The Greenback is the king among currencies

Impressive strength on the US Dollar can be seen for today after disappointing data out of the Euro Zone and the United Kingdom. The Dollar Index has reached a four year high and it is not showing any signs of correction at the moment. This Friday we have the Non-Farm Payrolls report out of the US and it is expected to show that the American economy has created 216 thousand new jobs for the month of September. If the reading comes out in line or better than expected, then hold on to your seats, because the Dollar may be launched like a rocket and the losses on its major counterparts could be exacerbated.

The USD/CAD is at a decisive point

The USD/CAD has kept a constant uptrend, but it seems like the bullish momentum is losing strength after it reached its most recent high at the 1.1178 level. On the Daily chart we can see that during the rallies, the real bodies of the candlesticks are relatively long, but when the real bodies shrink or become smaller, it usually signals an exhaustion of the bullish trend. Today we can see how the daily candle has closed in a “Spinning Top” formation; which is a Japanese Candlestick pattern of exhaustion and indecision. If tomorrow’s daily candle is bearish, then this could mean that a change in direction may be near.

However, we must keep in mind that during this week we have very important fundamental data pending that could support the Dollar, especially the Non-Farm Payrolls number; which if it comes out better than expected then the pair may continue with its uptrend.

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Code     Shares

AXP       American Express Company

BA          The Boeing Company

CAT        Caterpillar Inc.

CVX       Chevron Corporation

DD          E. I. du Pont de Nemours and Company

DIS         The Walt Disney Company

GE          General Electric Company

GS          The Goldman Sachs Group, Inc.

HD          The Home Depot, Inc.

IBM       International Business Machines Corporation

JNJ         Johnson & Johnson

JPM       JPMorgan Chase & Co.

KO          The Coca-Cola Company

MCD      McDonald's Corp.

MMM   3M Company

MRK      Merck & Co. Inc.

NKE       Nike, Inc.

PFE        Pfizer Inc.

PG          The Procter & Gamble Company

T             AT&T, Inc.

TRV        The Travelers Companies, Inc.

UNH      UnitedHealth Group Incorporated

UTX       United Technologies Corp.

V             Visa Inc.

VZ          Verizon Communications Inc.

WMT     Wal-Mart Stores Inc.

XOM     Exxon Mobil Corporation

Indicator – The Bollinger Bands

The Bollinger Bands is a volatility indicator that helps us determine how volatile a trading instrument is. The Bollinger Bands are composed of three bands or lines that shrink together when there is low volatility in the market or expand when there is high volatility in the market. The middle band is a 21 period simple moving average of the closing prices. The upper band is two standard deviations of the middle band and the lower band is minus two standard deviations of the middle band or 21 period moving average.

Usually, low periods of volatility are followed by high periods of volatility. That is why if we see the Bollinger Bands get together very close to each other; it means that the market may be getting ready to move. On the contrary, if the bands get away from each other, it means that the market has been trending, but the trend may be exhausted and a possible reversal may be near.

The AUD/USD continues falling

The Australian Dollar is being hurt by the slowdown of the Chinese economy due to the fact that China is the main trading partner of Australia. Besides this, the US Dollar keeps rallying and that is why the AUD/USD has continued with its bearish trend. The pair has so far broken below the 0.8900 level and it could be heading to the 0.8800 level.

However, we must keep in mind that the oscillators like the RSI and the Stochastic are in oversold levels and they may be indicating us that the pair may be getting ready to retrace. None the less, the fundamentals must also change in order for the Aussie to gain some traction.

Fibonacci Retracements – The 76.4% level

Fibonacci Retracements are zones of possible change of direction for the price, also known as support or resistance where the price tends to change its trajectory. The Fibonacci levels that are more reliable are the 50%, the 61.8%, and the 76.4%. Out of the three levels mentioned, the 76.4% could be the most reliable one as support or resistance. However, we must keep in mind that in order for the price to get to the 76.4%, it would have to break the 61.8% level first, which is also an important Fibo.

Therefore, we must make a decision before hand on which level are we going to take our entry. Both levels have their pros and cons. If we enter the market at the 61.8%, we must use a stop loss at the other side of the 76.4% just in case the price continues retracing all the way to that level and bounces from it.

If we wait for the price to get to the 76.4%, we could end up missing the entry, because the price could reverse direction from the 61.8% before reaching the 76.4%. None the less, an entry at the 76.4% would allow us to use a tighter stop loss and risk less on our position as if we were to enter at the 61.8%.

The EUR/JPY breaks above the 140.00 level

The Euro continues its rally for today after the European markets closed higher and the Pound strengthen after the polls suggest that the Scottish referendum will keep the UK united. The EUR/JPY has broken a key resistance level around the 140.00 and it looks like it will keep its bullish momentum. However, we must be attentive to a possible pullback to the 140.00, because the pair is clearly overbought. If the pair does pull back to this zone, the area could become support and stop the price there for a continuation of the bullish trend.