pattern beginning at the low on November 26th of last year and ending with the top made on the first trading day of 2010. The third wave, labeled as Z on the chart below, took almost 3 times as long to unfold as the initial X wave up--yet they are equal in length.

An 8 hour chart:

While there has been a higher high since that 93.20 high on January 4th, it can be seen as the 2nd wave in an irregular corrective move to the downside.

On the following 2 hour chart one can see how the 3rd wave of this minor correction (to the the larger corrective move) ends at a level exactly 1.272 times the distance of the initial wave.

There is an additional interesting symmetry in the irregular (y) wave. It also involves the minor Fibonacci ratio of 1.272, ending 1.272 times the length of the (x) wave (as figured from its beginning).

Thus we have an initial corrective move down, and then a widening corrective move in 2 larger waves, each of which has a 1.272 relationship with the original (x) wave.

Posted by Pure Guesswork at 8:02 AM | Permalink | Comments (0) | TrackBacks (0)

Eurusd rally faded at the 1.272 level (that is, 1.272 times the distance from the previous high on 1/5 to the low on Friday).

Almost certainly this is a temporary set back for a move to at least 1.46.

The risk trade or carry trade or whatever other appelation you want to put on this mindset is back on. The spectre of early CB tightening has receded with Friday's bad job number. Yet there seems something unconvincing about this return to risk. Like someone who has begun to sober up but then changed his mind and started drinking again. Unfortunately what usually follows is not a return to euphoria but a rather bad headache.

Posted by Pure Guesswork at 10:08 AM | Permalink | Comments (0) | TrackBacks (0)

The Fibonacci pattern most recently noted in Monday's post, proved operative again this morning as EURUSD bounced at the 1.4260 level right as the employment numbers were released.

This level was the 1.618 Fibonacci target on the way up from April through November. Once the rally ran out of energy in November around the 2.618 extension, this lower target level became an area of support.

Shown on a weekly chart:

On a 4 hour chart one can see how the bounce this morning came right on the 1.4260 level:

What is significant is not that the EURUSD rallied on the bad employment number, but rather that before the number came out, the market was unable to break through that 1.4260 barrier. Despite all the bullish talk in the market before this number came out--all the talk of early Fed moves, of wildly positive employment numbers, etc.--every time EURUSD approached this 1.4260 level in the past few weeks, sellers have disappeared. This morning was only the latest example of this.

Posted by Pure Guesswork at 9:10 AM | Permalink | Comments (0) | TrackBacks (0)

An alpha-beta-delta impulsive up move in October 2009, ending within one pip of the 2.618 target.

Here's how it played out:

• An alpha high at 0.8857 on October 1, then a beta low the following day at 0.8566, creating an alpha-beta base of 291 pips.
• 2.618 times that 291 pips would call for an impulsive rally of aprroximately 761 pips.
• On October 21 AUDUSD tops out at 0.9326, 760 pips above the beta low.

After that October 21 high we entered a long corrective period which possibly ended right before Christmas with a low on December 23 of 0.8732.

Two observations about that long corrective period:--

• First, it unfolded in a 3 wave pattern, with a slightly irregular Y (or B) wave. The last down wave (Z) ended on December 23. It was 10 pips shy of 1.618 times the first down wave (X).

• And second, the entire X-Y-Z corrective move retraced 78.6% of the impulsive move of October (within 3 pips).

Since the December 23 low we have seen a significant rally, retracing aprroximately 61.8% of the final Z down wave. But there will be no clear pattern until we see how any retracement of that rally unfolds.

Posted by Pure Guesswork at 7:22 AM | Permalink | Comments (0) | TrackBacks (0)

The same pattern noted in the last few posts of 2009 (here and here). As noted in the first of the two posts (from December 11), I first suggested the possibility of this fibonacci impulsive pattern in September.

The pattern is simply this, an alpha-beta base was built in the Spring. The alpha high on March 19 at 1.3737 and the beta low at 1.2884 on April 22 formed the base. Projected impulsive targets for this base would be 1.4264 (1.618 times the base) and 1.5117 (2.618 times the base. Minor levels would be 1.3969 (1.272 times the base) and 1.4639 (2.058 times the base).

And here is how the pattern played out. A weekly chart:

The actual top on November 26 was 28 pips above the theoretical target, fairly close (within 1.2%) when considering it was a move of over 2200 pips.

As shown in the December posts, once the retracement from the late November high began, the natural place to look for support to come in was at the 1.618 target (1.4264). It reached that target on December 18 and, while it traded below it a few days later, there proved to be no further downside energy in the move.

It rallied above this level in the thin year end trading, came down to test it again on December 30, rallied again, and then, in early Asian trading this morning, tested it again. Once again we have rallied sharply from that support level ( on positive European data).

An 8 hour chart (showing the position right before US open this morning:

Posted by Pure Guesswork at 7:26 AM | Permalink | Comments (0) | TrackBacks (0)