2014 saw a huge trend persist in the currency markets, specifically with the US Dollar and the Euro.
Let’s update our charts, note that trend, and tackle the current triangle forming (and what to expect).
We’ll start with the “Color Charts” of the persistent trends:
In July 2014, the Euro (seen here with the @EC Futures Contract) broke a sideways range and burst into a strong “collapse” trend that took the contract from the 1.3500 level to 1.0500.
In addition to being a textbook example of a power-trending market, we’re seeing a logical consolidation or triangle pattern develop at the current levels.
The picture – and trend – is the inverse on the US Dollar Index (@DX Futures):
Similarly, the Dollar broke the 83.00 level in July to emerge in a powerful trend that burst the market straight higher above the 100.00 target.
From there the index (contract) has traded sideways against this logical resistance level.
As we study these persistent trends, let’s now shift focus to plot the Triangle that’s developed in 2015.
We’ll start with the Euro (@EC):
March saw a key inflection low near 1.0500 in the Euro only to see a retest of this low – possible Double Bottom – earlier in April.
The price range is contracting between the 1.0600 and 1.0800 levels (highlighted).
From a planning standpoint, a breakthrough higher suggests a short-term rally toward the falling 50 day EMA and upper Bollinger Band aligned near 1.1000.
Failure here into the triangle resistance suggests another swing back to test the low.
Note that a breakout and possible short-term trend reversal into “Open Air” triggers as price moves up away from the 1.0100 level (green).
The picture is just the opposite in the US Dollar Index (@DC):
The levels to watch for the Dollar Index include the key resistance high into 100.00 and the inflection support low near 97.00.
These are easy-to-remember reference levels so if you are trading these contracts, be sure to monitor price action at these reference points and the possible breakout/trend move that could develop from a push beyond the known ‘triangle’ trendline levels.
For the Dollar, it would be a short-term bearish breakdown play under the 97.00 and 96.50 levels… or an alternate pro-trend continuation above the 100.00 level.
Continue monitoring these levels closely as the triangle continues… or resolves into a breakout opportunity.
Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade