WARNING: This text is a word-for-word transcription of Mac’s daily forex trading video. That means the writing will reflect the way he speaks, if anything seems out of place, please refer to the forex video on the page.
All right, everyone, I hope you had a safe and happy Memorial Day weekend. For those of you that are not in the United States, Memorial Day got started back in the 1800s. It was originally a day set aside to memorialize or remember the people who fell in establishing the United States of America and over time in subsequent wars and other conflicts. It has really become I think more of a three‑day holiday. I mean even to the guys I was in Army with, we looked at Memorial Day as just a great chance to hit the beach for three days and drink a lot of beer. So I can understand if you’re not taking the time to memorialize the holiday but also if you are. And so either way it goes, welcome back, hope you had a safe and relaxing time over the weekend.
And so let’s dive right into what’s going on. Let me first bring up the dollar index here and you can see that the dollar index continues to plunge. We are down at 80. We are nearing our prior December lows ‑‑ we will zoom out just a little bit more ‑‑ if you remember in December we had this enormous fast move down on the US dollar. In fact the dollar went from 87 to 77 in just a few weeks.
And we’re not seeing the same type of speed that we did back in December surely, but we’re still looking at this overall resistance pattern or potential topping pattern getting put in on the US dollar. And like I said in my weekly wrap, the bottom‑line here, folks, is if the world markets were buying into President Obama’s promises, his policies and everything else, we would see a recovery over time in the US dollar.
Now we have got to keep our eye on how the dollar pans out, in particular if it does get back down to these December lows. The December lows were actually a quite bullish reversal. You can see that during this one week prices got as low 78, but then wound up closing all the way back at 82.43. So it is very important that we watch this ‑ let me put a marker or a rectangle on it.
We need to watch this zone and what I’m doing is going from the low close over here to the low right here. The prices in here represent buying. We had a retest of those prices over here two weeks in a row that was subsequently rebuffed, if you will, and so the market rallied off of there.
As price starts to deal with this support area, we have got to keep our eye on the possibility of a move back up which means ‑‑ let’s go back over the British Pound ‑‑ we need to make sure that we are watching for the signs of the follow through here.
Now I’m going to put this rectangle over here, and so what I’m looking at is the resistance zone formed by the high here and the high over here. As you can see now, hopefully, we have broken above that high zone and have tried for the last three trading sessions to push back down inside of it. Remember, I said we need to watch for a little dipper.
As after price has broken above, we’re getting that little dipper now. In fact you can see here on the hourly charts how the little dipper is played out over a couple of different sessions.
And so let me switch this ‑‑ oops, let me go back to daily. OK, I was trying to get the rectangle to show up on the hourly as well. So this red line represents the top of our rectangle up here.
And so you can see price has broken above and pushed down on a couple of different occasions here and here, again the little dipper panning out at least for now, although we’re not getting a really fast momentum move to the upside. Which is why on Twitter today I talked about how we need to watch for resistance to set in up here at 59.48 or so.
As has been normal, I guess, of late, at least we’re getting this pennant pattern here late in the day. This is before the Asians sessions really had a chance to get started, so we do have an opportunity to trade. We got to watch for breaks below 59.11, that’s the low right here and also above 59.39.
Neither one of these are good autopilot trades because of both support and resistance nearby, but good counter‑trend trades, meaning if we do get a break above the high point, I think we will have a good chance to take advantage of a fast move to the upside. Also if we get a break below our low point, a fast move to the downside.
In your case though, we’ve got to watch for both support and resistance. In fact now, more than ever, is where we’re likely to get a whipsaw trade where we get one trade triggered and then the other trade triggered as the market just kind of flows around. So be ready for that as well.
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