The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- Following is a technical review of some major currencies.
Dollar Index Four-Hour Chart
The dollar index is trading below the 50- and 100-day simple moving average (SMA) area around 75.50, which was a pivotal price point in March, April, May and June. There have been 18 moves that have broken this same price point, both long and short, in as many weeks.
Most 24-hour trading sessions have one 60-minute period of trading containing the majority of that day's movement. Breaking and holding the previous session dollar index high or low is extremely difficult to accomplish with any sustainable follow through.
No midterm long signals will form on the dollar index until a weekly chart closes above 76.50. No midterm short signals will form until a weekly chart closes below 73.90.
: Choppy and overlapping chart patterns are caught in a four-month trading range with no clear technical signals. A trend line at 74.50 appears to be an important swing point for global dollar-based reserve valuations.
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This Week's Call to Action
: Look to sell the test of resistance at the previous day's high. Look to sell the test of support at the previous session low. Bank both trades at near-term targets. The dollar index may create buy signals from 75.50 that test 75.90 if the
drops and holds at less than 1295 this week.
Any dollar index sell signals will require the S&P 500 to hold above 1325 easily, something the index hasn't been able to do recently.
A four-hour chart algorithm signal was generated July 14 with a close below 74.80 that failed to trigger. This was repeated July 18 in a move that tested 74.00 support.
EUR/USD Four-Hour Chart
The euro is trading in a 10-week range against the dollar that now has trend-line support and resistance areas that are likely to create volatility this week at 1.4500 and 1.4250.
The 200-day SMA area was highlighted last week as a potential target area around 1.3900 that would provide support. A daily chart close at less than 1.3800 will put a lot of technical pressure on the short side of the euro/dollar currency pair.
History shows that 1.3750 is a major inflection point on EUR/USD values, and it is unlikely that a move below that point will be able to easily hold. The caveat will be an implosion of sentiment toward eurozone debt and an explosion of government credit default swap valuations in response to the banking stress tests that were reported last week.
The 50-day and 100-day SMA areas have now formed an upper price band of support at 1.4250, which we highlighted last week.
No midterm long signals will form on EUR/USD until a weekly chart closes at more than 1.4450. No midterm short signals will form until a weekly chart closes at less than 1.3950.
: Choppy and overlapping chart patterns are caught in a four-month trading range with no clear technical signals.
This Week's Call to Action
: Take great care in any euro-based trades this week as reactions to economic sound bites will dominate any technical signals.
A four-hour chart algorithm signal was generated July 18 with a move to more than 1.4250 that targeted 1.4290 and has now completed its cycle.
USD/JPY 4-Hour Chart
The dollar/yen currency pair broke a triple-bottom area of support at 79.50 last week in a technical reflection of the chaos underway in the global bond and interbank lending markets. The moves are not a reflection of Japanese economic strength and U.S. weakness. Rather, they reveal the strong intraday link that USD/JPY valuations have to interest rate markets.
The 50-day SMA resistance area around 80.50 has been in play since March and will undoubtedly create further volatility whenever it gets tested. The 5 p.m. EDT pattern of trade that has volatile 100-pip spikes has become the norm. It is likely caused by central banks and sovereign wealth funds testing strong-yen valuations.
No midterm long signals will form on USD/JPY until a weekly chart closes at more than 79.50. No midterm short signals will form until a weekly chart closes at less than 78.00.
: Choppy and overlapping chart patterns are caught in a four-month trading range with no clear technical signals. This is about as ugly as a midterm chart can get.
This Week's Call to Action
: The path of least resistance this week may be for JPY valuations to hold steady against most currencies. The volatility is building, and signals all is not well with regard to where the Bank of Japan would like to see yen valuations. Bank early and often if taking a JPY-based trade.
A four-hour chart algorithm signal was generated July 11 with a move below 80.20 that targeted 79.50 and has now completed its cycle.
Marco Hague is one of the founders and principals of The London Forex Broadsheet (commonly known as TheLFB), a global forex trader portal with headquarters in the U.S. Hague began his career with the Bank of England dealing with foreign exchange control, and he has been trading for the last three decades. He has been involved with institutional risk asset ratio analysis and the implementation and maintenance of institutional trade desks globally.