FX Instructor Live Forex Trading Room Results | 10/04/2007

It was a medium volatility day, with a few trades taken. However, our main focus and concern today were the market setups we see forming.

On the GBP/USD there is an uptrend in progress so far. We are expecting even further upmove, as prices are subscribing back to the middle channel of our daily uptrend line. However, we are expecting some sort of retracement from the 78.6% level, or a little higher, back down to the support trendline, and then will re-assess the whole situation.

We also see a potential bearish divergence on the daily charts, with higher highs on the price, and lower highs on the stochastics. It might take some time to materialize, or might simply be beached as the stochastics curl upwards, disqualifying our divergence setup. However, if this happens, then the breach of the 76.4% level and a close above would trigger our next Long position, with targets around 2.0605 and 2.0675, respectively.

On the same pair, on 4h charts, we have another development occurring. An interception downtrend is taking out the highs, and if breached, we will be contining in the uptrend we have been building. So far we have a conflict with the daily charts - we are seeing several interleaving bullish divergences on the 4h charts, and we could be seeing prices moving to the upside.

On the EUR/USD we have a somewhat similar situation on the daily chart. In our long term view, we are seeing an upmove taking place thus far, however it has been peaking around the 1.4280 level. A fibonacci retracement plotted to cover the entire upmove from 1.3360 to 1.4280 gives us significant levels around the 23.6% level of 1.4063.

If prices continues the move upwards, the probability of making the highs at a target, or even a newer high, would be valid targets, especially from an Elliot Wave perspective. We are probably looking at a Wave 5 in the making. If this view proves valid, we are looking at a target of 1.5000 so far. It won't happen this week, and probably not next week.

Lastly, on the GBP/JPY, after a few weeks of brief range trading, we are just breaching the 50% fib retracement level of the whole downmove from 251.09 down to 219.24. The 61.8% level is inbound as it is approaching us from above at 238.92. Although its a fib level, its a lot more important than that - its a very important resistance and support level for a good while now. Breaching this level would not be an easy task.

We do expect some retracement back to the 50% level for some momentum, and it should give the stochastics a chance to relax, as they are seriously overbought right now. That could be our next long entry on this pair.

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