Albertarocks' TA Discussions: Big Action Evolving On the Currency Front

Wednesday, February 6, 2013

Big Action Evolving On the Currency Front

The action in the currency markets has been taking a major league turn as of late. There has been a lot of action on so many fronts recently but really, all that action has been in pretty much every currency in the world 'except' the American dollar. The only exception would be the Canadian currency since it is extremely tightly linked to the American dollar... approximately equally as much as it is correlated to the health of the American economy itself. Those two currencies also represent the ties between the two biggest trading blocks in the world and as such, it is critically important that that particular pair remain stable and that they be prevented from wandering too far from each other.

As a result, very close attention is paid to managing that pair and for that reason I have always maintained that investors who look at the USD:CAD pair for guidance on the equities markets are barking up the wrong tree. Only when there are extreme stresses in the American economy will the Loonie start to wander off as the Canadian economy begins to suffer as well. On the other hand, if the American dollar begins to tank relative to "real goods" like gold, the Canadian dollar will soar since the value of the majority of the commodities coming out of Canada would soar in value as well... regardless of demand for them. If they're rising in value, they're rising in value.

At present, the key currencies in the limelight other than the Euro (which fluctuates for entirely different reasons) have been the Yen and the Australian dollar. Without trying to predict the direction of the key currency pairs (the Aussie:Yen and the USD:Yen), let's take a look at the general story in the daily chart below which shows all 3... the USD, Yen and Aussie, along with the S&P. Speaking in general terms, the annotations discuss what's going on:

Click here for a live and updating version

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DarkestKnight is one of a group of Australians who seem to have a real good grasp on wave counting. If I recall correctly I think he said he's British born, living in Australia. Another Aussie with talents like this is 'mars', another good guy and his haunt of preference is over on Pretzel's site. But we have the luxury of having DK drop in here from time to time with some great contributions. In any case, I don't know why Aussies seem to be so good at being able to see (and demonstrate) EW patterns and counts as clearly as they do, but I suspect it has something to do with the fact that in the land down under they must be looking at their charts upside down. Then they flip 'em over so we in the north can understand them. In any case, DarkestKnight has posted links in the comments section below to some really good charts. I'm going to insert some of them here for reference.

UPDATE: Once DK noticed that we were highlighting some of his charts here (I hadn't asked his permission but since he's been a friend of yours truly for quite a while and a friend of this blog since its inception I didn't think he'd mind), he suggested that we should probably start off with his weekly chart that would help put the others into proper context. So we've arranged the charts so they flow from longest to shortest in duration. And thanks DK for submitting more charts after seeing that I had posted your first 4 offerings. It's become a pretty impressive full kit now. With credit to DK and with thanks from this entire community, here are his excellent contributions:

HINT: Left click on any chart to open the 'lightbox' feature of Blogger and you can then toggle between all charts on a post. That capability works really well with DK's ~~four~~ seven charts below: