Daily Forex Trend Report

-EURUSD 1.25-1.30 range; positioned for upside break
-USDJPY trend in blow off stage
-USDCAD waiting for break out

[B]About the DFX Trend Index[/B]

The DFX Trend Index ranges from -100 to +100 with -100 being the most bearish and +100 being the most bullish. On the charts, bars are painted blue if the index is above 75 (strong uptrend) and red if the index is below -75 (strong downtrend). Readings between -25 and +25 result in a green bar to indicate mean reversion. Readings from 25 to 75 and -25 to -75 are left as regular black bars. Below each chart is a spreadsheet detailing the index values for the last 15 days. Basically, the colors identify the lowest and highest quartile with respect to tend strength. The trend index values are interpreted differently at different points in the trend.

[B]EURO / US DOLLAR[/B]

The trend index is at -46, which is neutral. The trend index put conditions at strong downtrend in early February. Failure to register a strong downtrend reading at a lower price indicates divergence and is bullish. A cautious bullish bias is warranted.

Strategy: bullish against 1.25, target above 1.30

[B]
BRITISH POUND / US DOLLAR[/B]

The trend index is at 16, which indicates mean reversion. There is no clear directional bias.

Strategy: none (stopped out)

[B]
AUSTRALIAN DOLLAR / US DOLLAR[/B]

The trend index is at -37, which is neutral.

Strategy: none

[B]
NEW ZEALAND DOLLAR / US DOLLAR[/B]

The trend index is at -38, which is neutral.

Strategy: none

[B]
US DOLLAR / JAPANESE YEN[/B]

The trend index is at 99, which indicates strong uptrend. Conditions have been strong uptrend for 6 days now, so beware of a reversal as the USDJPY nears resistance from Fibonacci in the 98-101 zone.

Strategy: none

[B]
US DOLLAR / CANADIAN DOLLAR[/B]

The trend index is at 52, which indicates early uptrend. The USDCAD market has spent a good deal of time in its mean reversion zone recently. I wrote yesterday that “until either a bullish reading from the trend index or a drop below 1.20, it is not safe to be long.” The early uptrend reading today signals that it is proper to be long.

Strategy: buy dips, support at 1.25, against 1.2350, target above 1.30

[B]
US DOLLAR / SWISS FRANC[/B]

The trend index is at 41, which is neutral. Following strong uptrend readings in early February, the USDCHF reversed and most recent readings have indicated mean reversion. Notice that there were not strong uptrend readings at the top of the recent range. This indicates a weak market and more weakness is expected.

Strategy: short, against 1.19, target 1.0950

Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market.

Please send comments about this report to [email protected]