Wednesday, February 24, 2010

Forex Trading Technical Analysis


As 2009 draws to a close, what can we learn from years past about the value of the USD and what happens to it during the holiday season. It's simple to find out yet so few people actually take the time to apply what they know about forex trading technical analysis to seasonal changes.

For instance, I have been making the point that I believed the the year would close out somewhere near the point that the month of October 2009 closed out. Why would I believe that and how did I come to that conclusion? So far, with only 11 days left in the trading year, my prediction is proving to be right.

Knowing the exact price that prices will close at would be impossible. I can however guess within reason the range that it will be in. In round numbers, I am suggesting that the USDINX will little unchanged form it's October 2009 close. That means that I believe that the index will be near 76.36 I reached this conclusion by looking at years past, and comparing those years price action to the current years price action.

Here is what I found. In 7 of the last 9 years, the index moved lower in the October through December time frame. Only twice did it close higher. In those two years, the index moved higher for the entire January through October time frame. This year certainly wasn't one of those years. In addition to that, two of the years that closed down, closed down only very marginally. Taking a closer look at the two years that closed up (2001 and 2005) and the two that closed down only marginally (2006 and 2007) brought me to my conclusion.

Since this has not been an up year, I ruled out a significantly higher close for the two month period. Looking that the two years that closed basically sideways, shows us that they were years of either correction or continuation. Since this was definitely a year of correction, I presumed that the year would close sideways for the two months ending the year.

I didn't leave it at just the index either. It's important to look at the major pairs that contribute to the index as well. Once I had done that, I was comfortable making my prediction.

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