Forex Course Currency Trading Commentary

Sept 29, 2004

Current account deficit, which is growing, plus the recent

oil price sticker shock, may cause traders to eventually

bolt from the U.S. dollar’s corral. This morning, traders

shrugged off the GDP revision, which is old news, leaving

the euro to hold its own. If you look closely at the daily

chart for the euro, you may be able to detect what looks

like the formation of a symmetrical triangle in an uptrend,

which is bullish. Not to mention the fact that price is still

above Tom DeMark’s down trendline, which was

breached to the upside September 21. Not a whole lot

of trading opps. today other than the London bounce

subsequent retracement. Yesterday, we had mid-

morning and noon trades at the end of dramatic runs. As

Mike Clements keeps reminding us, such runs usually

result in good trading opps., as they don’t last. Get used

to high oil prices. They appear to be here to stay. That’s

got to be a drag on the economy and the U.S. dollar.

Greenspan may even have second thoughts about further

tightening, which again would be dollar-negative. Today

is deemed an M2/M4 day. Notice how price bounced off

M2 at 6:45 am ET. There was no news at that time to

cause that spike. So, we can attribute that reversal to be

smart traders reacting to that significant support level.

(See currency trading chart below)

Sept 30, 2004

As I reported yesterday, we had a symmetrical

triangle forming on the daily chart, which is

normally a bullish sign. Well, today, if you take

a look at that chart, you’ll see what I mean.

Bingo! This stuff works folks. I’m sure Christy

would agree, as we talked about the triangle

yesterday, and I indicated price would test 2387

when it came out of the triangle. The next level

after that would be 2459. We are now at 2401 as

at 9:30 am ET. Trading is all about pattern

recognition – seeing things that have happened

before, and reacting with confidence. Please

study the daily chart in one of the previous

slides. So, today was an easy trade – essentially

grabbing price, as it came out of the apex of that

triangle, and running with it. You can see how

price played with the Pivot and M3, before

exiting that apex (the rightmost point of the

triangle). An easy 44 pips for those who saw

this coming.

(See currency trading chart below)

Oct 1, 2004

You can see that price went into a slide after the negative

divergence on MACD to price occurred mid-afternoon

yesterday. As price came into today’s session, it tested M3,

and that level held as resistance. Price then continued on

down through the London open, bouncing off the central

pivot point. Notice how price reacted at those two levels, being

contained between the two. The thing to watch for now is for

price to rebound, and head north again – since MACD has

neutralized after yesterday’s rapid rise. So, to repeat this

lesson: After a dramatic rise in price, price will level off, and

fall back, as MACD neutralizes. In the process, you get a

retracement. Once MACD has reached its neutral 0 line, or

thereabouts, price is primed to advance again. This

phenomenon happens often enough to pay attention to. It

offers three good trades – divergence, retracement, and then

rebound. Things often happen in threes. And, here we are.

The thing that precipitated this whole process to begin with

was the symmetrical triangle on the daily chart – next slide.

(See currency trading chart below)