Monday, May 31, 2010
GBP/USD Technical Analysis (June-01-2010)
The GBPUSD had a bullish momentum yesterday, but still unable to move consistently above 1.4527 region so far. On h4 chart below we can see that price is now struggling around to bullish channel lower line indicating critical technical point. A clear break below the bullish channel could trigger further bearish momentum towards 1.4350 before re-testing 1.4240 region. On the other hand, as long as price able to move inside the bullish channel, the upside correction scenario remains intact with 1.4608 and 1.4715 as technical target.
EUR/USd Daily Technical Analysis (June-01-2010)
The EURUSD didn't make significant movement yesterday. Earlier today in Asian session, price struggling around 1.2260 support area as you can see on my h1 chart below indicating critical intra-day technical phase. The major scenario remains to the downside but we need a consistent move below 1.2260 to continue the bearish pressure testing 1.2140/50 area before targeting 1.2000. A failure to do so could open the door for another upside pullback testing 1.2350 even 1.2450/70 region.
Sunday, May 30, 2010
EUR/USD Weekly Technical Analysis (May 31 - June 04 2010)
Employment figures are the highlight of this week’s busy European calendar, as the old continent continues to struggle with the contagious debt disease. Here’s an outlook for the events the will move the Euro, and an updated technical analysis for EUR/USD.
Euro/Dollar graph with support and resistance lines marked. Click to enlarge:
The report that Spain, Portugal and Greece are in debt of 2 trillion euros hurt the common currency, but China’s sign of confidence helped stabilize it. With the recent downgrade of Spain’s credit rating by Fitch, the crisis now focuses more and more on the Iberian peninsula than on Greece. OK, let’s start:
Jean-Claude Trichet talks: Begins speaking on Monday at 00:25 GMT. The president of the ECB participates in a conference by Korea’s central bank, via satellite. Trichet usually shakes the markets. As this speech comes so early in the week, any comments about the debt crisis will cause moves.
M3 Money Supply: Published on Monday at 8:00 GMT. The amount of money in circulation dropped in recent months, signalling deflationary pressure and contradicting the small rise in CPI. The year-over-year value fell by 0.1% last month. The forecast is for a 0.2% drop this time.
CPI Flash Estimate: Published on Monday at 9:00 GMT. The Euro-zone’s annual rise in prices climbed to 1.5%, the highest since the end of 2008. Looking at other inflation-related figures, a significant pick up of inflation isn’t expected in Europe – a rise to 1.7% is expected this time, but given the crisis, it could be lower. Note that this is the initial release.
Axel Weber talks: Starts speaking on Tuesday at 5:00 GMT. The president of the German Bundesbank, an influential member of the ECB and the main candidate to replace Trichet, usually stirs the markets. His speech in Frankfurt is likely to do it once again.
German Retail Sales: Published on Tuesday at 6:00 GMT. Europe’s locomotive suffered a big drop in retail sales last month – a drop of 2.4%. This report relates to May, and it will probably show that consumers were more careful amidst the big crisis and the talks of an austerity plan. A rise of 0.7% is expected now.
German Unemployment Change: Published on Tuesday at 7:55 GMT. Germany showed impressing drops in the number of unemployed people – 68,000 last month and 42,000 in the previous month. A smaller drop is predicted this time, 17,000, as consumer and investor confidence is down, and the turmoil in the content will also reach the German job market.
Unemployment Rate: Published on Tuesday at 9:00 GMT. The various countries in the Euro-zone vary in their unemployment rate. Spain reported over 20%. The average for the euro zone stands on 10%, a number that has been rather stable for 6 months, and causes worries. A drop under this double digit figure will sure help, but there’s a bigger chance of a rise – hurting the Euro.
PPI: Published on Wednesday at 9:00 GMT. Producer prices have a tendency of jumping in one month and then stalling in the next month. Last month’s rise of 0.6% was weaker than expected, but this month is still expected to see a smaller rise in prices – closer to 0.
Retail Sales: Published on Thursday at 9:00 GMT. Despite being release after the German release, the all-European number is of high importance. The volume of European sales hasn’t risen since January, and this isn’t expected to be seen now. No change in sales volume was reported last month, and an insignificant rise of 0.1% is the forecast for this release.
Revised GDP: Published on Friday at 9:00 GMT. This revision usually confirms the initial read, but it still shakes the markets. The Euro-zone’s growth in Q1 was 0.2% – quite weak. An upgrade will help the Euro, as the second quarter will probably see a return to contraction.
EUR/USD Technical Analysis
The Euro traded in a range, going lower throughout most of the week. The pair reached 1.2152, just 10 pips away from the 4 year low that it reached in the previous week, before making a neat comeback but finally settling at 1.2270 – a weekly loss of over 350 pips.
The Euro now trades between the 4 year low of 1.2142 and the “Lehman levels” of 1.2330. Some of the levels have changed since last week’s outlook.
Looking up above 1.2330, the next level of resistance is at 1.2460, which was the past week’s high and also a support line back at the beginning of 2009.
Above, 1.2672 provides minor resistance after breaking one of the short lived Euro recoveries. Higher, 1.2880 was another line of support in 2009, and it’s followed by 1.3114 and 1.3267, which held Euro/Dollar before the collapse.
Looking down below 1.2142, the round number of 1.20 is the next line of support. Stronger support appears at 1.1820, and its followed with 1.1630, which is the lowest level since 2003.
I continue being bearish on EUR/USD.
Another week of high volatility had one point of light – the Chinese denial, but ended with a dark tone – another credit downgrade, and an appetite for new lows. The contagious debt diseases are very far from over. A break under 1.20 could be seen soon.
Euro/Dollar graph with support and resistance lines marked. Click to enlarge:
The report that Spain, Portugal and Greece are in debt of 2 trillion euros hurt the common currency, but China’s sign of confidence helped stabilize it. With the recent downgrade of Spain’s credit rating by Fitch, the crisis now focuses more and more on the Iberian peninsula than on Greece. OK, let’s start:
Jean-Claude Trichet talks: Begins speaking on Monday at 00:25 GMT. The president of the ECB participates in a conference by Korea’s central bank, via satellite. Trichet usually shakes the markets. As this speech comes so early in the week, any comments about the debt crisis will cause moves.
M3 Money Supply: Published on Monday at 8:00 GMT. The amount of money in circulation dropped in recent months, signalling deflationary pressure and contradicting the small rise in CPI. The year-over-year value fell by 0.1% last month. The forecast is for a 0.2% drop this time.
CPI Flash Estimate: Published on Monday at 9:00 GMT. The Euro-zone’s annual rise in prices climbed to 1.5%, the highest since the end of 2008. Looking at other inflation-related figures, a significant pick up of inflation isn’t expected in Europe – a rise to 1.7% is expected this time, but given the crisis, it could be lower. Note that this is the initial release.
Axel Weber talks: Starts speaking on Tuesday at 5:00 GMT. The president of the German Bundesbank, an influential member of the ECB and the main candidate to replace Trichet, usually stirs the markets. His speech in Frankfurt is likely to do it once again.
German Retail Sales: Published on Tuesday at 6:00 GMT. Europe’s locomotive suffered a big drop in retail sales last month – a drop of 2.4%. This report relates to May, and it will probably show that consumers were more careful amidst the big crisis and the talks of an austerity plan. A rise of 0.7% is expected now.
German Unemployment Change: Published on Tuesday at 7:55 GMT. Germany showed impressing drops in the number of unemployed people – 68,000 last month and 42,000 in the previous month. A smaller drop is predicted this time, 17,000, as consumer and investor confidence is down, and the turmoil in the content will also reach the German job market.
Unemployment Rate: Published on Tuesday at 9:00 GMT. The various countries in the Euro-zone vary in their unemployment rate. Spain reported over 20%. The average for the euro zone stands on 10%, a number that has been rather stable for 6 months, and causes worries. A drop under this double digit figure will sure help, but there’s a bigger chance of a rise – hurting the Euro.
PPI: Published on Wednesday at 9:00 GMT. Producer prices have a tendency of jumping in one month and then stalling in the next month. Last month’s rise of 0.6% was weaker than expected, but this month is still expected to see a smaller rise in prices – closer to 0.
Retail Sales: Published on Thursday at 9:00 GMT. Despite being release after the German release, the all-European number is of high importance. The volume of European sales hasn’t risen since January, and this isn’t expected to be seen now. No change in sales volume was reported last month, and an insignificant rise of 0.1% is the forecast for this release.
Revised GDP: Published on Friday at 9:00 GMT. This revision usually confirms the initial read, but it still shakes the markets. The Euro-zone’s growth in Q1 was 0.2% – quite weak. An upgrade will help the Euro, as the second quarter will probably see a return to contraction.
EUR/USD Technical Analysis
The Euro traded in a range, going lower throughout most of the week. The pair reached 1.2152, just 10 pips away from the 4 year low that it reached in the previous week, before making a neat comeback but finally settling at 1.2270 – a weekly loss of over 350 pips.
The Euro now trades between the 4 year low of 1.2142 and the “Lehman levels” of 1.2330. Some of the levels have changed since last week’s outlook.
Looking up above 1.2330, the next level of resistance is at 1.2460, which was the past week’s high and also a support line back at the beginning of 2009.
Above, 1.2672 provides minor resistance after breaking one of the short lived Euro recoveries. Higher, 1.2880 was another line of support in 2009, and it’s followed by 1.3114 and 1.3267, which held Euro/Dollar before the collapse.
Looking down below 1.2142, the round number of 1.20 is the next line of support. Stronger support appears at 1.1820, and its followed with 1.1630, which is the lowest level since 2003.
I continue being bearish on EUR/USD.
Another week of high volatility had one point of light – the Chinese denial, but ended with a dark tone – another credit downgrade, and an appetite for new lows. The contagious debt diseases are very far from over. A break under 1.20 could be seen soon.
EUR/USD Weekly Technical Analysis (May 31 - June 04 2010)
Employment figures are the highlight of this week’s busy European calendar, as the old continent continues to struggle with the contagious debt disease. Here’s an outlook for the events the will move the Euro, and an updated technical analysis for EUR/USD.
Euro/Dollar graph with support and resistance lines marked. Click to enlarge:
The report that Spain, Portugal and Greece are in debt of 2 trillion euros hurt the common currency, but China’s sign of confidence helped stabilize it. With the recent downgrade of Spain’s credit rating by Fitch, the crisis now focuses more and more on the Iberian peninsula than on Greece. OK, let’s start:
Jean-Claude Trichet talks: Begins speaking on Monday at 00:25 GMT. The president of the ECB participates in a conference by Korea’s central bank, via satellite. Trichet usually shakes the markets. As this speech comes so early in the week, any comments about the debt crisis will cause moves.
M3 Money Supply: Published on Monday at 8:00 GMT. The amount of money in circulation dropped in recent months, signalling deflationary pressure and contradicting the small rise in CPI. The year-over-year value fell by 0.1% last month. The forecast is for a 0.2% drop this time.
CPI Flash Estimate: Published on Monday at 9:00 GMT. The Euro-zone’s annual rise in prices climbed to 1.5%, the highest since the end of 2008. Looking at other inflation-related figures, a significant pick up of inflation isn’t expected in Europe – a rise to 1.7% is expected this time, but given the crisis, it could be lower. Note that this is the initial release.
Axel Weber talks: Starts speaking on Tuesday at 5:00 GMT. The president of the German Bundesbank, an influential member of the ECB and the main candidate to replace Trichet, usually stirs the markets. His speech in Frankfurt is likely to do it once again.
German Retail Sales: Published on Tuesday at 6:00 GMT. Europe’s locomotive suffered a big drop in retail sales last month – a drop of 2.4%. This report relates to May, and it will probably show that consumers were more careful amidst the big crisis and the talks of an austerity plan. A rise of 0.7% is expected now.
German Unemployment Change: Published on Tuesday at 7:55 GMT. Germany showed impressing drops in the number of unemployed people – 68,000 last month and 42,000 in the previous month. A smaller drop is predicted this time, 17,000, as consumer and investor confidence is down, and the turmoil in the content will also reach the German job market.
Unemployment Rate: Published on Tuesday at 9:00 GMT. The various countries in the Euro-zone vary in their unemployment rate. Spain reported over 20%. The average for the euro zone stands on 10%, a number that has been rather stable for 6 months, and causes worries. A drop under this double digit figure will sure help, but there’s a bigger chance of a rise – hurting the Euro.
PPI: Published on Wednesday at 9:00 GMT. Producer prices have a tendency of jumping in one month and then stalling in the next month. Last month’s rise of 0.6% was weaker than expected, but this month is still expected to see a smaller rise in prices – closer to 0.
Retail Sales: Published on Thursday at 9:00 GMT. Despite being release after the German release, the all-European number is of high importance. The volume of European sales hasn’t risen since January, and this isn’t expected to be seen now. No change in sales volume was reported last month, and an insignificant rise of 0.1% is the forecast for this release.
Revised GDP: Published on Friday at 9:00 GMT. This revision usually confirms the initial read, but it still shakes the markets. The Euro-zone’s growth in Q1 was 0.2% – quite weak. An upgrade will help the Euro, as the second quarter will probably see a return to contraction.
EUR/USD Technical Analysis
The Euro traded in a range, going lower throughout most of the week. The pair reached 1.2152, just 10 pips away from the 4 year low that it reached in the previous week, before making a neat comeback but finally settling at 1.2270 – a weekly loss of over 350 pips.
The Euro now trades between the 4 year low of 1.2142 and the “Lehman levels” of 1.2330. Some of the levels have changed since last week’s outlook.
Looking up above 1.2330, the next level of resistance is at 1.2460, which was the past week’s high and also a support line back at the beginning of 2009.
Above, 1.2672 provides minor resistance after breaking one of the short lived Euro recoveries. Higher, 1.2880 was another line of support in 2009, and it’s followed by 1.3114 and 1.3267, which held Euro/Dollar before the collapse.
Looking down below 1.2142, the round number of 1.20 is the next line of support. Stronger support appears at 1.1820, and its followed with 1.1630, which is the lowest level since 2003.
I continue being bearish on EUR/USD.
Another week of high volatility had one point of light – the Chinese denial, but ended with a dark tone – another credit downgrade, and an appetite for new lows. The contagious debt diseases are very far from over. A break under 1.20 could be seen soon.
Euro/Dollar graph with support and resistance lines marked. Click to enlarge:
The report that Spain, Portugal and Greece are in debt of 2 trillion euros hurt the common currency, but China’s sign of confidence helped stabilize it. With the recent downgrade of Spain’s credit rating by Fitch, the crisis now focuses more and more on the Iberian peninsula than on Greece. OK, let’s start:
Jean-Claude Trichet talks: Begins speaking on Monday at 00:25 GMT. The president of the ECB participates in a conference by Korea’s central bank, via satellite. Trichet usually shakes the markets. As this speech comes so early in the week, any comments about the debt crisis will cause moves.
M3 Money Supply: Published on Monday at 8:00 GMT. The amount of money in circulation dropped in recent months, signalling deflationary pressure and contradicting the small rise in CPI. The year-over-year value fell by 0.1% last month. The forecast is for a 0.2% drop this time.
CPI Flash Estimate: Published on Monday at 9:00 GMT. The Euro-zone’s annual rise in prices climbed to 1.5%, the highest since the end of 2008. Looking at other inflation-related figures, a significant pick up of inflation isn’t expected in Europe – a rise to 1.7% is expected this time, but given the crisis, it could be lower. Note that this is the initial release.
Axel Weber talks: Starts speaking on Tuesday at 5:00 GMT. The president of the German Bundesbank, an influential member of the ECB and the main candidate to replace Trichet, usually stirs the markets. His speech in Frankfurt is likely to do it once again.
German Retail Sales: Published on Tuesday at 6:00 GMT. Europe’s locomotive suffered a big drop in retail sales last month – a drop of 2.4%. This report relates to May, and it will probably show that consumers were more careful amidst the big crisis and the talks of an austerity plan. A rise of 0.7% is expected now.
German Unemployment Change: Published on Tuesday at 7:55 GMT. Germany showed impressing drops in the number of unemployed people – 68,000 last month and 42,000 in the previous month. A smaller drop is predicted this time, 17,000, as consumer and investor confidence is down, and the turmoil in the content will also reach the German job market.
Unemployment Rate: Published on Tuesday at 9:00 GMT. The various countries in the Euro-zone vary in their unemployment rate. Spain reported over 20%. The average for the euro zone stands on 10%, a number that has been rather stable for 6 months, and causes worries. A drop under this double digit figure will sure help, but there’s a bigger chance of a rise – hurting the Euro.
PPI: Published on Wednesday at 9:00 GMT. Producer prices have a tendency of jumping in one month and then stalling in the next month. Last month’s rise of 0.6% was weaker than expected, but this month is still expected to see a smaller rise in prices – closer to 0.
Retail Sales: Published on Thursday at 9:00 GMT. Despite being release after the German release, the all-European number is of high importance. The volume of European sales hasn’t risen since January, and this isn’t expected to be seen now. No change in sales volume was reported last month, and an insignificant rise of 0.1% is the forecast for this release.
Revised GDP: Published on Friday at 9:00 GMT. This revision usually confirms the initial read, but it still shakes the markets. The Euro-zone’s growth in Q1 was 0.2% – quite weak. An upgrade will help the Euro, as the second quarter will probably see a return to contraction.
EUR/USD Technical Analysis
The Euro traded in a range, going lower throughout most of the week. The pair reached 1.2152, just 10 pips away from the 4 year low that it reached in the previous week, before making a neat comeback but finally settling at 1.2270 – a weekly loss of over 350 pips.
The Euro now trades between the 4 year low of 1.2142 and the “Lehman levels” of 1.2330. Some of the levels have changed since last week’s outlook.
Looking up above 1.2330, the next level of resistance is at 1.2460, which was the past week’s high and also a support line back at the beginning of 2009.
Above, 1.2672 provides minor resistance after breaking one of the short lived Euro recoveries. Higher, 1.2880 was another line of support in 2009, and it’s followed by 1.3114 and 1.3267, which held Euro/Dollar before the collapse.
Looking down below 1.2142, the round number of 1.20 is the next line of support. Stronger support appears at 1.1820, and its followed with 1.1630, which is the lowest level since 2003.
I continue being bearish on EUR/USD.
Another week of high volatility had one point of light – the Chinese denial, but ended with a dark tone – another credit downgrade, and an appetite for new lows. The contagious debt diseases are very far from over. A break under 1.20 could be seen soon.
Best Non-Farm Payrolls in Past 13 Years?
The upcoming Non-Farm Payrolls release on June 4th holds high expectations – a job gain of 500K jobs, the best since 1997, but this includes special government hiring. Here are the things to watch for in this release, and the expected impact on currencies.
It’s important to stress that the Non-Farm Payrolls release is the most volatile event in forex trading, and causes very high volatility. I suggest you read my 5 notes for Non-Farm Payrolls trading. The comment regarding the risk factor is very important these days. OK, let’s see what’s special this time:
The decennial government census already had an impact on previous Non-Farm Payrolls releases. The impact will come to a climax in June 4th’s report. Previous months were dedicated for preparations, and this reported month, May, is when the census was held.
So, a big bulk of the gain in jobs comes from the government. Private sector hiring is only a small part of this month’s report, but it’s of high importance, as it serves as the core value, only slightly affected by the census, and supplying a long-term value.
The markets will pay less importance to the headline number, but rather focus on hiring in the private sector, which is expected to reach 180,000.
Contradicting rise in the unemployment rate
Last month saw a huge leap of 290K jobs, far better than expected. The figure for the previous month was also revised to the upside. But the unemployment rate jumped from 9.7% to 9.9%, very close to the scary 10% figure.
Despite the huge gain expected in jobs in the public sector, and the neat gain in jobs in the private sector, the unemployment rate is expected to drop by only 0.1% to 9.8%. The best explanation for last month’s rise and this month’s expected small dip is that the deep crisis sent many people off charts. As they stopped being part of the workforce, they didn’t contribute to the unemployment rate.
Now that they’re starting to get back, they enlarge the total workforce in a similar scale to the gain in jobs, thus leaving the unemployment rate almost unchanged.
Impact on forex trading
Yet again, this seems to be another win-win situation for the dollar, especially in the Euro/Dollar and the Pound/Dollar. If the results come as expected, it will be another sign of the American economy’s strength. This strength stands out against the great European weakness and against the Pound that follows it.
On the other hand, the Canadian and Australian economies are also doing quite well, and could still rise after this result. AUD/USD has lots of room to rise after the recent falls, driven mostly by risk aversive action. A good NFP will trigger risk appetite behavior and send the Aussie up.
Canada expects a busy week, with a possible rate hike, GDP numbers and employment figures just 90 minutes before the NFP. If Canadian numbers are OK, USD/CAD could fall.
Scenarios for surprises – dollar strength expected.
A disappointing outcome of the Non-Farm Payrolls or a rise of the unemployment rate above 10% could trigger risk aversive trading across the board, hurting also stronger currencies. We’ve seen the dollar rise after weak GDP and weak jobless claims last week. In these chaotic days, bad news, even if they come from the US, trigger dollar buying.
The opposite scenario, of a big drop in the unemployment rate and an even-higher gain in jobs, the dollar will stand out against all the currencies, and will fully justify its safe haven status.
We have lots of other major events before Friday’s NFP. How do you see the Non-Farm Payrolls unfold for forex trading?
It’s important to stress that the Non-Farm Payrolls release is the most volatile event in forex trading, and causes very high volatility. I suggest you read my 5 notes for Non-Farm Payrolls trading. The comment regarding the risk factor is very important these days. OK, let’s see what’s special this time:
The decennial government census already had an impact on previous Non-Farm Payrolls releases. The impact will come to a climax in June 4th’s report. Previous months were dedicated for preparations, and this reported month, May, is when the census was held.
So, a big bulk of the gain in jobs comes from the government. Private sector hiring is only a small part of this month’s report, but it’s of high importance, as it serves as the core value, only slightly affected by the census, and supplying a long-term value.
The markets will pay less importance to the headline number, but rather focus on hiring in the private sector, which is expected to reach 180,000.
Contradicting rise in the unemployment rate
Last month saw a huge leap of 290K jobs, far better than expected. The figure for the previous month was also revised to the upside. But the unemployment rate jumped from 9.7% to 9.9%, very close to the scary 10% figure.
Despite the huge gain expected in jobs in the public sector, and the neat gain in jobs in the private sector, the unemployment rate is expected to drop by only 0.1% to 9.8%. The best explanation for last month’s rise and this month’s expected small dip is that the deep crisis sent many people off charts. As they stopped being part of the workforce, they didn’t contribute to the unemployment rate.
Now that they’re starting to get back, they enlarge the total workforce in a similar scale to the gain in jobs, thus leaving the unemployment rate almost unchanged.
Impact on forex trading
Yet again, this seems to be another win-win situation for the dollar, especially in the Euro/Dollar and the Pound/Dollar. If the results come as expected, it will be another sign of the American economy’s strength. This strength stands out against the great European weakness and against the Pound that follows it.
On the other hand, the Canadian and Australian economies are also doing quite well, and could still rise after this result. AUD/USD has lots of room to rise after the recent falls, driven mostly by risk aversive action. A good NFP will trigger risk appetite behavior and send the Aussie up.
Canada expects a busy week, with a possible rate hike, GDP numbers and employment figures just 90 minutes before the NFP. If Canadian numbers are OK, USD/CAD could fall.
Scenarios for surprises – dollar strength expected.
A disappointing outcome of the Non-Farm Payrolls or a rise of the unemployment rate above 10% could trigger risk aversive trading across the board, hurting also stronger currencies. We’ve seen the dollar rise after weak GDP and weak jobless claims last week. In these chaotic days, bad news, even if they come from the US, trigger dollar buying.
The opposite scenario, of a big drop in the unemployment rate and an even-higher gain in jobs, the dollar will stand out against all the currencies, and will fully justify its safe haven status.
We have lots of other major events before Friday’s NFP. How do you see the Non-Farm Payrolls unfold for forex trading?
GBP/USD Weekly Technical Analysis (May 31- June 04 2010)
The British Pound is closely tied to the Euro, and didn’t manage to close higher. The upcoming week has many important events that will shake the Pound. Here’s an outlook for those events and an updated technical analysis for GBP/USD.
GBP/USD graph with support and resistance lines marked. Click to enlarge:
Britain’s growth rate for the first quarter of 2010 was upgraded to 0.3%, but this didn’t seem to help the Pound. After a bank holiday on Monday, we have British figures coming in every day. Let’s start:
Halifax HPI: Publication time unknown at the moment. This is a highly regarded house price index, as HBOS calculates the changes in prices using its wide internal data. After many months of rises, prices became more unstable. A drop in prices three months ago was followed by a neat rise, but last month’s drop undermined the thought that the drop wasn’t a one time event. The forecast is for a small rise of 0.3%.
Manufacturing PMI: Published on Tuesday at 8:30 GMT. Purchasin managers in Britain’s manufacturing sector are quite optimistic – the index rose to 58 points last month – the highest level sine the outbreak of the financial crisis, and it also beat expectations. This survey of 600 managers is likely to drop this time, but remain above 50 – the line that separates optimism and pessimism.
Net Lending to Individuals: Published on Wednesday at 8:30 GMT. After a few strong months, the Bank of England showed that borrowing dropped to 0.6 billion, from the highs of 2 billion. This indicates a more cautious attitude from consumers. This trend will probably continue, and a negative figure won’t be surprising.
Construction PMI: Published on Wednesday at 8:30 GMT. The second purchasing managers’ release for this week concerns the housing sector. Also here, a big leap was seen last month to 58.2 points. These numbers follow many months of scores under 50, so this fast jump might be followed with a downside correction.
Nationwide HPI: Published on Thursday at 6:00 GMT. This important house price index fell only in one month and then returned to strong rises. This is different than the Halifax HPI. But this time, prices are expected to rise by only 0.5%, half of last month’s rise.
Services PMI: Published on Thursday at 8:30 GMT. The last PMI figure is different from the first two. It fell in the past two months, and isn’t at record numbers anymore. From 55.3 points last month, the forecast is for a small rise to 55.6 points.
GBP/USD Technical Analysis
Cable began the week with a dip towards this year’s low of 1.4227, but remained far enough. A rally sent all the way to 1.4611, but these gains didn’t hold, and the pair closed at 1.4451, not far from last week’s close.
Some lines have changed since last week’s outlook. The Pound’s range is now between 1.44, a minor support line, and 1.4520, a pivotal line in the past week. It’s quite far from stronger lines.
Looking up, the stubborn peak of 1.4611 provides the next resistance line for the pair. This is followed by 1.4780, a very important line that stopped the previous collapse of the Pound, and now works as a resistance line.
Higher, 1.4975 is another minor line, and it’s followed by 1.5140, which worked as a strong support line, before the recent collapse. The next lines are 1.5350 and 1.5520, but they’re quite far away now.
Looking down, the 2010 low of 1.4227 is a strong line of support. It was approached several times, and wasn’t breached. Not yet. The next support line is quite close – 1.4130, serving as a support line at the beginning of 2009.
Even lower, 1.38 also worked as a support line at the beginning of 2009. Below, 1.3514 is the ultimate line of support, being the lowest level in over two decades. This is still very far.
I remain bearish on GBP/USD.
The European debt issues have a very strong impact on Britain. The Pound will probably suffer from the deteriorating situation. The contagious disease is on the doorstep of the UK.
GBP/USD graph with support and resistance lines marked. Click to enlarge:
Britain’s growth rate for the first quarter of 2010 was upgraded to 0.3%, but this didn’t seem to help the Pound. After a bank holiday on Monday, we have British figures coming in every day. Let’s start:
Halifax HPI: Publication time unknown at the moment. This is a highly regarded house price index, as HBOS calculates the changes in prices using its wide internal data. After many months of rises, prices became more unstable. A drop in prices three months ago was followed by a neat rise, but last month’s drop undermined the thought that the drop wasn’t a one time event. The forecast is for a small rise of 0.3%.
Manufacturing PMI: Published on Tuesday at 8:30 GMT. Purchasin managers in Britain’s manufacturing sector are quite optimistic – the index rose to 58 points last month – the highest level sine the outbreak of the financial crisis, and it also beat expectations. This survey of 600 managers is likely to drop this time, but remain above 50 – the line that separates optimism and pessimism.
Net Lending to Individuals: Published on Wednesday at 8:30 GMT. After a few strong months, the Bank of England showed that borrowing dropped to 0.6 billion, from the highs of 2 billion. This indicates a more cautious attitude from consumers. This trend will probably continue, and a negative figure won’t be surprising.
Construction PMI: Published on Wednesday at 8:30 GMT. The second purchasing managers’ release for this week concerns the housing sector. Also here, a big leap was seen last month to 58.2 points. These numbers follow many months of scores under 50, so this fast jump might be followed with a downside correction.
Nationwide HPI: Published on Thursday at 6:00 GMT. This important house price index fell only in one month and then returned to strong rises. This is different than the Halifax HPI. But this time, prices are expected to rise by only 0.5%, half of last month’s rise.
Services PMI: Published on Thursday at 8:30 GMT. The last PMI figure is different from the first two. It fell in the past two months, and isn’t at record numbers anymore. From 55.3 points last month, the forecast is for a small rise to 55.6 points.
GBP/USD Technical Analysis
Cable began the week with a dip towards this year’s low of 1.4227, but remained far enough. A rally sent all the way to 1.4611, but these gains didn’t hold, and the pair closed at 1.4451, not far from last week’s close.
Some lines have changed since last week’s outlook. The Pound’s range is now between 1.44, a minor support line, and 1.4520, a pivotal line in the past week. It’s quite far from stronger lines.
Looking up, the stubborn peak of 1.4611 provides the next resistance line for the pair. This is followed by 1.4780, a very important line that stopped the previous collapse of the Pound, and now works as a resistance line.
Higher, 1.4975 is another minor line, and it’s followed by 1.5140, which worked as a strong support line, before the recent collapse. The next lines are 1.5350 and 1.5520, but they’re quite far away now.
Looking down, the 2010 low of 1.4227 is a strong line of support. It was approached several times, and wasn’t breached. Not yet. The next support line is quite close – 1.4130, serving as a support line at the beginning of 2009.
Even lower, 1.38 also worked as a support line at the beginning of 2009. Below, 1.3514 is the ultimate line of support, being the lowest level in over two decades. This is still very far.
I remain bearish on GBP/USD.
The European debt issues have a very strong impact on Britain. The Pound will probably suffer from the deteriorating situation. The contagious disease is on the doorstep of the UK.
GBP/USD Weekly Technical Analysis (May 31- June 04 2010)
The British Pound is closely tied to the Euro, and didn’t manage to close higher. The upcoming week has many important events that will shake the Pound. Here’s an outlook for those events and an updated technical analysis for GBP/USD.
GBP/USD graph with support and resistance lines marked. Click to enlarge:
Britain’s growth rate for the first quarter of 2010 was upgraded to 0.3%, but this didn’t seem to help the Pound. After a bank holiday on Monday, we have British figures coming in every day. Let’s start:
Halifax HPI: Publication time unknown at the moment. This is a highly regarded house price index, as HBOS calculates the changes in prices using its wide internal data. After many months of rises, prices became more unstable. A drop in prices three months ago was followed by a neat rise, but last month’s drop undermined the thought that the drop wasn’t a one time event. The forecast is for a small rise of 0.3%.
Manufacturing PMI: Published on Tuesday at 8:30 GMT. Purchasin managers in Britain’s manufacturing sector are quite optimistic – the index rose to 58 points last month – the highest level sine the outbreak of the financial crisis, and it also beat expectations. This survey of 600 managers is likely to drop this time, but remain above 50 – the line that separates optimism and pessimism.
Net Lending to Individuals: Published on Wednesday at 8:30 GMT. After a few strong months, the Bank of England showed that borrowing dropped to 0.6 billion, from the highs of 2 billion. This indicates a more cautious attitude from consumers. This trend will probably continue, and a negative figure won’t be surprising.
Construction PMI: Published on Wednesday at 8:30 GMT. The second purchasing managers’ release for this week concerns the housing sector. Also here, a big leap was seen last month to 58.2 points. These numbers follow many months of scores under 50, so this fast jump might be followed with a downside correction.
Nationwide HPI: Published on Thursday at 6:00 GMT. This important house price index fell only in one month and then returned to strong rises. This is different than the Halifax HPI. But this time, prices are expected to rise by only 0.5%, half of last month’s rise.
Services PMI: Published on Thursday at 8:30 GMT. The last PMI figure is different from the first two. It fell in the past two months, and isn’t at record numbers anymore. From 55.3 points last month, the forecast is for a small rise to 55.6 points.
GBP/USD Technical Analysis
Cable began the week with a dip towards this year’s low of 1.4227, but remained far enough. A rally sent all the way to 1.4611, but these gains didn’t hold, and the pair closed at 1.4451, not far from last week’s close.
Some lines have changed since last week’s outlook. The Pound’s range is now between 1.44, a minor support line, and 1.4520, a pivotal line in the past week. It’s quite far from stronger lines.
Looking up, the stubborn peak of 1.4611 provides the next resistance line for the pair. This is followed by 1.4780, a very important line that stopped the previous collapse of the Pound, and now works as a resistance line.
Higher, 1.4975 is another minor line, and it’s followed by 1.5140, which worked as a strong support line, before the recent collapse. The next lines are 1.5350 and 1.5520, but they’re quite far away now.
Looking down, the 2010 low of 1.4227 is a strong line of support. It was approached several times, and wasn’t breached. Not yet. The next support line is quite close – 1.4130, serving as a support line at the beginning of 2009.
Even lower, 1.38 also worked as a support line at the beginning of 2009. Below, 1.3514 is the ultimate line of support, being the lowest level in over two decades. This is still very far.
I remain bearish on GBP/USD.
The European debt issues have a very strong impact on Britain. The Pound will probably suffer from the deteriorating situation. The contagious disease is on the doorstep of the UK.
GBP/USD graph with support and resistance lines marked. Click to enlarge:
Britain’s growth rate for the first quarter of 2010 was upgraded to 0.3%, but this didn’t seem to help the Pound. After a bank holiday on Monday, we have British figures coming in every day. Let’s start:
Halifax HPI: Publication time unknown at the moment. This is a highly regarded house price index, as HBOS calculates the changes in prices using its wide internal data. After many months of rises, prices became more unstable. A drop in prices three months ago was followed by a neat rise, but last month’s drop undermined the thought that the drop wasn’t a one time event. The forecast is for a small rise of 0.3%.
Manufacturing PMI: Published on Tuesday at 8:30 GMT. Purchasin managers in Britain’s manufacturing sector are quite optimistic – the index rose to 58 points last month – the highest level sine the outbreak of the financial crisis, and it also beat expectations. This survey of 600 managers is likely to drop this time, but remain above 50 – the line that separates optimism and pessimism.
Net Lending to Individuals: Published on Wednesday at 8:30 GMT. After a few strong months, the Bank of England showed that borrowing dropped to 0.6 billion, from the highs of 2 billion. This indicates a more cautious attitude from consumers. This trend will probably continue, and a negative figure won’t be surprising.
Construction PMI: Published on Wednesday at 8:30 GMT. The second purchasing managers’ release for this week concerns the housing sector. Also here, a big leap was seen last month to 58.2 points. These numbers follow many months of scores under 50, so this fast jump might be followed with a downside correction.
Nationwide HPI: Published on Thursday at 6:00 GMT. This important house price index fell only in one month and then returned to strong rises. This is different than the Halifax HPI. But this time, prices are expected to rise by only 0.5%, half of last month’s rise.
Services PMI: Published on Thursday at 8:30 GMT. The last PMI figure is different from the first two. It fell in the past two months, and isn’t at record numbers anymore. From 55.3 points last month, the forecast is for a small rise to 55.6 points.
GBP/USD Technical Analysis
Cable began the week with a dip towards this year’s low of 1.4227, but remained far enough. A rally sent all the way to 1.4611, but these gains didn’t hold, and the pair closed at 1.4451, not far from last week’s close.
Some lines have changed since last week’s outlook. The Pound’s range is now between 1.44, a minor support line, and 1.4520, a pivotal line in the past week. It’s quite far from stronger lines.
Looking up, the stubborn peak of 1.4611 provides the next resistance line for the pair. This is followed by 1.4780, a very important line that stopped the previous collapse of the Pound, and now works as a resistance line.
Higher, 1.4975 is another minor line, and it’s followed by 1.5140, which worked as a strong support line, before the recent collapse. The next lines are 1.5350 and 1.5520, but they’re quite far away now.
Looking down, the 2010 low of 1.4227 is a strong line of support. It was approached several times, and wasn’t breached. Not yet. The next support line is quite close – 1.4130, serving as a support line at the beginning of 2009.
Even lower, 1.38 also worked as a support line at the beginning of 2009. Below, 1.3514 is the ultimate line of support, being the lowest level in over two decades. This is still very far.
I remain bearish on GBP/USD.
The European debt issues have a very strong impact on Britain. The Pound will probably suffer from the deteriorating situation. The contagious disease is on the doorstep of the UK.
EUR/JPY Weekly Technical Analysis and Trade (May 31 - June 4 2010)
Weekly
Last Candlesticks pattern: Evening star
Time of formation: June 2009
Trend bias: Sideways
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 14 Aug 2009
Trend bias: Up
Although the single currency resumed medium term downtrend as suggested in our previous update and reached our indicated downside target at 110.49 and 109.12, as the currency pair has rebounded from this week’s low of 108.83, suggesting a minor low has possibly been formed and consolidation with mild upside bias is seen for retracement to 114.40/50, break there would bring stronger rebound towards 116.13 (38.2% Fibonacci retracement of 127.95 to 108.83) but reckon the Kijun-Sen (now at 119.15 would remain intact.
On the downside, expect pullback to be limited to 111.50 and reckon 110.00 would hold and bring such a rebound later. Only below yesterday’s low at 109.20 would risk a retest of 108.83 and break of latter level would signal medium term downtrend is still in progress, then weakness to 108.35 (100% projection of 139.26-119.66 measuring from 127.95) and possibly 107.00 would follow before prospect of another rebound.
Recommendation: Buy towards 111.00 for 115.00 with stop above 109.00.
On the weekly chart, although euro fell marginally to 108.83 this week, lack of follow through selling and the rebound from there suggest a possible ‘hammer’ candlestick pattern formation is under way and if price close around current level today, this would add credence to this reversal pattern formation. Having said that, we need to see a long white candle to be formed next week in order to provide confirmation of a temporary low and bring retracement of recent decline towards the Tenkan-Sen (now at 118.37) but reckon the Kijun-Sen (now at 121.69) would hold.
On the downside, expect 110.40/50 to contain pullback and bring such a rebound. Only breach of this week’s low at 108.83 would signal downtrend is still in progress and extend weakness to 107.00 and 106.00 but reckon downside would be limited to 105.00 and 103.48 (61.8% projection of 169.97 to 112.08 measuring from 139.26) should hold.
Last Candlesticks pattern: Evening star
Time of formation: June 2009
Trend bias: Sideways
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 14 Aug 2009
Trend bias: Up
Although the single currency resumed medium term downtrend as suggested in our previous update and reached our indicated downside target at 110.49 and 109.12, as the currency pair has rebounded from this week’s low of 108.83, suggesting a minor low has possibly been formed and consolidation with mild upside bias is seen for retracement to 114.40/50, break there would bring stronger rebound towards 116.13 (38.2% Fibonacci retracement of 127.95 to 108.83) but reckon the Kijun-Sen (now at 119.15 would remain intact.
On the downside, expect pullback to be limited to 111.50 and reckon 110.00 would hold and bring such a rebound later. Only below yesterday’s low at 109.20 would risk a retest of 108.83 and break of latter level would signal medium term downtrend is still in progress, then weakness to 108.35 (100% projection of 139.26-119.66 measuring from 127.95) and possibly 107.00 would follow before prospect of another rebound.
Recommendation: Buy towards 111.00 for 115.00 with stop above 109.00.
On the weekly chart, although euro fell marginally to 108.83 this week, lack of follow through selling and the rebound from there suggest a possible ‘hammer’ candlestick pattern formation is under way and if price close around current level today, this would add credence to this reversal pattern formation. Having said that, we need to see a long white candle to be formed next week in order to provide confirmation of a temporary low and bring retracement of recent decline towards the Tenkan-Sen (now at 118.37) but reckon the Kijun-Sen (now at 121.69) would hold.On the downside, expect 110.40/50 to contain pullback and bring such a rebound. Only breach of this week’s low at 108.83 would signal downtrend is still in progress and extend weakness to 107.00 and 106.00 but reckon downside would be limited to 105.00 and 103.48 (61.8% projection of 169.97 to 112.08 measuring from 139.26) should hold.
EUR/JPY Weekly Technical Analysis and Trade (May 31 - June 4 2010)
Weekly
Last Candlesticks pattern: Evening star
Time of formation: June 2009
Trend bias: Sideways
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 14 Aug 2009
Trend bias: Up
Although the single currency resumed medium term downtrend as suggested in our previous update and reached our indicated downside target at 110.49 and 109.12, as the currency pair has rebounded from this week’s low of 108.83, suggesting a minor low has possibly been formed and consolidation with mild upside bias is seen for retracement to 114.40/50, break there would bring stronger rebound towards 116.13 (38.2% Fibonacci retracement of 127.95 to 108.83) but reckon the Kijun-Sen (now at 119.15 would remain intact.
On the downside, expect pullback to be limited to 111.50 and reckon 110.00 would hold and bring such a rebound later. Only below yesterday’s low at 109.20 would risk a retest of 108.83 and break of latter level would signal medium term downtrend is still in progress, then weakness to 108.35 (100% projection of 139.26-119.66 measuring from 127.95) and possibly 107.00 would follow before prospect of another rebound.
Recommendation: Buy towards 111.00 for 115.00 with stop above 109.00.
On the weekly chart, although euro fell marginally to 108.83 this week, lack of follow through selling and the rebound from there suggest a possible ‘hammer’ candlestick pattern formation is under way and if price close around current level today, this would add credence to this reversal pattern formation. Having said that, we need to see a long white candle to be formed next week in order to provide confirmation of a temporary low and bring retracement of recent decline towards the Tenkan-Sen (now at 118.37) but reckon the Kijun-Sen (now at 121.69) would hold.
On the downside, expect 110.40/50 to contain pullback and bring such a rebound. Only breach of this week’s low at 108.83 would signal downtrend is still in progress and extend weakness to 107.00 and 106.00 but reckon downside would be limited to 105.00 and 103.48 (61.8% projection of 169.97 to 112.08 measuring from 139.26) should hold.
Last Candlesticks pattern: Evening star
Time of formation: June 2009
Trend bias: Sideways
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 14 Aug 2009
Trend bias: Up
Although the single currency resumed medium term downtrend as suggested in our previous update and reached our indicated downside target at 110.49 and 109.12, as the currency pair has rebounded from this week’s low of 108.83, suggesting a minor low has possibly been formed and consolidation with mild upside bias is seen for retracement to 114.40/50, break there would bring stronger rebound towards 116.13 (38.2% Fibonacci retracement of 127.95 to 108.83) but reckon the Kijun-Sen (now at 119.15 would remain intact.
On the downside, expect pullback to be limited to 111.50 and reckon 110.00 would hold and bring such a rebound later. Only below yesterday’s low at 109.20 would risk a retest of 108.83 and break of latter level would signal medium term downtrend is still in progress, then weakness to 108.35 (100% projection of 139.26-119.66 measuring from 127.95) and possibly 107.00 would follow before prospect of another rebound.
Recommendation: Buy towards 111.00 for 115.00 with stop above 109.00.
On the weekly chart, although euro fell marginally to 108.83 this week, lack of follow through selling and the rebound from there suggest a possible ‘hammer’ candlestick pattern formation is under way and if price close around current level today, this would add credence to this reversal pattern formation. Having said that, we need to see a long white candle to be formed next week in order to provide confirmation of a temporary low and bring retracement of recent decline towards the Tenkan-Sen (now at 118.37) but reckon the Kijun-Sen (now at 121.69) would hold.On the downside, expect 110.40/50 to contain pullback and bring such a rebound. Only breach of this week’s low at 108.83 would signal downtrend is still in progress and extend weakness to 107.00 and 106.00 but reckon downside would be limited to 105.00 and 103.48 (61.8% projection of 169.97 to 112.08 measuring from 139.26) should hold.
USD/CAD Weekly Technical Analysis and Trade (May 31-June 4 2010)
Weekly
Last Candlesticks pattern: Doji
Time of formation: 19 Mar 2009
Trend bias: Down
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 25 May 2010
Trend bias: Sideways
Although the greenback rallied according to our expectation, reached our indicated upside target at 1.0750, however, the currency pair ran into heavy offers just below indicated previous resistance at 1.0871 and retreated sharply from there, leaving a ‘shooting star’ candlestick pattern on the daily chart and the subsequent black candle signals a top has been formed there and a week of consolidation is in store with downside bias for retracement to the Kijun-Sen (now at 1.0407) and possibly the Ichimoku cloud top (now at 1.0344) but reckon support at 1.0246 would hold from here.
On the upside, whilst recovery to 1.0590/00 cannot be ruled out, reckon 1.0705/10 would hold and bring such a correction. A daily close above 1.0750 would revive our bullishness for another rise to 1.0854-71 resistance area but it is necessary to see a sustained breach above there to encourage for retracement of medium term downtrend to 1.1000.
Recommendation: Sell towards 1.0600 for 1.0350 with stop below 1.0720.
On the weekly chart, although the currency pair rose in line with our expectation in our previous update, as price failed to close above the Ichimoku cloud bottom and retreated sharply from 1.0854 (a shooting star was formed), suggesting the rebound from0.9931 has formed a temporary top there and consolidation would be seen with mild downside bias for weakness to the convergence of the Tenkan-Sen and Kijun-Sen (now both at 1.0392) but reckon 1.0246 minor support would limit downside and key level at 1.0110 should remain intact, bring another rally next month.
On the upside, recovery is likely to be limited to 1.0700 and bring such a retreat. Only a weekly close above the Ichimoku cloud bottom (now at 1.0782) would revive bullishness and breach of resistance area at 1.0854-71 would bring retracement of medium term downtrend from 1.3066 to 1.1129 (38.2% Fibonacci retracement).
Last Candlesticks pattern: Doji
Time of formation: 19 Mar 2009
Trend bias: Down
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 25 May 2010
Trend bias: Sideways
Although the greenback rallied according to our expectation, reached our indicated upside target at 1.0750, however, the currency pair ran into heavy offers just below indicated previous resistance at 1.0871 and retreated sharply from there, leaving a ‘shooting star’ candlestick pattern on the daily chart and the subsequent black candle signals a top has been formed there and a week of consolidation is in store with downside bias for retracement to the Kijun-Sen (now at 1.0407) and possibly the Ichimoku cloud top (now at 1.0344) but reckon support at 1.0246 would hold from here.
On the upside, whilst recovery to 1.0590/00 cannot be ruled out, reckon 1.0705/10 would hold and bring such a correction. A daily close above 1.0750 would revive our bullishness for another rise to 1.0854-71 resistance area but it is necessary to see a sustained breach above there to encourage for retracement of medium term downtrend to 1.1000.
Recommendation: Sell towards 1.0600 for 1.0350 with stop below 1.0720.
On the weekly chart, although the currency pair rose in line with our expectation in our previous update, as price failed to close above the Ichimoku cloud bottom and retreated sharply from 1.0854 (a shooting star was formed), suggesting the rebound from0.9931 has formed a temporary top there and consolidation would be seen with mild downside bias for weakness to the convergence of the Tenkan-Sen and Kijun-Sen (now both at 1.0392) but reckon 1.0246 minor support would limit downside and key level at 1.0110 should remain intact, bring another rally next month.
On the upside, recovery is likely to be limited to 1.0700 and bring such a retreat. Only a weekly close above the Ichimoku cloud bottom (now at 1.0782) would revive bullishness and breach of resistance area at 1.0854-71 would bring retracement of medium term downtrend from 1.3066 to 1.1129 (38.2% Fibonacci retracement).
USD/CAD Weekly Technical Analysis and Trade (May 31-June 4 2010)
Weekly
Last Candlesticks pattern: Doji
Time of formation: 19 Mar 2009
Trend bias: Down
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 25 May 2010
Trend bias: Sideways
Although the greenback rallied according to our expectation, reached our indicated upside target at 1.0750, however, the currency pair ran into heavy offers just below indicated previous resistance at 1.0871 and retreated sharply from there, leaving a ‘shooting star’ candlestick pattern on the daily chart and the subsequent black candle signals a top has been formed there and a week of consolidation is in store with downside bias for retracement to the Kijun-Sen (now at 1.0407) and possibly the Ichimoku cloud top (now at 1.0344) but reckon support at 1.0246 would hold from here.
On the upside, whilst recovery to 1.0590/00 cannot be ruled out, reckon 1.0705/10 would hold and bring such a correction. A daily close above 1.0750 would revive our bullishness for another rise to 1.0854-71 resistance area but it is necessary to see a sustained breach above there to encourage for retracement of medium term downtrend to 1.1000.
Recommendation: Sell towards 1.0600 for 1.0350 with stop below 1.0720.
On the weekly chart, although the currency pair rose in line with our expectation in our previous update, as price failed to close above the Ichimoku cloud bottom and retreated sharply from 1.0854 (a shooting star was formed), suggesting the rebound from0.9931 has formed a temporary top there and consolidation would be seen with mild downside bias for weakness to the convergence of the Tenkan-Sen and Kijun-Sen (now both at 1.0392) but reckon 1.0246 minor support would limit downside and key level at 1.0110 should remain intact, bring another rally next month.
On the upside, recovery is likely to be limited to 1.0700 and bring such a retreat. Only a weekly close above the Ichimoku cloud bottom (now at 1.0782) would revive bullishness and breach of resistance area at 1.0854-71 would bring retracement of medium term downtrend from 1.3066 to 1.1129 (38.2% Fibonacci retracement).
Last Candlesticks pattern: Doji
Time of formation: 19 Mar 2009
Trend bias: Down
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 25 May 2010
Trend bias: Sideways
Although the greenback rallied according to our expectation, reached our indicated upside target at 1.0750, however, the currency pair ran into heavy offers just below indicated previous resistance at 1.0871 and retreated sharply from there, leaving a ‘shooting star’ candlestick pattern on the daily chart and the subsequent black candle signals a top has been formed there and a week of consolidation is in store with downside bias for retracement to the Kijun-Sen (now at 1.0407) and possibly the Ichimoku cloud top (now at 1.0344) but reckon support at 1.0246 would hold from here.
On the upside, whilst recovery to 1.0590/00 cannot be ruled out, reckon 1.0705/10 would hold and bring such a correction. A daily close above 1.0750 would revive our bullishness for another rise to 1.0854-71 resistance area but it is necessary to see a sustained breach above there to encourage for retracement of medium term downtrend to 1.1000.
Recommendation: Sell towards 1.0600 for 1.0350 with stop below 1.0720.
On the weekly chart, although the currency pair rose in line with our expectation in our previous update, as price failed to close above the Ichimoku cloud bottom and retreated sharply from 1.0854 (a shooting star was formed), suggesting the rebound from0.9931 has formed a temporary top there and consolidation would be seen with mild downside bias for weakness to the convergence of the Tenkan-Sen and Kijun-Sen (now both at 1.0392) but reckon 1.0246 minor support would limit downside and key level at 1.0110 should remain intact, bring another rally next month.
On the upside, recovery is likely to be limited to 1.0700 and bring such a retreat. Only a weekly close above the Ichimoku cloud bottom (now at 1.0782) would revive bullishness and breach of resistance area at 1.0854-71 would bring retracement of medium term downtrend from 1.3066 to 1.1129 (38.2% Fibonacci retracement).
AUD/USD Weekly Technical Analysis (May 31- June 4 2010)
A very busy week expects Aussie traders: a rate decision, the GDP release and 11 more events will shake the Australian dollar. Here’s an outlook for the Australian events and an updated technical analysis for AUD/USD.
AUD/USD graph with support and resistance lines marked. Click to enlarge:
The Australian dollar enjoyed a significant recovery this week, finally dropping the Euro’s weight on the global markets. The crowded Australian calendar means that this trend will continue. Let’s start:
HIA New Home Sales: Publication time unknown at the moment. Australia’s Housing Industry Association finally provided a stable change in the number of newly constructed homes last month. The rise of 0.9% followed a drop of 5.2% and a rise of 9.5% beforehand. The forecast is for a small rise that will help the Aussie.
MI Inflation Gauge: Published on Monday at 12:30 GMT. Melbourne Institute’s inflation gauge completes the gap that the government leaves by releasing the CPI figures only once per quarter. Prices have risen by 0.4% last month, and this modest rise will probably be repeated.
Current Account: Published on Monday at 1:30 GMT. Although this figure lags the related trade balance release, this quarterly figure still has a strong impact on currencies. Australia’s deficit rose to 17.5 billion in Q4, and is now expected to show a smaller deficit of 16.4 billion.
Private Sector Credit: Published on Monday at 1:30 GMT. Businesses and consumers increased their credit by 0.5% last month, a higher rate than in previous months, indicating economic expansion. Forecasts stand on a 0.5% rise.
AIG Manufacturing Index: Published on Monday at 23:30 GMT. The Australia Industry Group showed a big improvement in the manufacturing sector last month – this PMI-like figure rose to 59.8, a level unseen since the beginning of the global crisis. The 200 manufacturers that are surveyed for this indicator will probably show a drop, but a figure above 50 – more economic expansion.
Chinese Manufacturing PMI: Published on Tuesday at 1:00 GMT. Australia’s main trade partner is expected to show a similar score this time – 55.5 points. Any leap or drop in this major Chinese indicator will rock the Aussie as well.
Retail Sales: Published on Tuesday at 1:30 GMT. After a big drop two months ago, consumers increased their spending once again – sales volume rose by 0.3% and is expected to rise by the same scale once again.
Building Approvals: Published on Tuesday at 1:30 GMT and overshadowed by retail sales. After two months of big drops, this major housing sector gauge leaped by 15.3%. This volatile indicator will probably show another correction – to the downside this time, with a drop of 4.9%.
Rate decision: Published on Tuesday at 4:30 GMT. After two surprising rate hikes, Glenn Stevens’ RBA is expected to pause before another rate hike. The hikes succeeded in cooling down the housing sector, and the global turmoil in May create a consensus that Australia’s Cash Rate will remain at 4.5%. There are no other forecasts for this Australian rate decision.
Commodity Prices: Published on Tuesday at 6:30 GMT. Australia’s commodity oriented economy saw a big year-over-year jump in prices last month – 29.4%. It’s hard to tell where prices will go this time, making the release more important this time. On one hand, gold reached new highs, but oil prices slumped.
GDP: Published on Wednesday at 1:30 GMT. The Australian economy, that never experienced an official recession, is expected to show slower growth in Q1 – only 0.6%, after a strong 0.9% rise last time. This major indicator will shake the markets, no matter the outcome.
AIG Services Index: Published on Thursday at 23:30 GMT. The second release from AIG is different. Contrary to the manufacturing sector, Australia’s services sector returned to expansion just last month, following three months of contraction. The index rose above 50 to 52.3 points. A similar score is predicted this time.
Trade Balance: Published on Thursday at 1:30 GMT. This figure relates to April. Forecasts are positive this time. Australia is expected to see a drop in its deficit – from 2 billion to 770 million. This significant change will probably boost the Aussie.
AUD/USD Technical Analysis
The Aussie challenged the 0.8066 support line once again, but bounced off it and began a rally. After struggling with the 0.8240 resistance line, it rose up to 0.8550 before closing at 0.8477.
The current range for AUD/USD is between the minor resistance line of 0.8477, which was a strong line of resistance last year, and with 0.8240 which had a similar role.
Looking down, strong support is found at 0.8066, a line that was added on last week’s outlook. Further below, 0.7860 was a support line back in July 2009, and it’s followed by the important support line of 0.77. AUD/USD fell off this line with a big gap at the height of the financial crisis. Lower, 0.7450 is the line the Aussie fell to in those dark days.
Looking up, 0.8567, which provided support for many months, is now a strong resistance line. It’s followed by 0.88, that also was a line of support, and with 0.90, which is also a round psychological number.
Higher, 0.9135 supported the Aussie before the big collapse. It’s followed by 0.9327, which was a line of resistance lots of times in recent months.
I am bullish on AUD/USD.
The Aussie returned to enjoy its strong fundamentals, and take less hits from risk aversive trading. This busy week should provide more fuel for the Aussie to rise.
AUD/USD graph with support and resistance lines marked. Click to enlarge:
The Australian dollar enjoyed a significant recovery this week, finally dropping the Euro’s weight on the global markets. The crowded Australian calendar means that this trend will continue. Let’s start:
HIA New Home Sales: Publication time unknown at the moment. Australia’s Housing Industry Association finally provided a stable change in the number of newly constructed homes last month. The rise of 0.9% followed a drop of 5.2% and a rise of 9.5% beforehand. The forecast is for a small rise that will help the Aussie.
MI Inflation Gauge: Published on Monday at 12:30 GMT. Melbourne Institute’s inflation gauge completes the gap that the government leaves by releasing the CPI figures only once per quarter. Prices have risen by 0.4% last month, and this modest rise will probably be repeated.
Current Account: Published on Monday at 1:30 GMT. Although this figure lags the related trade balance release, this quarterly figure still has a strong impact on currencies. Australia’s deficit rose to 17.5 billion in Q4, and is now expected to show a smaller deficit of 16.4 billion.
Private Sector Credit: Published on Monday at 1:30 GMT. Businesses and consumers increased their credit by 0.5% last month, a higher rate than in previous months, indicating economic expansion. Forecasts stand on a 0.5% rise.
AIG Manufacturing Index: Published on Monday at 23:30 GMT. The Australia Industry Group showed a big improvement in the manufacturing sector last month – this PMI-like figure rose to 59.8, a level unseen since the beginning of the global crisis. The 200 manufacturers that are surveyed for this indicator will probably show a drop, but a figure above 50 – more economic expansion.
Chinese Manufacturing PMI: Published on Tuesday at 1:00 GMT. Australia’s main trade partner is expected to show a similar score this time – 55.5 points. Any leap or drop in this major Chinese indicator will rock the Aussie as well.
Retail Sales: Published on Tuesday at 1:30 GMT. After a big drop two months ago, consumers increased their spending once again – sales volume rose by 0.3% and is expected to rise by the same scale once again.
Building Approvals: Published on Tuesday at 1:30 GMT and overshadowed by retail sales. After two months of big drops, this major housing sector gauge leaped by 15.3%. This volatile indicator will probably show another correction – to the downside this time, with a drop of 4.9%.
Rate decision: Published on Tuesday at 4:30 GMT. After two surprising rate hikes, Glenn Stevens’ RBA is expected to pause before another rate hike. The hikes succeeded in cooling down the housing sector, and the global turmoil in May create a consensus that Australia’s Cash Rate will remain at 4.5%. There are no other forecasts for this Australian rate decision.
Commodity Prices: Published on Tuesday at 6:30 GMT. Australia’s commodity oriented economy saw a big year-over-year jump in prices last month – 29.4%. It’s hard to tell where prices will go this time, making the release more important this time. On one hand, gold reached new highs, but oil prices slumped.
GDP: Published on Wednesday at 1:30 GMT. The Australian economy, that never experienced an official recession, is expected to show slower growth in Q1 – only 0.6%, after a strong 0.9% rise last time. This major indicator will shake the markets, no matter the outcome.
AIG Services Index: Published on Thursday at 23:30 GMT. The second release from AIG is different. Contrary to the manufacturing sector, Australia’s services sector returned to expansion just last month, following three months of contraction. The index rose above 50 to 52.3 points. A similar score is predicted this time.
Trade Balance: Published on Thursday at 1:30 GMT. This figure relates to April. Forecasts are positive this time. Australia is expected to see a drop in its deficit – from 2 billion to 770 million. This significant change will probably boost the Aussie.
AUD/USD Technical Analysis
The Aussie challenged the 0.8066 support line once again, but bounced off it and began a rally. After struggling with the 0.8240 resistance line, it rose up to 0.8550 before closing at 0.8477.
The current range for AUD/USD is between the minor resistance line of 0.8477, which was a strong line of resistance last year, and with 0.8240 which had a similar role.
Looking down, strong support is found at 0.8066, a line that was added on last week’s outlook. Further below, 0.7860 was a support line back in July 2009, and it’s followed by the important support line of 0.77. AUD/USD fell off this line with a big gap at the height of the financial crisis. Lower, 0.7450 is the line the Aussie fell to in those dark days.
Looking up, 0.8567, which provided support for many months, is now a strong resistance line. It’s followed by 0.88, that also was a line of support, and with 0.90, which is also a round psychological number.
Higher, 0.9135 supported the Aussie before the big collapse. It’s followed by 0.9327, which was a line of resistance lots of times in recent months.
I am bullish on AUD/USD.
The Aussie returned to enjoy its strong fundamentals, and take less hits from risk aversive trading. This busy week should provide more fuel for the Aussie to rise.
AUD/USD Weekly Technical Analysis (May 31- June 4 2010)
A very busy week expects Aussie traders: a rate decision, the GDP release and 11 more events will shake the Australian dollar. Here’s an outlook for the Australian events and an updated technical analysis for AUD/USD.
AUD/USD graph with support and resistance lines marked. Click to enlarge:
The Australian dollar enjoyed a significant recovery this week, finally dropping the Euro’s weight on the global markets. The crowded Australian calendar means that this trend will continue. Let’s start:
HIA New Home Sales: Publication time unknown at the moment. Australia’s Housing Industry Association finally provided a stable change in the number of newly constructed homes last month. The rise of 0.9% followed a drop of 5.2% and a rise of 9.5% beforehand. The forecast is for a small rise that will help the Aussie.
MI Inflation Gauge: Published on Monday at 12:30 GMT. Melbourne Institute’s inflation gauge completes the gap that the government leaves by releasing the CPI figures only once per quarter. Prices have risen by 0.4% last month, and this modest rise will probably be repeated.
Current Account: Published on Monday at 1:30 GMT. Although this figure lags the related trade balance release, this quarterly figure still has a strong impact on currencies. Australia’s deficit rose to 17.5 billion in Q4, and is now expected to show a smaller deficit of 16.4 billion.
Private Sector Credit: Published on Monday at 1:30 GMT. Businesses and consumers increased their credit by 0.5% last month, a higher rate than in previous months, indicating economic expansion. Forecasts stand on a 0.5% rise.
AIG Manufacturing Index: Published on Monday at 23:30 GMT. The Australia Industry Group showed a big improvement in the manufacturing sector last month – this PMI-like figure rose to 59.8, a level unseen since the beginning of the global crisis. The 200 manufacturers that are surveyed for this indicator will probably show a drop, but a figure above 50 – more economic expansion.
Chinese Manufacturing PMI: Published on Tuesday at 1:00 GMT. Australia’s main trade partner is expected to show a similar score this time – 55.5 points. Any leap or drop in this major Chinese indicator will rock the Aussie as well.
Retail Sales: Published on Tuesday at 1:30 GMT. After a big drop two months ago, consumers increased their spending once again – sales volume rose by 0.3% and is expected to rise by the same scale once again.
Building Approvals: Published on Tuesday at 1:30 GMT and overshadowed by retail sales. After two months of big drops, this major housing sector gauge leaped by 15.3%. This volatile indicator will probably show another correction – to the downside this time, with a drop of 4.9%.
Rate decision: Published on Tuesday at 4:30 GMT. After two surprising rate hikes, Glenn Stevens’ RBA is expected to pause before another rate hike. The hikes succeeded in cooling down the housing sector, and the global turmoil in May create a consensus that Australia’s Cash Rate will remain at 4.5%. There are no other forecasts for this Australian rate decision.
Commodity Prices: Published on Tuesday at 6:30 GMT. Australia’s commodity oriented economy saw a big year-over-year jump in prices last month – 29.4%. It’s hard to tell where prices will go this time, making the release more important this time. On one hand, gold reached new highs, but oil prices slumped.
GDP: Published on Wednesday at 1:30 GMT. The Australian economy, that never experienced an official recession, is expected to show slower growth in Q1 – only 0.6%, after a strong 0.9% rise last time. This major indicator will shake the markets, no matter the outcome.
AIG Services Index: Published on Thursday at 23:30 GMT. The second release from AIG is different. Contrary to the manufacturing sector, Australia’s services sector returned to expansion just last month, following three months of contraction. The index rose above 50 to 52.3 points. A similar score is predicted this time.
Trade Balance: Published on Thursday at 1:30 GMT. This figure relates to April. Forecasts are positive this time. Australia is expected to see a drop in its deficit – from 2 billion to 770 million. This significant change will probably boost the Aussie.
AUD/USD Technical Analysis
The Aussie challenged the 0.8066 support line once again, but bounced off it and began a rally. After struggling with the 0.8240 resistance line, it rose up to 0.8550 before closing at 0.8477.
The current range for AUD/USD is between the minor resistance line of 0.8477, which was a strong line of resistance last year, and with 0.8240 which had a similar role.
Looking down, strong support is found at 0.8066, a line that was added on last week’s outlook. Further below, 0.7860 was a support line back in July 2009, and it’s followed by the important support line of 0.77. AUD/USD fell off this line with a big gap at the height of the financial crisis. Lower, 0.7450 is the line the Aussie fell to in those dark days.
Looking up, 0.8567, which provided support for many months, is now a strong resistance line. It’s followed by 0.88, that also was a line of support, and with 0.90, which is also a round psychological number.
Higher, 0.9135 supported the Aussie before the big collapse. It’s followed by 0.9327, which was a line of resistance lots of times in recent months.
I am bullish on AUD/USD.
The Aussie returned to enjoy its strong fundamentals, and take less hits from risk aversive trading. This busy week should provide more fuel for the Aussie to rise.
AUD/USD graph with support and resistance lines marked. Click to enlarge:
The Australian dollar enjoyed a significant recovery this week, finally dropping the Euro’s weight on the global markets. The crowded Australian calendar means that this trend will continue. Let’s start:
HIA New Home Sales: Publication time unknown at the moment. Australia’s Housing Industry Association finally provided a stable change in the number of newly constructed homes last month. The rise of 0.9% followed a drop of 5.2% and a rise of 9.5% beforehand. The forecast is for a small rise that will help the Aussie.
MI Inflation Gauge: Published on Monday at 12:30 GMT. Melbourne Institute’s inflation gauge completes the gap that the government leaves by releasing the CPI figures only once per quarter. Prices have risen by 0.4% last month, and this modest rise will probably be repeated.
Current Account: Published on Monday at 1:30 GMT. Although this figure lags the related trade balance release, this quarterly figure still has a strong impact on currencies. Australia’s deficit rose to 17.5 billion in Q4, and is now expected to show a smaller deficit of 16.4 billion.
Private Sector Credit: Published on Monday at 1:30 GMT. Businesses and consumers increased their credit by 0.5% last month, a higher rate than in previous months, indicating economic expansion. Forecasts stand on a 0.5% rise.
AIG Manufacturing Index: Published on Monday at 23:30 GMT. The Australia Industry Group showed a big improvement in the manufacturing sector last month – this PMI-like figure rose to 59.8, a level unseen since the beginning of the global crisis. The 200 manufacturers that are surveyed for this indicator will probably show a drop, but a figure above 50 – more economic expansion.
Chinese Manufacturing PMI: Published on Tuesday at 1:00 GMT. Australia’s main trade partner is expected to show a similar score this time – 55.5 points. Any leap or drop in this major Chinese indicator will rock the Aussie as well.
Retail Sales: Published on Tuesday at 1:30 GMT. After a big drop two months ago, consumers increased their spending once again – sales volume rose by 0.3% and is expected to rise by the same scale once again.
Building Approvals: Published on Tuesday at 1:30 GMT and overshadowed by retail sales. After two months of big drops, this major housing sector gauge leaped by 15.3%. This volatile indicator will probably show another correction – to the downside this time, with a drop of 4.9%.
Rate decision: Published on Tuesday at 4:30 GMT. After two surprising rate hikes, Glenn Stevens’ RBA is expected to pause before another rate hike. The hikes succeeded in cooling down the housing sector, and the global turmoil in May create a consensus that Australia’s Cash Rate will remain at 4.5%. There are no other forecasts for this Australian rate decision.
Commodity Prices: Published on Tuesday at 6:30 GMT. Australia’s commodity oriented economy saw a big year-over-year jump in prices last month – 29.4%. It’s hard to tell where prices will go this time, making the release more important this time. On one hand, gold reached new highs, but oil prices slumped.
GDP: Published on Wednesday at 1:30 GMT. The Australian economy, that never experienced an official recession, is expected to show slower growth in Q1 – only 0.6%, after a strong 0.9% rise last time. This major indicator will shake the markets, no matter the outcome.
AIG Services Index: Published on Thursday at 23:30 GMT. The second release from AIG is different. Contrary to the manufacturing sector, Australia’s services sector returned to expansion just last month, following three months of contraction. The index rose above 50 to 52.3 points. A similar score is predicted this time.
Trade Balance: Published on Thursday at 1:30 GMT. This figure relates to April. Forecasts are positive this time. Australia is expected to see a drop in its deficit – from 2 billion to 770 million. This significant change will probably boost the Aussie.
AUD/USD Technical Analysis
The Aussie challenged the 0.8066 support line once again, but bounced off it and began a rally. After struggling with the 0.8240 resistance line, it rose up to 0.8550 before closing at 0.8477.
The current range for AUD/USD is between the minor resistance line of 0.8477, which was a strong line of resistance last year, and with 0.8240 which had a similar role.
Looking down, strong support is found at 0.8066, a line that was added on last week’s outlook. Further below, 0.7860 was a support line back in July 2009, and it’s followed by the important support line of 0.77. AUD/USD fell off this line with a big gap at the height of the financial crisis. Lower, 0.7450 is the line the Aussie fell to in those dark days.
Looking up, 0.8567, which provided support for many months, is now a strong resistance line. It’s followed by 0.88, that also was a line of support, and with 0.90, which is also a round psychological number.
Higher, 0.9135 supported the Aussie before the big collapse. It’s followed by 0.9327, which was a line of resistance lots of times in recent months.
I am bullish on AUD/USD.
The Aussie returned to enjoy its strong fundamentals, and take less hits from risk aversive trading. This busy week should provide more fuel for the Aussie to rise.
Tuesday, May 25, 2010
EUR/USD - 1.2215
Original strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
New strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
Although the single currency has remained under pressure, as this move is a bit over-extended, suggesting downside would be limited to recent low at 1.2143 and risk has increased for a rebound. Above the Tenkan-Sen (now at 1.2257) would bring recovery towards the Kijun-Sen (now at 1.2335) but renewed selling interest should emerge there and bring another decline later, break of 1.2143 would extend weakness towards 1.2090/00.
In view of this, we are still looking to sell euro on recovery but at a lower level. Above 1.2380 would risk stronger rebound to previous support at 1.2417 before prospect of another selloff later.
Original strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
New strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
Although the single currency has remained under pressure, as this move is a bit over-extended, suggesting downside would be limited to recent low at 1.2143 and risk has increased for a rebound. Above the Tenkan-Sen (now at 1.2257) would bring recovery towards the Kijun-Sen (now at 1.2335) but renewed selling interest should emerge there and bring another decline later, break of 1.2143 would extend weakness towards 1.2090/00.
In view of this, we are still looking to sell euro on recovery but at a lower level. Above 1.2380 would risk stronger rebound to previous support at 1.2417 before prospect of another selloff later.
EUR/USD - 1.2215
Original strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
New strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
Although the single currency has remained under pressure, as this move is a bit over-extended, suggesting downside would be limited to recent low at 1.2143 and risk has increased for a rebound. Above the Tenkan-Sen (now at 1.2257) would bring recovery towards the Kijun-Sen (now at 1.2335) but renewed selling interest should emerge there and bring another decline later, break of 1.2143 would extend weakness towards 1.2090/00.
In view of this, we are still looking to sell euro on recovery but at a lower level. Above 1.2380 would risk stronger rebound to previous support at 1.2417 before prospect of another selloff later.
Original strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
New strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
Although the single currency has remained under pressure, as this move is a bit over-extended, suggesting downside would be limited to recent low at 1.2143 and risk has increased for a rebound. Above the Tenkan-Sen (now at 1.2257) would bring recovery towards the Kijun-Sen (now at 1.2335) but renewed selling interest should emerge there and bring another decline later, break of 1.2143 would extend weakness towards 1.2090/00.
In view of this, we are still looking to sell euro on recovery but at a lower level. Above 1.2380 would risk stronger rebound to previous support at 1.2417 before prospect of another selloff later.
EUR/USD - 1.2215
Original strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
New strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
Although the single currency has remained under pressure, as this move is a bit over-extended, suggesting downside would be limited to recent low at 1.2143 and risk has increased for a rebound. Above the Tenkan-Sen (now at 1.2257) would bring recovery towards the Kijun-Sen (now at 1.2335) but renewed selling interest should emerge there and bring another decline later, break of 1.2143 would extend weakness towards 1.2090/00.
In view of this, we are still looking to sell euro on recovery but at a lower level. Above 1.2380 would risk stronger rebound to previous support at 1.2417 before prospect of another selloff later.
Original strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
New strategy :
Sell at 1.2260, Target: 1.2150, Stop: 1.2310
Although the single currency has remained under pressure, as this move is a bit over-extended, suggesting downside would be limited to recent low at 1.2143 and risk has increased for a rebound. Above the Tenkan-Sen (now at 1.2257) would bring recovery towards the Kijun-Sen (now at 1.2335) but renewed selling interest should emerge there and bring another decline later, break of 1.2143 would extend weakness towards 1.2090/00.
In view of this, we are still looking to sell euro on recovery but at a lower level. Above 1.2380 would risk stronger rebound to previous support at 1.2417 before prospect of another selloff later.
GBP/USD - 1.4292
New strategy :
Sell at 1.4360, Target: 1.4260, Stop: 1.4410
Cable broke below support at 1.4317 as suggested in our previous update, indicating the correction from 1.4228 has ended at 1.4529 and bearishness remains for decline to resume for subsequent retest of 1.4228, however, break there is needed to retain bearishness and extend fall towards 1.4160/70 but reckon 1.4131 (50% projection of 1.5046 to 1.4249 measuring from 1.4529) would hold.
In view of this, we are looking to sell cable again on recovery as renewed selling interest should emerge below the Kijun-Sen (now at 1.4369) and the Ichimoku cloud bottom (now at 1.4381) would hold. Only above 1.4400/10 would prolong choppy consolidation and risk another rebound to the upper Kumo (now at 1.4448).
New strategy :
Sell at 1.4360, Target: 1.4260, Stop: 1.4410
Cable broke below support at 1.4317 as suggested in our previous update, indicating the correction from 1.4228 has ended at 1.4529 and bearishness remains for decline to resume for subsequent retest of 1.4228, however, break there is needed to retain bearishness and extend fall towards 1.4160/70 but reckon 1.4131 (50% projection of 1.5046 to 1.4249 measuring from 1.4529) would hold.
In view of this, we are looking to sell cable again on recovery as renewed selling interest should emerge below the Kijun-Sen (now at 1.4369) and the Ichimoku cloud bottom (now at 1.4381) would hold. Only above 1.4400/10 would prolong choppy consolidation and risk another rebound to the upper Kumo (now at 1.4448).
GBP/USD - 1.4292
New strategy :
Sell at 1.4360, Target: 1.4260, Stop: 1.4410
Cable broke below support at 1.4317 as suggested in our previous update, indicating the correction from 1.4228 has ended at 1.4529 and bearishness remains for decline to resume for subsequent retest of 1.4228, however, break there is needed to retain bearishness and extend fall towards 1.4160/70 but reckon 1.4131 (50% projection of 1.5046 to 1.4249 measuring from 1.4529) would hold.
In view of this, we are looking to sell cable again on recovery as renewed selling interest should emerge below the Kijun-Sen (now at 1.4369) and the Ichimoku cloud bottom (now at 1.4381) would hold. Only above 1.4400/10 would prolong choppy consolidation and risk another rebound to the upper Kumo (now at 1.4448).
New strategy :
Sell at 1.4360, Target: 1.4260, Stop: 1.4410
Cable broke below support at 1.4317 as suggested in our previous update, indicating the correction from 1.4228 has ended at 1.4529 and bearishness remains for decline to resume for subsequent retest of 1.4228, however, break there is needed to retain bearishness and extend fall towards 1.4160/70 but reckon 1.4131 (50% projection of 1.5046 to 1.4249 measuring from 1.4529) would hold.
In view of this, we are looking to sell cable again on recovery as renewed selling interest should emerge below the Kijun-Sen (now at 1.4369) and the Ichimoku cloud bottom (now at 1.4381) would hold. Only above 1.4400/10 would prolong choppy consolidation and risk another rebound to the upper Kumo (now at 1.4448).
Monday, May 24, 2010
Intraday bias in AUD/USD remains neutral as it's still bounded in range above 0.8069. Another rise cannot be ruled out but upside should be limited by 38.2% retracement of 0.9077 to 0.8069 at 0.8454 and bring fall resumption. On the downside, break of 0.8069 will confirm fall resumption and should target next key support level at 0.7702.
In the bigger picture, while the decline from 0.9380 is steep, it's still treated as a correction to medium term up trend from 0.6008. Hence, we're expecting strong support from 0.7702 (50% retracement of 0.6008 to 0.9404 at 0.7706), at least initially, to bring rebound. But after all, break of 0.8715 support turned resistance is needed to indicate that fall from 0.9380 is completed. Otherwise, more downside would remain in favor.
In the bigger picture, while the decline from 0.9380 is steep, it's still treated as a correction to medium term up trend from 0.6008. Hence, we're expecting strong support from 0.7702 (50% retracement of 0.6008 to 0.9404 at 0.7706), at least initially, to bring rebound. But after all, break of 0.8715 support turned resistance is needed to indicate that fall from 0.9380 is completed. Otherwise, more downside would remain in favor.
Intraday bias in AUD/USD remains neutral as it's still bounded in range above 0.8069. Another rise cannot be ruled out but upside should be limited by 38.2% retracement of 0.9077 to 0.8069 at 0.8454 and bring fall resumption. On the downside, break of 0.8069 will confirm fall resumption and should target next key support level at 0.7702.
In the bigger picture, while the decline from 0.9380 is steep, it's still treated as a correction to medium term up trend from 0.6008. Hence, we're expecting strong support from 0.7702 (50% retracement of 0.6008 to 0.9404 at 0.7706), at least initially, to bring rebound. But after all, break of 0.8715 support turned resistance is needed to indicate that fall from 0.9380 is completed. Otherwise, more downside would remain in favor.
In the bigger picture, while the decline from 0.9380 is steep, it's still treated as a correction to medium term up trend from 0.6008. Hence, we're expecting strong support from 0.7702 (50% retracement of 0.6008 to 0.9404 at 0.7706), at least initially, to bring rebound. But after all, break of 0.8715 support turned resistance is needed to indicate that fall from 0.9380 is completed. Otherwise, more downside would remain in favor.
Intraday bias in AUD/USD remains neutral as it's still bounded in range above 0.8069. Another rise cannot be ruled out but upside should be limited by 38.2% retracement of 0.9077 to 0.8069 at 0.8454 and bring fall resumption. On the downside, break of 0.8069 will confirm fall resumption and should target next key support level at 0.7702.
In the bigger picture, while the decline from 0.9380 is steep, it's still treated as a correction to medium term up trend from 0.6008. Hence, we're expecting strong support from 0.7702 (50% retracement of 0.6008 to 0.9404 at 0.7706), at least initially, to bring rebound. But after all, break of 0.8715 support turned resistance is needed to indicate that fall from 0.9380 is completed. Otherwise, more downside would remain in favor.
In the bigger picture, while the decline from 0.9380 is steep, it's still treated as a correction to medium term up trend from 0.6008. Hence, we're expecting strong support from 0.7702 (50% retracement of 0.6008 to 0.9404 at 0.7706), at least initially, to bring rebound. But after all, break of 0.8715 support turned resistance is needed to indicate that fall from 0.9380 is completed. Otherwise, more downside would remain in favor.
GBP/USD Daily Technical Forecast (May 25-2010)
With 4 hours MACD crossed below signal line, GBP/USD's recovery might be completed at 1.4527 already. Intraday bias is cautiously on the downside for the moment. Break of 1.4230 will confirm down trend resumption and should target 100% projection of 1.6456 to 1.4783 from 1.5521 at 1.3848 next. However, break of 1.4527 will suggest that a short term bottom is formed and bring stronger rebound towards 1.5053 resistance before staying another fall.
In the bigger picture, our bearish view remains unchanged. Fall fro 1.7043 is tentatively treated as resumption of the whole down trend from 2007 high of 2.1161. Such fall should target 61.8% projection of 2.1161 to 1.3503 from 1.7043 at 1.2310 after taking out 1.3503 low. On the upside, break of 1.5521 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
In the bigger picture, our bearish view remains unchanged. Fall fro 1.7043 is tentatively treated as resumption of the whole down trend from 2007 high of 2.1161. Such fall should target 61.8% projection of 2.1161 to 1.3503 from 1.7043 at 1.2310 after taking out 1.3503 low. On the upside, break of 1.5521 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
GBP/USD Daily Technical Forecast (May 25-2010)
With 4 hours MACD crossed below signal line, GBP/USD's recovery might be completed at 1.4527 already. Intraday bias is cautiously on the downside for the moment. Break of 1.4230 will confirm down trend resumption and should target 100% projection of 1.6456 to 1.4783 from 1.5521 at 1.3848 next. However, break of 1.4527 will suggest that a short term bottom is formed and bring stronger rebound towards 1.5053 resistance before staying another fall.
In the bigger picture, our bearish view remains unchanged. Fall fro 1.7043 is tentatively treated as resumption of the whole down trend from 2007 high of 2.1161. Such fall should target 61.8% projection of 2.1161 to 1.3503 from 1.7043 at 1.2310 after taking out 1.3503 low. On the upside, break of 1.5521 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
In the bigger picture, our bearish view remains unchanged. Fall fro 1.7043 is tentatively treated as resumption of the whole down trend from 2007 high of 2.1161. Such fall should target 61.8% projection of 2.1161 to 1.3503 from 1.7043 at 1.2310 after taking out 1.3503 low. On the upside, break of 1.5521 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
EUR/USD Daily Technical Forecast ( May-25-2010)
EUR/USD's break of 1.2295 minor support suggests that recovery from 1.2143 has completed at 1.2671 already. Intraday bias is flipped back to the downside for 1.2143 low first. break will confirm down trend resumption for 1.2 psychological level next. On the upside, above 1.2415 minor resistance will delay the bearish case and bring more consolidations first. But upside should be limited by 38.2% retracement of 1.3691 to 1.2143 at 1.2734 and bring fall resumption.
In the bigger picture, the break of 1.2329 low confirms that whole down trend from 2008 high 1.6039 has resumed. Such down trend should now target 1.1639 key support level and possibly further to 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. On the upside, break of 1.3266 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
In the bigger picture, the break of 1.2329 low confirms that whole down trend from 2008 high 1.6039 has resumed. Such down trend should now target 1.1639 key support level and possibly further to 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. On the upside, break of 1.3266 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
EUR/USD Daily Technical Forecast ( May-25-2010)
EUR/USD's break of 1.2295 minor support suggests that recovery from 1.2143 has completed at 1.2671 already. Intraday bias is flipped back to the downside for 1.2143 low first. break will confirm down trend resumption for 1.2 psychological level next. On the upside, above 1.2415 minor resistance will delay the bearish case and bring more consolidations first. But upside should be limited by 38.2% retracement of 1.3691 to 1.2143 at 1.2734 and bring fall resumption.
In the bigger picture, the break of 1.2329 low confirms that whole down trend from 2008 high 1.6039 has resumed. Such down trend should now target 1.1639 key support level and possibly further to 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. On the upside, break of 1.3266 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
In the bigger picture, the break of 1.2329 low confirms that whole down trend from 2008 high 1.6039 has resumed. Such down trend should now target 1.1639 key support level and possibly further to 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. On the upside, break of 1.3266 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
EUR/USD breaks out 1.2290
Following inappropriate commentaries from Japan's Finance Minister Sengoku San stating: “he does not expect the EU to recover soon”, the Euro downlegged over 90 pips since opening at 1.2369 earlier in Asia.
The downside acceleration violated May 20 lows at 1.2295 to fall further down only pausing at 1.2283, hitting a new 4-day low. At present, the pair bounced off lows hovering between 1.2305/00.
According to Valeria Bednarik technical analysis: “Support levels may be encountered at 1.2330, 1.2290 and 1.2250. Resistance levels may be taken at 1.2365 1.2410 1.2450”.
The downside acceleration violated May 20 lows at 1.2295 to fall further down only pausing at 1.2283, hitting a new 4-day low. At present, the pair bounced off lows hovering between 1.2305/00.
According to Valeria Bednarik technical analysis: “Support levels may be encountered at 1.2330, 1.2290 and 1.2250. Resistance levels may be taken at 1.2365 1.2410 1.2450”.
EUR/USD breaks out 1.2290
Following inappropriate commentaries from Japan's Finance Minister Sengoku San stating: “he does not expect the EU to recover soon”, the Euro downlegged over 90 pips since opening at 1.2369 earlier in Asia.
The downside acceleration violated May 20 lows at 1.2295 to fall further down only pausing at 1.2283, hitting a new 4-day low. At present, the pair bounced off lows hovering between 1.2305/00.
According to Valeria Bednarik technical analysis: “Support levels may be encountered at 1.2330, 1.2290 and 1.2250. Resistance levels may be taken at 1.2365 1.2410 1.2450”.
The downside acceleration violated May 20 lows at 1.2295 to fall further down only pausing at 1.2283, hitting a new 4-day low. At present, the pair bounced off lows hovering between 1.2305/00.
According to Valeria Bednarik technical analysis: “Support levels may be encountered at 1.2330, 1.2290 and 1.2250. Resistance levels may be taken at 1.2365 1.2410 1.2450”.
GBP/JPy Daily Technical Forecast (May-24-2010)
As you can see on my h1 chart below, the GBPJPY slipped above the bearish channel indicating a serious threat to the bearish scenario but price so far unable to move consistently above the channel. Although nearest term pressure is now more to the upside, price still trapped in range area of 130.80 - 128.00. We need a clear break above 130.80 to continue the bullish scenario testing 132.80 region. On the other hand, Break below 128.00 could resume the major bearish scenario testing 126.75 region.
GBP/JPy Daily Technical Forecast (May-24-2010)
As you can see on my h1 chart below, the GBPJPY slipped above the bearish channel indicating a serious threat to the bearish scenario but price so far unable to move consistently above the channel. Although nearest term pressure is now more to the upside, price still trapped in range area of 130.80 - 128.00. We need a clear break above 130.80 to continue the bullish scenario testing 132.80 region. On the other hand, Break below 128.00 could resume the major bearish scenario testing 126.75 region.
Sunday, May 23, 2010
The EURUSD was traded lower earlier today in Asian session around 1.2480 at the time I wrote this comment after touched the major trendline support on Friday. On h4 chart below we can see that price is now testing the lower line of the bullish channel. Although the major scenario remains bearish, note that as long as price move in the bullish channel the bullish correction scenario remains intact and only a violation to the bullish channel can be a threat the bullish correction scenario. Also I have been watching an interesting phenomena lately where price tend to go lower in Asian session but go to the upside significantly in US session. Immediate support at 1.2440 area. Consistent move below that area could trigger further bearish pressure testing 1.2350 before testing 1.2280/60 region. Initial resistance at 1.2700 area. Consistent move above that area could be a serious threat to the major bearish scenario
The EURUSD was traded lower earlier today in Asian session around 1.2480 at the time I wrote this comment after touched the major trendline support on Friday. On h4 chart below we can see that price is now testing the lower line of the bullish channel. Although the major scenario remains bearish, note that as long as price move in the bullish channel the bullish correction scenario remains intact and only a violation to the bullish channel can be a threat the bullish correction scenario. Also I have been watching an interesting phenomena lately where price tend to go lower in Asian session but go to the upside significantly in US session. Immediate support at 1.2440 area. Consistent move below that area could trigger further bearish pressure testing 1.2350 before testing 1.2280/60 region. Initial resistance at 1.2700 area. Consistent move above that area could be a serious threat to the major bearish scenario
AUD/USD Weekly Analysis (May 24-28)
Everything turned against the Aussie, and it closed a terrible week with a loss of about 550 pips. The upcoming week consists of 5 events that will move the Aussie, and an updated technical analysis for AUD/USD, now at lower ground.
AUD/USD chart with support and resistance lines marked. Click to enlarge:
Indications for a pause in rate hikes, lower inflation expectations, a drop in consumer confidence and the European debt issues (risk aversion), all hurt the Aussie, which needed (rumored) intervention to stabilize. Let’s start:
AUD/USD Technical Analysis
The Aussie began the week by losing the 0.88 support line, that held it in recent weeks. It then lost the all-important 0.8567 line that was the lowest point since October and also the 2010 low, until this week. Trouble continued as the pair broke under the important 0.8240 line, which worked as a resistance and as a support line before AUD/USD went to higher ground. After bottoming out at 0.8071, it closed at 0.8308. A very exciting and awful week for the Aussie.
Many lines have been added on last week’s outlook. The current range for the pair is between the important support line of 0.8240 and the minor resistance line of 0.8477, which worked as a strong resistance line before the pair broke higher.
Lower, 0.8040 is the next line of support, serving as such long ago. Significant support can be found at 0.77, which was the place that the Aussie dropped from in the height of the financial crisis, back in October 2008. It also worked as a support line last summer.
Even lower, 0.7450, the place where the Aussie fell to during the crisis is another significant support line. It’s followed by 0.71.
Looking up, 0.8567 continues to be an important line. A break above this line will mean a strong correction. Above this line, 0.88 is the next resistance line, followed by 0.90, 0.9135 and the almighty 0.9327 resistance line. Note that most lines worked as support lines just a few weeks ago.
I’m neutral on the Aussie.
It’s drop last week was the biggest move since October 2008. On one hand, the loss of 0.8567 means bearish momentum, but on the other hand, it’s in oversold territory. The rate hikes worked so well, that the economy cooled down. It will take at least another week before the pair stabilizes and a new direction will be seen.
AUD/USD chart with support and resistance lines marked. Click to enlarge:
Indications for a pause in rate hikes, lower inflation expectations, a drop in consumer confidence and the European debt issues (risk aversion), all hurt the Aussie, which needed (rumored) intervention to stabilize. Let’s start:
- New Motor Vehicle Sales: Published on Monday at 1:30 GMT. The automotive industry is a strong one in Australia and moves the currency, especially as it comes on a rather empty calendar on Monday. Sales fell in the past three months after many months of rises. They’re expected to rise now.
- MI Leading Index: Published on Wednesday at 00:30 GMT. This composite index from the Melbourne Institute, based on 9 indicators that most of them have already been released, rose by 0.5% last time, similar to previous months. A rise above 1% this time will push the Aussie higher.
- Construction Work Done: Published on Wednesday at 1:30 GMT. This important quarterly indicator from the housing sector exceeded expectations in the past 3 quarters, with great leaps. Q4’s 2.6% rise will probably be followed by a 4.1% rise this time.
- CB Leading Index: Published on Thursday at midnight GMT. Contrary to MI’s indicator, the leading index from the Conference Board dropped in the past two months. A rise is predicted this time. Note that this index is based on 7 indicators, rather than 9 in the previous one.
- Private Capital Expenditure: Published on Thursday at 1:30 GMT. The amount of new capital / investments in Australia is a very important indicator, as it’s a quarterly one. After a drop of 5.2% in Q3, expenditure jumped by 5.5% in Q4. A milder rise of 2.6% is predicted this time.
AUD/USD Technical Analysis
The Aussie began the week by losing the 0.88 support line, that held it in recent weeks. It then lost the all-important 0.8567 line that was the lowest point since October and also the 2010 low, until this week. Trouble continued as the pair broke under the important 0.8240 line, which worked as a resistance and as a support line before AUD/USD went to higher ground. After bottoming out at 0.8071, it closed at 0.8308. A very exciting and awful week for the Aussie.
Many lines have been added on last week’s outlook. The current range for the pair is between the important support line of 0.8240 and the minor resistance line of 0.8477, which worked as a strong resistance line before the pair broke higher.
Lower, 0.8040 is the next line of support, serving as such long ago. Significant support can be found at 0.77, which was the place that the Aussie dropped from in the height of the financial crisis, back in October 2008. It also worked as a support line last summer.
Even lower, 0.7450, the place where the Aussie fell to during the crisis is another significant support line. It’s followed by 0.71.
Looking up, 0.8567 continues to be an important line. A break above this line will mean a strong correction. Above this line, 0.88 is the next resistance line, followed by 0.90, 0.9135 and the almighty 0.9327 resistance line. Note that most lines worked as support lines just a few weeks ago.
I’m neutral on the Aussie.
It’s drop last week was the biggest move since October 2008. On one hand, the loss of 0.8567 means bearish momentum, but on the other hand, it’s in oversold territory. The rate hikes worked so well, that the economy cooled down. It will take at least another week before the pair stabilizes and a new direction will be seen.
AUD/USD Weekly Analysis (May 24-28)
Everything turned against the Aussie, and it closed a terrible week with a loss of about 550 pips. The upcoming week consists of 5 events that will move the Aussie, and an updated technical analysis for AUD/USD, now at lower ground.
AUD/USD chart with support and resistance lines marked. Click to enlarge:
Indications for a pause in rate hikes, lower inflation expectations, a drop in consumer confidence and the European debt issues (risk aversion), all hurt the Aussie, which needed (rumored) intervention to stabilize. Let’s start:
AUD/USD Technical Analysis
The Aussie began the week by losing the 0.88 support line, that held it in recent weeks. It then lost the all-important 0.8567 line that was the lowest point since October and also the 2010 low, until this week. Trouble continued as the pair broke under the important 0.8240 line, which worked as a resistance and as a support line before AUD/USD went to higher ground. After bottoming out at 0.8071, it closed at 0.8308. A very exciting and awful week for the Aussie.
Many lines have been added on last week’s outlook. The current range for the pair is between the important support line of 0.8240 and the minor resistance line of 0.8477, which worked as a strong resistance line before the pair broke higher.
Lower, 0.8040 is the next line of support, serving as such long ago. Significant support can be found at 0.77, which was the place that the Aussie dropped from in the height of the financial crisis, back in October 2008. It also worked as a support line last summer.
Even lower, 0.7450, the place where the Aussie fell to during the crisis is another significant support line. It’s followed by 0.71.
Looking up, 0.8567 continues to be an important line. A break above this line will mean a strong correction. Above this line, 0.88 is the next resistance line, followed by 0.90, 0.9135 and the almighty 0.9327 resistance line. Note that most lines worked as support lines just a few weeks ago.
I’m neutral on the Aussie.
It’s drop last week was the biggest move since October 2008. On one hand, the loss of 0.8567 means bearish momentum, but on the other hand, it’s in oversold territory. The rate hikes worked so well, that the economy cooled down. It will take at least another week before the pair stabilizes and a new direction will be seen.
AUD/USD chart with support and resistance lines marked. Click to enlarge:
Indications for a pause in rate hikes, lower inflation expectations, a drop in consumer confidence and the European debt issues (risk aversion), all hurt the Aussie, which needed (rumored) intervention to stabilize. Let’s start:
- New Motor Vehicle Sales: Published on Monday at 1:30 GMT. The automotive industry is a strong one in Australia and moves the currency, especially as it comes on a rather empty calendar on Monday. Sales fell in the past three months after many months of rises. They’re expected to rise now.
- MI Leading Index: Published on Wednesday at 00:30 GMT. This composite index from the Melbourne Institute, based on 9 indicators that most of them have already been released, rose by 0.5% last time, similar to previous months. A rise above 1% this time will push the Aussie higher.
- Construction Work Done: Published on Wednesday at 1:30 GMT. This important quarterly indicator from the housing sector exceeded expectations in the past 3 quarters, with great leaps. Q4’s 2.6% rise will probably be followed by a 4.1% rise this time.
- CB Leading Index: Published on Thursday at midnight GMT. Contrary to MI’s indicator, the leading index from the Conference Board dropped in the past two months. A rise is predicted this time. Note that this index is based on 7 indicators, rather than 9 in the previous one.
- Private Capital Expenditure: Published on Thursday at 1:30 GMT. The amount of new capital / investments in Australia is a very important indicator, as it’s a quarterly one. After a drop of 5.2% in Q3, expenditure jumped by 5.5% in Q4. A milder rise of 2.6% is predicted this time.
AUD/USD Technical Analysis
The Aussie began the week by losing the 0.88 support line, that held it in recent weeks. It then lost the all-important 0.8567 line that was the lowest point since October and also the 2010 low, until this week. Trouble continued as the pair broke under the important 0.8240 line, which worked as a resistance and as a support line before AUD/USD went to higher ground. After bottoming out at 0.8071, it closed at 0.8308. A very exciting and awful week for the Aussie.
Many lines have been added on last week’s outlook. The current range for the pair is between the important support line of 0.8240 and the minor resistance line of 0.8477, which worked as a strong resistance line before the pair broke higher.
Lower, 0.8040 is the next line of support, serving as such long ago. Significant support can be found at 0.77, which was the place that the Aussie dropped from in the height of the financial crisis, back in October 2008. It also worked as a support line last summer.
Even lower, 0.7450, the place where the Aussie fell to during the crisis is another significant support line. It’s followed by 0.71.
Looking up, 0.8567 continues to be an important line. A break above this line will mean a strong correction. Above this line, 0.88 is the next resistance line, followed by 0.90, 0.9135 and the almighty 0.9327 resistance line. Note that most lines worked as support lines just a few weeks ago.
I’m neutral on the Aussie.
It’s drop last week was the biggest move since October 2008. On one hand, the loss of 0.8567 means bearish momentum, but on the other hand, it’s in oversold territory. The rate hikes worked so well, that the economy cooled down. It will take at least another week before the pair stabilizes and a new direction will be seen.
GBP/USD Weekly Analysis (May 24-28)
A revised version on the GDP and 5 other events will shake the Pound, now at lower ground. Here’s an outlook for the British events and an updated technical analysis for GBP/USD.
GBP/USD chart with support and resistance lines marked. Click to enlarge:
While the political uncertainty didn’t stay too long, the Pound’s situation is still dire. It’s fate cannot be detached from the fate of the Euro. Contagion also reached Britain. OK, let’s start:
GBP/USD Technical Analysis
The British Pound reached fresh lows very early in the week, breaking the technical level of 1.44 and bottomed out only at 1.4230. It then recovered and closed at 1.4450.
The Pound’s range is now between 1.44, the previous major support line, and 1.45, which proved to be a new line of resistance. Note that some lines were added on last week’s outlook.
Looking up, the next line of resistance is at 1.4780, which held GBP/USD for several months. This is a strong line. Above, 1.4975 is a minor resistance line, followed by 1.5130, which worked as support just a few weeks ago. It’s followed by 1.5350, which worked as both support and resistance, and by 1.5520 which wasn’t broken in three months.
Looking down, the fresh 2010 low of 1.4230 is the next immediate support. Stronger support is found at 1.4130, which was a support line in April 2009. Further below, 1.38 also stopped the pair at the beginning of 2009, and is the next line of support. The ultimate support line is 1.35, which is the lowest level seen in over 20 years.
I remain bearish on the Pound.
A serious revision in GDP is necessary for the Pound to recover from the recent blows, but the European troubles will probably continue bringing it down.
GBP/USD chart with support and resistance lines marked. Click to enlarge:
While the political uncertainty didn’t stay too long, the Pound’s situation is still dire. It’s fate cannot be detached from the fate of the Euro. Contagion also reached Britain. OK, let’s start:
- Adam Posen talks: Starts speaking on Monday at 17:30 GMT. External BOE MPC Member Adam Posen already moved the Pound several times in the past, and he’ll have a chance to do so in his speech early in the week. Any hints about future rate hikes or the situation of the economy are likely to impact trading.
- Revised GDP: Published on Tuesday at 8:30 GMT. Britain’s economy is still struggling. According to the initial release, Britain grew by only 0.2% in Q1. This was half of early expectations. The second release is expected to show a better picture – a growth rate of 0.3%. Any result will rock the Pound.
- BBA Mortgage Approvals: Published on Tuesday at 8:30 GMT, and overshadowed by the GDP release. The British Bankers Association covers two thirds of all British mortgages, and releases this housing figure quite early. After losing the highs of 46K, the figure fell under 34K. It’s now expected to recover and rise to 38.3K.
- CBI Realized Sales: Published on Thursday at 10:00 GMT. 160 retailers and wholesalers are surveyed for CBI’s important indicator. In the past three months, this number was positive, indicators higher sales volume. A small rise from 13 to 14 is predicted this time.
- GfK Consumer Confidence: Published on Thursday at 23:00 GMT (midnight UK). Consumers’ pessimism worsened last month, with an unexpected drop to -16 points. 2,000 consumers are expected to show a bit less pessimism this time, with a rise to -15 points.
- Nationwide HPI: Publication time unknown at the moment. Two straight months of rises have proved that the drop seen in January was a one time glitch. The UK’s second earliest house price report always rocks the markets. Another small rise of 0.5% is expected this time.
GBP/USD Technical Analysis
The British Pound reached fresh lows very early in the week, breaking the technical level of 1.44 and bottomed out only at 1.4230. It then recovered and closed at 1.4450.
The Pound’s range is now between 1.44, the previous major support line, and 1.45, which proved to be a new line of resistance. Note that some lines were added on last week’s outlook.
Looking up, the next line of resistance is at 1.4780, which held GBP/USD for several months. This is a strong line. Above, 1.4975 is a minor resistance line, followed by 1.5130, which worked as support just a few weeks ago. It’s followed by 1.5350, which worked as both support and resistance, and by 1.5520 which wasn’t broken in three months.
Looking down, the fresh 2010 low of 1.4230 is the next immediate support. Stronger support is found at 1.4130, which was a support line in April 2009. Further below, 1.38 also stopped the pair at the beginning of 2009, and is the next line of support. The ultimate support line is 1.35, which is the lowest level seen in over 20 years.
I remain bearish on the Pound.
A serious revision in GDP is necessary for the Pound to recover from the recent blows, but the European troubles will probably continue bringing it down.
GBP/USD Weekly Analysis (May 24-28)
A revised version on the GDP and 5 other events will shake the Pound, now at lower ground. Here’s an outlook for the British events and an updated technical analysis for GBP/USD.
GBP/USD chart with support and resistance lines marked. Click to enlarge:
While the political uncertainty didn’t stay too long, the Pound’s situation is still dire. It’s fate cannot be detached from the fate of the Euro. Contagion also reached Britain. OK, let’s start:
GBP/USD Technical Analysis
The British Pound reached fresh lows very early in the week, breaking the technical level of 1.44 and bottomed out only at 1.4230. It then recovered and closed at 1.4450.
The Pound’s range is now between 1.44, the previous major support line, and 1.45, which proved to be a new line of resistance. Note that some lines were added on last week’s outlook.
Looking up, the next line of resistance is at 1.4780, which held GBP/USD for several months. This is a strong line. Above, 1.4975 is a minor resistance line, followed by 1.5130, which worked as support just a few weeks ago. It’s followed by 1.5350, which worked as both support and resistance, and by 1.5520 which wasn’t broken in three months.
Looking down, the fresh 2010 low of 1.4230 is the next immediate support. Stronger support is found at 1.4130, which was a support line in April 2009. Further below, 1.38 also stopped the pair at the beginning of 2009, and is the next line of support. The ultimate support line is 1.35, which is the lowest level seen in over 20 years.
I remain bearish on the Pound.
A serious revision in GDP is necessary for the Pound to recover from the recent blows, but the European troubles will probably continue bringing it down.
GBP/USD chart with support and resistance lines marked. Click to enlarge:
While the political uncertainty didn’t stay too long, the Pound’s situation is still dire. It’s fate cannot be detached from the fate of the Euro. Contagion also reached Britain. OK, let’s start:
- Adam Posen talks: Starts speaking on Monday at 17:30 GMT. External BOE MPC Member Adam Posen already moved the Pound several times in the past, and he’ll have a chance to do so in his speech early in the week. Any hints about future rate hikes or the situation of the economy are likely to impact trading.
- Revised GDP: Published on Tuesday at 8:30 GMT. Britain’s economy is still struggling. According to the initial release, Britain grew by only 0.2% in Q1. This was half of early expectations. The second release is expected to show a better picture – a growth rate of 0.3%. Any result will rock the Pound.
- BBA Mortgage Approvals: Published on Tuesday at 8:30 GMT, and overshadowed by the GDP release. The British Bankers Association covers two thirds of all British mortgages, and releases this housing figure quite early. After losing the highs of 46K, the figure fell under 34K. It’s now expected to recover and rise to 38.3K.
- CBI Realized Sales: Published on Thursday at 10:00 GMT. 160 retailers and wholesalers are surveyed for CBI’s important indicator. In the past three months, this number was positive, indicators higher sales volume. A small rise from 13 to 14 is predicted this time.
- GfK Consumer Confidence: Published on Thursday at 23:00 GMT (midnight UK). Consumers’ pessimism worsened last month, with an unexpected drop to -16 points. 2,000 consumers are expected to show a bit less pessimism this time, with a rise to -15 points.
- Nationwide HPI: Publication time unknown at the moment. Two straight months of rises have proved that the drop seen in January was a one time glitch. The UK’s second earliest house price report always rocks the markets. Another small rise of 0.5% is expected this time.
GBP/USD Technical Analysis
The British Pound reached fresh lows very early in the week, breaking the technical level of 1.44 and bottomed out only at 1.4230. It then recovered and closed at 1.4450.
The Pound’s range is now between 1.44, the previous major support line, and 1.45, which proved to be a new line of resistance. Note that some lines were added on last week’s outlook.
Looking up, the next line of resistance is at 1.4780, which held GBP/USD for several months. This is a strong line. Above, 1.4975 is a minor resistance line, followed by 1.5130, which worked as support just a few weeks ago. It’s followed by 1.5350, which worked as both support and resistance, and by 1.5520 which wasn’t broken in three months.
Looking down, the fresh 2010 low of 1.4230 is the next immediate support. Stronger support is found at 1.4130, which was a support line in April 2009. Further below, 1.38 also stopped the pair at the beginning of 2009, and is the next line of support. The ultimate support line is 1.35, which is the lowest level seen in over 20 years.
I remain bearish on the Pound.
A serious revision in GDP is necessary for the Pound to recover from the recent blows, but the European troubles will probably continue bringing it down.
EUR/USD Weekly Analysis (May 24-28)
Another intense week ended with a significant recovery for the common currency. Will the recovery continue? Or was it just a temporary correction? Here’s an outlook for the events that will rock the Euro, and an updated technical analysis for EUR/USD.
EUR/USD chart with support and resistance lines marked. Click to enlarge:
The contagious debt problems sent the pair to four year lows, but it managed to end the week higher after the German parliament approved the huge bailout package. This week might be more stable… OK, let’s start:
- Industrial New Orders: Published on Tuesday at 9:00 GMT. European manufacturers sent mixed signals in recent months. After last month’s nice rise in orders, 1.5%, expectations are for another rise, of 2.3% this time. Learning from the past, a drop won’t be a big surprise.
- German GfK Consumer Climate: Published on Wednesday at 6:00 GMT. 2,000 German consumers are surveyed for this important indicator. After many months of stability, this indicator finally rose to 3.8 points, showing that consumers feel better about the economic situation. A small drop to 3.7 points is predicted this time. A bigger drop will probably be seen next time – representing the impact of the financial crisis.
- French Consumer Spending: Published on Wednesday at 6:45 GMT. Also in Europe’s second largest economy, consumers showed growing confidence as their spending rose by 1.2% last time. This is expected to change now, with a drop of 0.5%.
- NBB Business Climate: Published on Wednesday at 13:00 GMT. This wide survey of 6,000 businesses is highly regarded, despite coming from a small country – Belgium. The score improved to from -3.6 to -2.4 and is expected to edge up to -2.1. The improving negative score means that businesses are now less pessimistic. Also here, a negative change will probably seen next time.
- German CPI: Published on Thursday. The different German states release their consumer price index throughout the day, building up the preliminary release. Inflation seemed to pick up two months ago, as prices rose by 0.5%, but last month’s drop of 0.1% showed that no big change is coming. A small rise of 0.1% is expected this time.
EUR/USD Technical Analysis
The Euro began the week with a quick deterioration below the “Lehman levels”, 1.2330 and even broke another technical level, 1.22, before making an impressing comeback and closing above 1.2520, at 1.2563.
The current range for the pair is between 1.2520, which held the Euro temporarily before a bigger collapse, and 1.2672, a new line (didn’t appear in last week’s outlook), that was the peak in the past week.
Looking higher, 1.2880 is the next line of resistance, being a significant line of support about one year ago. The next important line of resistance is 1.3114, which held the pair before it fell below 1.30.
Further resistance is found at 1.3267, which also had an important role as a support line. 1.3440 is the next hurdle, but it’s quite far.
Looking down, immediate support can still be found at the 2008 low of 1.2330. This is followed by the round number of 1.22, which worked as a support line back in 2006, and the fresh year-to-date low of 1.2144.
Even lower, the round number of 1.20 provides more support. Stronger support is found at 1.1820, which was a strong support line, and 1.1630, the lowest level since 2003. Low levels indeed.
I remain bearish on EUR/USD.
Despite the fresh optimism from the German approval, the markets are still far from stabilization. The Euro can experience more rounds of downfalls before settling down. Contagious diseases take time to cure.
EUR/USD Weekly Analysis (May 24-28)
Another intense week ended with a significant recovery for the common currency. Will the recovery continue? Or was it just a temporary correction? Here’s an outlook for the events that will rock the Euro, and an updated technical analysis for EUR/USD.
EUR/USD chart with support and resistance lines marked. Click to enlarge:
The contagious debt problems sent the pair to four year lows, but it managed to end the week higher after the German parliament approved the huge bailout package. This week might be more stable… OK, let’s start:
- Industrial New Orders: Published on Tuesday at 9:00 GMT. European manufacturers sent mixed signals in recent months. After last month’s nice rise in orders, 1.5%, expectations are for another rise, of 2.3% this time. Learning from the past, a drop won’t be a big surprise.
- German GfK Consumer Climate: Published on Wednesday at 6:00 GMT. 2,000 German consumers are surveyed for this important indicator. After many months of stability, this indicator finally rose to 3.8 points, showing that consumers feel better about the economic situation. A small drop to 3.7 points is predicted this time. A bigger drop will probably be seen next time – representing the impact of the financial crisis.
- French Consumer Spending: Published on Wednesday at 6:45 GMT. Also in Europe’s second largest economy, consumers showed growing confidence as their spending rose by 1.2% last time. This is expected to change now, with a drop of 0.5%.
- NBB Business Climate: Published on Wednesday at 13:00 GMT. This wide survey of 6,000 businesses is highly regarded, despite coming from a small country – Belgium. The score improved to from -3.6 to -2.4 and is expected to edge up to -2.1. The improving negative score means that businesses are now less pessimistic. Also here, a negative change will probably seen next time.
- German CPI: Published on Thursday. The different German states release their consumer price index throughout the day, building up the preliminary release. Inflation seemed to pick up two months ago, as prices rose by 0.5%, but last month’s drop of 0.1% showed that no big change is coming. A small rise of 0.1% is expected this time.
EUR/USD Technical Analysis
The Euro began the week with a quick deterioration below the “Lehman levels”, 1.2330 and even broke another technical level, 1.22, before making an impressing comeback and closing above 1.2520, at 1.2563.
The current range for the pair is between 1.2520, which held the Euro temporarily before a bigger collapse, and 1.2672, a new line (didn’t appear in last week’s outlook), that was the peak in the past week.
Looking higher, 1.2880 is the next line of resistance, being a significant line of support about one year ago. The next important line of resistance is 1.3114, which held the pair before it fell below 1.30.
Further resistance is found at 1.3267, which also had an important role as a support line. 1.3440 is the next hurdle, but it’s quite far.
Looking down, immediate support can still be found at the 2008 low of 1.2330. This is followed by the round number of 1.22, which worked as a support line back in 2006, and the fresh year-to-date low of 1.2144.
Even lower, the round number of 1.20 provides more support. Stronger support is found at 1.1820, which was a strong support line, and 1.1630, the lowest level since 2003. Low levels indeed.
I remain bearish on EUR/USD.
Despite the fresh optimism from the German approval, the markets are still far from stabilization. The Euro can experience more rounds of downfalls before settling down. Contagious diseases take time to cure.
Friday, May 7, 2010
Money Management Strategy in Forex or Stock
This article deals with one of the most important aspects of trading - money management.
Although there are plenty of trading systems and trading strategies with good win/loss ratio, proper money management can change the outcome of the net profit amount for any trading system.
Essentially, money management strategy is a statistical tool to control the risk exposure and profit potential when we enter into a trade; and by applying it, we can control our emotions and lack of plan (the main reason why most of traders lose their money).
The importance of determine a stop-loss
C.O.N.T.R.O.L... When a trader lose control the results are often disastrous. Many traders often enter the market with a profit target, but without a clearly defined protective stop-loss.
With a pre-determined profit target and a pre-determined stop-loss, you know where you will get out if you are wrong and where you will get out if you are right. In other words, you have control.
Diversification - Trade more then one currency pair
When trading more then one currency pair, i.e. EUR/USD, USD/JPY, USD/CHF, GBP/USD atc., each pair would have a different stop-loss and profit target. With multiple currency pairs, each having a different entry and exit points you can smooth your system equity curve so your account draw-downs will be smaller.
Note: It's important that you diversify your orders between currencies that have low correlation.
Case study - Fixed Ratio With Fixed Number of Trades
Money management is the most significant part of any trading system. Our Forex money management strategy is simple to implement, conservative and practical when combined with one of our trading tutorials strategies.
First of all, you should understand the following terms:
Fixed Risk Ratio
Never risk more than 2% of your account size on any single currency pair, if possible, risk less. Plus, never risk more than 10% in any complex of open positions, on any given day. For any given trade you must know how much you will lose if the market goes against you.
Example - According to our money management strategy, you should be risking no more then 2% of you balance per single trade. So, if you start with $1,000 account size you may lose up to $20 in one trade, i.e. If the trade is stopped, you will lose $20 which is 2% of your initial balance.
Please note: You can open up to 5 parallel trades (other pairs), at the same time - max risk = 10% from your initial balance.
Fixed Number of Trades
The "fixed number of trades" parameter derives from the trading system profitable factor, as follows:
Forex money management strategy implementation
Now that we have these two parameters (the fixed risk ratio and the fixed number of trades), let's make an example:
In this case we can lose up to $50 ($2,500 * 2%) at any given trade for the next 30 actual trades. Then, after 30 trades we will re-calculate our maximum risk amount, i.e., if the new account size is now $3,000, we can afford to lose up to $60 at any given trade for the following 30 trades, and so on.
Basically, we re-calculate the risk amount (based on the fixed risk ratio and account balance) after each fixed number of trades, in this example, 30.
Note: You can adapt this money management strategy to fit smaller or bigger trading accounts, providing you stick to the 2% risk rule.
Diversification - Trade more then one currency pair
When trading more then one currency pair, i.e. EUR/USD, USD/JPY, USD/CHF, GBP/USD atc., each pair would have a different stop-loss and profit target. With multiple currency pairs, each having a different entry and exit points you can smooth your system equity curve so your account draw-downs will be smaller.
Note: It's important that you diversify your orders between currencies that have low correlation.
Case study - Fixed Ratio With Fixed Number of Trades
Money management is the most significant part of any trading system. Our Forex money management strategy is simple to implement, conservative and practical when combined with one of our trading tutorials strategies.
First of all, you should understand the following terms:
Fixed Risk Ratio
Never risk more than 2% of your account size on any single currency pair, if possible, risk less. Plus, never risk more than 10% in any complex of open positions, on any given day. For any given trade you must know how much you will lose if the market goes against you.
Example - According to our money management strategy, you should be risking no more then 2% of you balance per single trade. So, if you start with $1,000 account size you may lose up to $20 in one trade, i.e. If the trade is stopped, you will lose $20 which is 2% of your initial balance.
Please note: You can open up to 5 parallel trades (other pairs), at the same time - max risk = 10% from your initial balance.
Fixed Number of Trades
The "fixed number of trades" parameter derives from the trading system profitable factor, as follows:
Trading System Percent Profitable (no. of winning trades / total no. of trades) | fixed Number of Trades |
60% | 40 |
65% | 35 |
70% | 30 |
75% | 25 |
80% | 20 |
85% | 15 |
Forex money management strategy implementation
Now that we have these two parameters (the fixed risk ratio and the fixed number of trades), let's make an example:
- Account size = $2,500
- Fixed Risk Ratio = 2%
- Fixed Number of Trades = 30 (we use trading system with 70% winning trades expectation - see table above).
In this case we can lose up to $50 ($2,500 * 2%) at any given trade for the next 30 actual trades. Then, after 30 trades we will re-calculate our maximum risk amount, i.e., if the new account size is now $3,000, we can afford to lose up to $60 at any given trade for the following 30 trades, and so on.
Basically, we re-calculate the risk amount (based on the fixed risk ratio and account balance) after each fixed number of trades, in this example, 30.
Note: You can adapt this money management strategy to fit smaller or bigger trading accounts, providing you stick to the 2% risk rule.
Forex Intra-Day Trading Strategy
Overview
This forex day trading strategy will focus on one of the best analysis method for forex trading - the use of multiple time frames.
Basically, in this strategy, we will use the longer timeframe (chart #1) to define our support and resistance price levels and the shorter timeframe (chart #2) for our trading entry, stop-loss and exit levels.
Also, for confirmation and momentum measurement we will use slow stochastic oscillator indicator (one of the best momentum indicators).
Forex day trading strategy rules:
- We use two time frames, long time frame - 4 hour and short time frame - 15 minute.
- We identify the support and resistance price levels on the longer timeframe a day before.
- We apply the stochastic indicator in both time frames to determine if we enter long or short position in our next intraday trading.
Case study - Forex (Foreign Exchange) USD/JPY Multiple Time Frame Bar Charts
USD/JPY 4 Hour Bar Chart (Chart #1)
Indicators and Parameters:
Support and Resistance Price Levels (Gray) - we use the swing pivot points of the previous day (yellow rectangle); 116.15,116.27,116.43,116.70 and 116.76.
Slow Stochastic Oscillator (lower window) - we set the stochastic indicator parameters for both time frames, as follow: %K period = 8, %D period = 3, Slowing = 3 (optional).
Forex day trading strategy practical analysis:
Chart #1 displays the 4 hour timeframe for the previous day (14 August).
What we can learn from this chart?
1. Resistance and Support price levels for the next day, our trading day, 15 August.
- High = 116.73 (bar 6)
- Low = 116.15 (bar 1)
- The High of the swing move 0-1 = 116.43 (also the high of 11 August)
- The High and Low of the swing move 4-5 = 116.70 (high) and 116.27 (low)
Note: as an opposite from calculated pivot points our price levels are generated from actual swing trading on this day.
2. What type of trading position we will favor the next day; short or long?
As you can see, the stochastic oscillator create diversion with this currency pair price (green line), i.e. the momentum is weakening; plus the stochastic indicates on an overbought situation (above 80 level). So, the next day (15 August), we will try to find conditions to enter a short position.
USD/JPY 15 Minute Bar Chart (Chart #2)
Forex day trading strategy - our trading day, 15 August:
At Chart #2 we can see the previous day - 14 August (yellow rectangle), our support and resistance price levels that we already identify, and the open price of our trading session at 116.62 (bar 1).
Because the open price of this day (116.62) is contained within a support/resistance horizontal channel, 116.43-116.70, and we want to place a short position, we have two options:
- We can enter short at 116.70, when the price retrace toward the resistance line.
- We can enter short at 116.38, when the price penetrate the support line (5 pips to confirm breakout).
In this case, USD/JPY currency price carried out the 116.70 short order (point A). As always, we placed immediately a stop-loss order at 116.81, 5 pips above the upper resistance price level; and a profit target order at 116.43, the next support level (point B).
Forex Day Trading Strategy Implementation
You can implement this forex day trading strategy on any fx currency pair. The mentioned setup and rules can be found almost everyday in the foreign exchange market. Good trading...
Descending Triangle Chart Pattern | Demand Index Indicator
Overview
A Descending Triangle chart pattern is a continues price formation; when combined with a Demand Index Indicator properly, over 75% of our trading positions will be profitable. By definition, the Descending Triangle chart pattern indicate a sell pressure; You can see visually that the sellers sell at lower prices as time progress (A,B and C).
Professional trader will use Demand Index indicator in several ways. I will focus on this indicator ability to predict trend strength, so, if the indicator stays near the level of zero for any length of time (see blue rectangle in chart - lower window) we can anticipate a price breakout.
Case study - NASDAQ-100 Index Tracking Stock ETF (QQQQ) Bar Chart
Indicators and Parameters:
Descending Triangle chart pattern - continues (red) - normally formed in a few week period, and consist from an upper descending resistance line (A-B-C) and support line (2).
Demand Index (red; lower window) - calculated by the change in price and volume alike.
How to use the Descending Triangle chart pattern - practical analysis:
The first step is to recognize we are dealing with Descending Triangle price formation, to do that we must identify:
- Descending resistance line with two or more reaction points (points A-B-C).
- Support line (2), horizontal line, with two or more reaction points.
Second, we have to define our profit target by finding the delta between line 1(green) price level and line 2(red) price level. In our case, the delta equal 1.75 points (43.05-41.30). So, line 2(red), the support line, minus the delta equal our profit target at 39.55 (blue line #3).
Point D - This is our entry point.
The short order entry price is 41.05 and our stop-loss order price is 41.55; why?
Very important: we determine our profit target and stop-loss orders with the assistance of mathematical calculations. First, we anticipate a winning ratio of 75%, i.e. we will win with this strategy 3 times out of 4, and second, we want at least 1 to 3 win/loss ratio.
So, we will divide our delta (1.75) by 7 and use the triangle support line(2) as our pivot price level (41.30). Then, we calculate our orders price, 41.30 minus 0.25 = 41.05 as our entry, and 41.30 plus 0.25 = 41.55 as our stop-loss.
Point E - We closed our short position at 39.55 - profit target.
Note: Because descending triangle is a bearish pattern which indicates distribution of money, the combination with Demand Index indicator is a very powerful one.
Descending Triangle Chart Pattern
In order to qualify as a descending pattern, at least two reaction highs are required to form the upper trend line (in our case - three). Also, at least two reaction lows required to form the support horizontal line.
Basically, the trader must see a visual Triangle chart pattern emerging from his price chart.
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