Forex Chart Setups: Dollar Makes a Run as Oil Falls

Top Chart Setup #1: Euro Slack in Action

The EUR/USD has been nothing but a chop shop lately, with the pair trading seemingly endlessly sideways. However, early Tuesday morning, crude traded as low as $127 a barrel, thus causing a selloff within the aforementioned currency pair. It's important to note that oil is directly tied to the U.S. Dollar, in that for every $1 the greenback drops, oil should (in theory) add $4 in premium. What's more, because the U.S. Dollar Index is about 58% comprised of the euro, when oil sells off about $4, the U.S. should firm up roughly 60 PIPs in the present range. This morning, that's exactly what happened. Many eyes are now on oil for more follow through in the EUR/USD.

Top Chart Setup #2: Swiss Franc gets burnt by the USD

With the rally in the U.S. Dollar this morning in the EUR/USD, the greenback is also firming in other currencies as well. Case in point, the U.S. Dollar made a bold run at the Swiss Franc early Tuesday too. While an all out reversal cannot be called just yet, the strength displayed this morning might just be the chutzpah the greenback needs to break the recent lateral trading action.

Mark Whistler is the founder of www.WallStreetRockStar.com and is the author of multiple books on trading. Mark's newest book, The Swing Trader's Bible - co-authored with CNBC/Fox News regular guest Matt McCall - will be on shelves in late summer, 2008. In addition, Mark also writes regularly for TraderDaily.com and Investopedia.com.