The strength of the USD against the Canadian dollar this week and revisiting the DAX

The USD has rallied agains the Canadian this week, helped in some part by the FOMC announcements earlier. Here is a M30 technical chart of the pair.

In the last post I mentioned trading the DAX and using trend envelopes, courtesy of my good friend and a legend of a trader, valeofx from the forex-tsd forum aka Hercs.

As a follow on from that trend which was held in place by the M30 trend envelopes. Here is a chart of today’s action.

As can be seen, the trend envelope on the M30 chart (displayed – Mauve line) and its accompanying 21EMA set to high/low/close acted as strong support for a continued rally, which was firmly corrected, possibly due to DAX December options expiry being today.

Today, the price reached and exceed the resistance 1 pivot level (R1), but closed just above it, before a 50+ point sell off. I favour further bullish activity today, since there is a failed hammer reversal (3rd bar in from the right) and indeed the failure shows a 1 bar reversal (2nd bar in from the right has a lower low, but a higher close than the hammer candle). I’m not holding out, but I think it will go up some more before the close of day. NB. This is educated guessing and not investment advice.

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Technical Studies on the DAX unlikely to be found anywhere else

Without doubt my chart and trade of the day is this entry marked on the 15 minute chart on the DAX.

The indicators

  • Pivot points are shown.The MR1 line (red dashed) R1 line (red solid), MR2, R2, MR3, R3 are the only pivots that can be seen.
  • The ‘channels’ are in fact an interesting combination of exponential moving averages
    • A 21 exponential moving average set to close the white dotted line
    • Above and below the exponential 21 MA set to high and low, respectively
      • Notice how when a candle has closed ABOVE the 21EMA(HIGH) the 21EMA(LOW) changes to the MAUVE solid line
      • Notice how when a candle has closed BELOW the 21EMA(LOW) the 21EMA(HIGH) changes to the MAUVE solid line
        • In my trading circle we call this a ‘Trend Envelope’
    • The exact same ‘trend envelope’ setup is transposed from the 30 minute chart onto this 15 minute chart – but it could be set up by flicking between the two charts (colour orange)
    • A 55 EMA is in grey (solid)

Ignore the CCI panel for now.

You will see a fast moving relative strength index (RSI) indicator on the indicator window on bottom.

The analysis

(i) Note how well the M30 trend envelope has ‘held’ – acting as support

(ii) Coming down through the mauve trend envelope (left side of graph), price has bounced off the M30 trend envelope – this is the clue.

(iii) Bouncing off the orange trend envelope, we see 3 bullish black candles, which form a ‘3 bar reversal’ – the third bullish candle takes out the 3 preceding highs.

(iv) The 3rd candle is strong and bullish, and also the 55EMA is turning up and seems to be holding

(v) The RSI7 has moved through the 50 line

(vi) The green dashed line marks my entry, but one could have waited for the break of the M15 trend envelopes for confirmation.

(vii) A beautiful upmove ensues.

That’s all for now.

Have a terrific Friday,

Sam.

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