Dollar Strengthens: Eyeing the Pairs

Currency Pair Overview: Overall, the dollar index strengthened across the board in Tuesday trade, in response to the decline in futures, cash and equity markets. With the declines seen over the last period, some of the major pairs have reached critical swing areas, which previously had acted as significant support or resistance areas. Ahead, the calendar is clear of any red-flag reports during the upcoming U.S. session, which might allow the currency valuations a fair chance to complete their technical and fundamental plays.

Dollar Index Technical View: TheLFB Member Charts

4-Hour Chart: Mixed. Main price points: 74.95, and 76.57. Looking for: Wave ii

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The dollar index is trading higher, and very close to the 76.57 top, where a possible break will put the higher black wave iii (shown) in play. If this resistance area holds, the move of a corrective wave ii, with wave c down to 50% or 61.8% retracement areas, is still possible.

This long wave count stays valid if the 74.95 area holds as support. Any break of this low will invalidate the wave count, as wave 2 must not make a retrace of more than 100% of the wave 1 distance.

The euro (EUR/USD 1.4660) has lost 140 pips since the beginning of the European session, in-line with the global equity markets losing value. Right now, the euro is trading just above the 50-day moving average, a support area under which the pair broke the last time in April 09.

The pound (GBP/USD 1.6315) fell some 100 pips during the European trading hours, but as soon as it touched the 1.6280 area, the pair surged 60 pips, up to TheLFB S1 (1.6325). If the pound breaks below the 1.6280 area, it will run into 1.6250, where the 50 and the 100-day moving averages meet.