Quote of the day: “Never trouble another for what you can do for yourself.” ~ Thomas Jefferson

Good morning. The dollar pulled back yesterday, forming several reversal signals across the board as everything is correlated these days. Yesterday’s setups are still in play although most of them don’t look as good as I wanted yet, but it’s really worth keeping an eye on them. Some of you, regular readers, might already know that I’m not a fan of correlations because you’re likely to put all eggs in same basket no matter how many currency pairs your trading platforms provides. Some would argue that there’s an advantage when the market goes your way, so if you are into several highly correlated trades, you would make a good profit. In theory yes, but in practice – as much as it might sound like Murphy’s Law – things are likely to turn bad more often than good if you put several/all eggs in the same basket. So the best option would be, in my opinion, to focus only on the best setups although there are several (almost) identical when you scan the charts, eventually increase the position sizes to reflect the level of confidence you have at that time, instead of opening several trades in different highly correlated pairs. Bernanke will speak in Cleveland later today – this being the most important event of the economic calendar

Now let’s take a look at today’s charts of interest:

EURUSD

Although the market is getting some relief, the euro remains very fragile and keep in mind that current EURUSD recovery is caused by other assets appreciating against the dollar, thus dollar losing ground – EURUSD strengthening. As you can see in the hourly chart below, the support zone around 1.3550 is currently being tested and the pair will remain slightly bullish on short term basis as long as the said level holds. Selling on the potential break below is an option to consider.

Euro Vs US Dollar Chart Hourly 9-28-2011

And here is the euro index chart – just be aware what you’re doing and what to expect if you’re planning to buy dips

Euro Index Chart Daily 9-28-2011

and the other bad apple dollar index, which looks much better than the euro these days (at least on a short term perspective)

Dollar Index Chart Daily 9-28-2011

AUDUSD

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- Continue reading: Dollar’s Correction Continues, Reversal Patterns Still Valid