FOREX TRADING

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push lower yesterday, bottomed at 1.4283 but closed higher at 1.4408. The pair still trapped in 1.4250 – 1.4450/80 area. Maybe we need a fundamental catalyst to lead us out from this choppy market and US NFP tomorrow is expected to do this job. While aggressive traders can continue to use range trading strategy to short around 1.4450/80 or to long around 1.4250 with tight stop loss, conservative traders wait until we have a clear break from the range area to make decision.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push higher yesterday, slipped above 1.4450, topped at 1.4483 but further bullish momentum was rejected as price whipsawed to the downside, bottomed at 1.4346 and closed at 1.4363. On h4 chart below we can see that this was a case of a false breakout which usually trigger bearish pressure testing 1.4250 area. We need the price to close below that area to confirm the bearish scenario testing 1.4127 – 1.4000 this week. Immediate resistance at 1.4400 – 1.4450 area.

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EUR/USD closed lower due to profit taking on Tuesday as it consolidated some of Monday’s rally but remains above the 10-day moving average crossing. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI remain neutral to bullish signalling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted. If it renews the decline off December’s high, the 38% retracement level of the 2008-2009-rally crossing is the next downside target.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push lower yesterday, bottomed at 1.4272 but closed higher at 1.4338. The pair is still consolidating in range area. I think we are in no trading zone now as direction is not clear in nearest term. Another way to trade in this kind of market is to short around 1.4420/50 or long around 1.4250 with a tight stop loss. We need a break from the range area to see clearer direction.  Break above 1.4420/50 area should be seen as bearish failure and trigger further bullish momentum towards 1.4600 even 1.4800 area. Break below 1.4250 should trigger further bearish momentum targeting 1.4170 – 1.4130 before testing 1.4000 area.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push higher yesterday, topped at 1.4372 but further bullish momentum was rejected as price closed lower at 1.4273. This fact should keep the pressure on Euro re-testing 1.4250/60 support area today. The bias remains to the downside targeting 1.4172 – 1.4127 area today but we need consistent move below 1.4250/60 to continue the bearish scenario since we seems to have a double bottom support around that area as you can see on my h4 chart below. Immediate resistance at 1.4350/70 area followed by 1.4400 – 1.4450 area. Break above 1.4450 area should be seen as potential threat to the bearish outlook.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push higher yesterday, topped at 1.4589 after some good results of manufacturing and services PMI data, but further bullish momentum was rejected as the pair closed lower at 1.4529. This fact should keep my bearish scenario targeting 1.4450 and 1.4250 this week remains intact. On h1 chart below we can see that price still trapped in a range area of 1.4585 – 1.4500 area indicating consolidation but the bias remains to the downside. We need a consistent move below 1.4500 area to continue bearish momentum towards 1.4450 – 1.4400 area today. Immediate resistance at 1.4589 area (yesterday’s high) and the trendline resistance area (red). Break above those area could be a threat to my bearish scenario and lead us into no trading zone.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD had a bullish momentum yesterday, slipped above my bearish channel but price retreat to the downside indicating bullish continuation scenario is potential but don’t be too optimistic yet. We only have 2 options regarding the bearish channel break, whether it is a true breakout or a false breakout. If today price made another bullish above 1.5000 area, I will consider the breakout is valid and bullish momentum should continue testing 1.5062, but if today price fall below 1.4920, I will consider it as a false breakout which lead to significant bearish momentum re-testing 1.4850/20 area. If you follow my daily analysis during the last two weeks, you may know that for me only movement above 1.5062 can be considered as bullish continuation scenario confirmation targeting 1.5150 and 1.5300. Below 1.5062, nothing is confirmed and bearish reversal scenario is still wide open. I still believe so

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Daily Technical Analysis

EURUSD

The EURUSD made another indecisive movement yesterday, still trapped in 1.5062 – 1.4930 range area. As you might already know, I have been paying attention on potential double top formation since the beginning of this week, as you can see in my daily chart below. Here are two double top scenarios I have in mind:

Valid: Double top is a bearish reversal pattern. With 1.5062/50 area considered as the peaks, failure to break above that area would trigger downside pressure, and once price break below 1.4850 the double top bearish reversal scenario is confirmed. Break below 1.4850 might also a violation to the major trendline support (blue) which potentially also trigger bearish reversal scenario.

Failure: A double top formation considered to be fail if price break above the peaks. I like to see it this way: A bearish reversal scenario failure usually produced the other scenario, bullish continuation with technical target remains at 1.5150 and 1.5300

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Daily Technical Analysis

EURUSD Outlook

The EURUSD failed to continue it’s bearish momentum yesterday, even the Fed statement was flat, nothing significant. The way I see it, market opinion was that the economy recovery is still in the right track. The Fed also said that it will keep the rates near zero for ‘an extended period’ which make the Dollar less interesting than major currencies.

Technically, we have false breakdown on both major trendline support on daily chart and the range area on h4 chart as you can see in my daily and h4 charts below, which potentially lead to further bullish momentum. Like I said yesterday, false breakdown from the range area on h4 chart lead to further bullish momentum with 1.4950 – 1.5060 area as potential bullish target. I prefer a bullish scenario at this phase and focus now is on ECB rate decision and press conference today. With no significant surprise in economic data, it’s more likely that the ECB statement will also flat but investors, once again, might see that global recovery is also still in the right track. Unless we have significant negative tone from ECB, the Dollar should keep under pressure. Immediate support at 1.4800. Break below that area should lead us into no trading zone but I still prefer bullish scenario. I think it’s better to do nothing for now until the ECB press conference. Patient, my dear fellow traders, is a virtue.

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Dollar Falls As Fed Keeps Loose Monetary Stance

The dollar fell on Wednesday as the Federal Open Market Committee reiterated that US economic conditions ‘are likely to warrant exceptionally low levels of the federal funds rate for an extended period.’ The FOMC also said inflationary expectations are well anchored and consumer spending is improving. Bond yields and commodity prices rose following the Fed statement, but US stocks pared strong gains at the close and the S&P 500 closed just 1.09 points higher at 1,046.50. The yen fell for a third consecutive day. The euro, supported by improved risk sentiment, rallied after finding support at the 1.47 handle. Sterling rose on strong UK consumer confidence and services PMI data. The Australian and Canadian dollars gained as commodity prices advanced and gold made a new record high.

The dollar index fell as risk appetite increased. Negatively correlated with the equity market, the dollar index fell as stocks rose. The dollar index’ long-term downtrend was broken last week. The 76-area support was broken today as the Fed promised to keep its highly accommodative monetary stance. The Fed’s stance makes it difficult to see any upside on the dollar; still, shorting dollar is a crowded trade, so there could be sharp short covering rallies. There are support at the 75-handle and resistance in the 77-78 area.

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Daily Technical Analysis

EURUSD Outlook

We have a significant technical event yesterday. As you can see in my daily chart below, the trendline support has been violated to the downside, bottomed at 1.4625. This fact should trigger further weakness for the Euro with 1.4450 as technical target, but we need to be very careful here since the pair closed much higher at 1.4716 indicating limited bearish. Every time a trendline support is broken, oftenly price retreat to the upside and testing the trendline area, which is now become a resistance. So, as long as the pair stay below the trendline, expect further bearish scenario.

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USD Consolidates Gains, Factory Orders Rise

• USD: Higher, stocks erase early losses on banking woes, factory orders rise
• JPY: Higher, supported by rising risk aversion as equity markets decline
• EUR: Lower, bank stress tests reveal the EU may face additional bank losses, deficits rising
• GBP: Mixed, UK construction spending falls, bank troubles re-emerge, more bailout money for RBS & Lloyds
• CAD and AUD: AUD lower & CAD higher, RBA hikes rates, dovish statement, CAD supported by gold rally

Overview

European bank troubles sparked a sharp sell of in global equity markets, a spike in risk aversion and a rally in the USD. UBS posted a larger than expected Q3 loss, RBS and Lloyd’s will receive additional bailout funds from the UK government and the EU commission warns that EU banks face additional banks looses. The GBP was pressured by a WSJ report which says economists expect the BOE to expand its asset purchases by 25 bln at Thursday BOE policy meeting. The other major feature of Tuesday’s trade was the RBA decision to hike rates 25 bps to 3.5%. The rate hike was widely expected and the AUD traded lower pressured by falling equity markets and doubt about whether the RBA will hike rates again in December. The RBA policy statement showed little urgency for the need to hike rates again in December. US economic data was positive as factory orders rise. The rise in factory orders helped to erase sharp early losses for the US equity market and the USD gave back some of its overseas gains versus the high yields currencies. JPM cut its GDP forecast to 3.1% from 3.5% after today’s release factory orders release.

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If you are new to forex trading, do you know which types of technical indicators are for what kinds of usage? And if you are already an experienced forex trader, are you using the correct combinations of technical indicators to help you profit consistently in the forex market If w:you are still not sure, we’ll discuss the following 4 different types of forex technical indicators below
1. Trend Indicators – Also known as Directional Indicators. I have always reminded my students, ‘Trend is your best friend and always trade in the direction of a trend’. A forex trend may be quite subjective to different traders as they may have different views on trendiness. So those trend indicators out there in the forex market can help traders detect the starting and ending of a trend. Some of the more popular trend following indicators includes MACD (Moving Average Convergence Divergence), MA (Moving Average), Parabolic SAR. Depending just on trend indicators is not enough, you may need Momentum Indicator(s) to enter and/or exit a trade.
2. Momentum indicator – Also known as Strength Indicators. It is described as the speed of a move in price over a period of time. They are oscillators which are able to indicate whether the forex market is in the overbought or oversold regions. If they have risen to the overbought zone, there is high possibility that the price will be going down, and if they have fallen to oversold zone, there is high possibility price will be going up. Some of the more popular oscillating indicators in forex trading include Stochastic, Momentum, RSI (Relative Strength Index), CCI (Commodity Channel Index).

3. Volatility indicators – Also known as Bands Indicators. Often, a change in volatility will lead to a change in price. Therefore, we can see how active the forex market is just by looking at the price ranges. You may want to trade when there is a dramatic change in price movements, which suggests that the market is actively trading forex
. Some of the more popular Volatility Indicator includes BB (Bollinger Bands, ATR (Average True Range), Price Envelopes

4. Volume indicator – They are used to show the volume of forex trading and are useful to confirm the direction of a trend, a reversal or a breakout. Price movements increase when the volume increases, low volume may warn of a reversal in a forex trade. If a currency pair trades from a narrow range and then breaks out on high volume, this is a strong signal and may suggest a breakout. Some of the more widely used Volume Indicator includes DemandIndex, Chaikin Money Flow, Money Flow Index, Ease Of Movement, OBV (On Balance Volume).
I’m sure that after the above discussions, you should have a better idea of the different types of forex technical indicators. While they can greatly help you in technical analysis and make trading decisions, I want to stress that NO forex indicators is holy grail. The
indicators are just a confirmation of history and a guide for the future. Most importantly, you need to know the right combination of the forex technical indicators to get you profitable consistently in the long haul. You can find a forex trading system which has a very good combination of indicators in my forex ebook which I give for FREE. Good trading to all.

Last week I’ve posted a pattern spotted on AUD/USD chart that seemed to be a descending triangle. It turned out to be false (with several features pointing on that fact even 7 days ago) and the whole pattern has now transformed into a falling wedge with a very gradual narrowing, which suggests possibility for another pattern transformation. But nevertheless you can already start looking for a breakout to have good entry opportunity. Click the image to get the larger screenshot.

AUD/USD, Daily, Falling Wedge:

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Read the rest of Forex Chart Pattern — AUD/USD (15 words)

Posted on Forex blog.