Range-Bound Dollar Creates Opportunities

03/24/2011 2:00 am EST

Focus: FOREX

Raghee Horner

Author, Forex Trading for Maximum Profit

News events and heightened market volatility have been driving world currency markets, and here, trader Raghee Horner analyzes the US dollar-based pairs, suggesting key items and levels to watch and sharing important tactical advice.

Forex traders have a lot of choices in which currency pairs they trade of course, but outside of the majors or within the majors themselves. Our guest today is Raghee Horner. She's going to talk about what she's watching. Raghee, so what currency pairs are your favorites? Give us an idea of what you're trading these days.

I like anything that has a correlation back to the US dollar, so most of my trading is really dollar-correlated majors, your dollar/swissie, Euro/US dollar, the cable, the dollar/yen, and then the comm-dolls, the dollar/Canada, the aussie/US dollar, and I've been watching the interesting price actions going on right now in the swissie and the dollar/yen, because both those have found ranges at the bottom at their respective downtrends, and they're beginning a back-and-forth battle between whether or not their downtrends can resume if they can regain strength on the dollar, or whether or not we're going to remain sideways. While the confusion is ruling, I'm actually fading the floors and ceilings on both those pairs on the daily charts.

On the daily charts, I was just about to ask you. So intraday do you find opportunities as well?

Intraday, as we're riding up towards the ceiling on that daily range or down towards the floor, absolutely. I just caution anybody against taking much longer-term intraday looks, like a sixth-year 240 when we're too close to the ceiling, because we might be running into selling pressure or too close to the floor. When we near those two levels, my suggestion should go much shorter term so you can stay nimble.

Alright, if we break that range, we either break above it or break below it; will you then go long or short in those?

You know, it's interesting, because if we can get out of the distribution that we're seeing right now, then I'll expect that organization to take us higher or lower with momentum. But as long as we're in distribution, even if we break outside the range and end up overbought or oversold, I'll still be very cautious about expecting organization lower or higher. I think right now then, looking at the dollar is really going to hold a clue to whether or not I will take a longer-term momentum play. As long as the dollar is stuck between 77 and 79 on the US dollar index, there's probably not going to be a lot of follow through above or below those key levels and the dollar/yen, dollar/swissie. Same goes with the euro/US dollar. There's a good chance that we've cycled out of the, transitioned out of the uptrend that we saw and now we're looking at a range-bound market, which again, you really got to look at the range on the dollar index to find whether there's going to be a follow through.

I know you focus strongly on the technicals and what you see on a chart.  Do you follow the fundamental news, interest rates, and say, euro debt, that sort of thing.

I do, I think in terms of fundamentals, any technician who's ignoring them completely would be really damaging their own potential trading, underestimating volatility. I look at fundamentals from a perspective of psychology. What they do to psychology, heighten that fear, heighten that greed, increase that volatility. I'm not playing the news in terms of my perception of what it's going to do to price; I'm playing the news as far as its impact on the price of movement range within the technicals.

Do you see that everything that's in the news is typically built into the chart, or it's just another piece of information you use when you're making your decision?

As a "chartologist," as I call myself, I think you really do look at the charts and think that the discounting has already, you know, the news has already built in, everything has been baked into the cake.  When you look at the kind of geopolitical unrest we've been seeing lately, we can't bake that into the cake. When you were looking at the crude oil plays right now or maybe flight to safety into gold or whatever it may be, so you still got to pay attention to those unscheduled events, you still have to give them their due respect, but at the same time, again I'm not going to play the news, but I'll play the price action the news creates.

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