How to Improve Your Market Direction Forecasting Skills (Part 3)

03/11/2009 12:01 am EST

Focus: STRATEGIES

Timothy Morge

President, MarketGeometry.com

Let's look at some current markets now and see if we can identify what it would take for each of these markets to change their trends.

The strength of the US dollar is puzzling. The Secretary of State was recently in China asking the Chinese government to invest in US Treasury bonds and assets. Our stock market is plummeting, our unemployment is skyrocketing, and the US dollar is..well.strong!

chart

Looking at the chart, you can see that price has made three drives to the bottom and the slope of the trend of the US dollar against the euro currency has begun to flatten out. We've had two distinct drives to the top but so far, there is no clear sign that the dollar is about to experience a change in trend.

What would it take for the up trend to be declared dead? Price would have to climb above the prior two major swing highs-somewhere above 1.32000 on the CME Euro FX futures.

Do you see that move? Or do you see a stronger dollar continuing?

chart

The Canadian dollar made a spectacular run last year to break and trade well above parity against the US dollar. But with the recent fall in energy prices, the Canadian dollar suffered a sharp sell off and is now mired in a 10 point range.

What would make the Canadian dollar strengthen and break above the top of this trading range at 8600 and further, above the prior major swing high at 8700-8800?

Can you see anything that tells you this is likely? Or do you see the down trend resuming for the Canadian dollar?

More tomorrow in Part 4.

Timothy Morge

timmorge@gmail.com
www.medianline.com
www.marketgeometry.com

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