What fundamentals ?

For six weeks now, the euro-dollar exchange rate, known to forex traders as the EUR/USD, has gone nowhere. The dollar has gained big since late November, but while we've seen some big ups and downs lately, they made almost zero net progress: Today, the rate stands near $1.3650, where it was in early February.

You may say, sure -- the U.S. "fundamentals" are still shaky, so why would the U.S. dollar keep gaining? From the conventional economic wisdom standpoint, that's true. Of course, it's the same "wisdom" that, based on the very same "fundamentals," was calling for the dollar's complete collapse in late 2009, when the EUR/USD was near $1.50. Since then, the U.S. broad economic picture has hardly improved -- yet the USD has only gotten stronger. Hmm.

Now you understand why technical analysts don't put much faith in the presumed effects of the economy on the markets, and vice versa. For us, market forecasting is all about reading chart patterns.