EUR/JPY Elliot Wave Weekly Forecast and Trade(SEP 6- 10)

Weekly

* Last Candlesticks pattern: Dragonfly Doji
* Time of formation: Aug 2010
* Trend bias: Down

Daily

* Last Candlesticks pattern: Morning star
* Time of formation: 29 June 2010
* Trend bias: Up

The single currency moved pretty much in line with our expectation and despite rebounding to 109.56 on Monday morning this week (we recommended in our previous update last Friday to sell euro at 109.00 targeting for 106.30-40), price then quickly retreated sharply from there and reached our indicated target at 106.30/40 (with 260 points profit) before rebounding from 106.16. This bounce from 106.16 suggests downtrend is not ready to resume yet and further consolidation would take place, however, upside should be limited to this week’s high of 109.56. Only a daily close above the Kijun-Sen (now at 109.83) would signal a temporary low has been formed at 105.44 earlier and then correction to 110.09 (50% Fibonacci retracement of 114.74 to 105.44) and possibly 111.19 (61.8% Fibonacci retracement) would follow but reckon the Ichimoku cloud area (now at 111.40-70) would hold.

On the downside, a daily close below this week’s support at 106.16 would revive our bearishness and signal rebound from 105.44 has ended at 109.56, bring retest of this support later. Below there would extend downtrend to 105.00, however, loss of near term downward momentum would prevent sharp fall below 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74) and price should stay well above 101.98 (61.8% projection) and bring rebound later.

Recommendation: Short position entered at 109.00 met target at 106.30/40 with 260 points profit

Recommended Trade for This Week: Sell @ 109.80 with SL Above 110.50 for 107.00


On the weekly chart, despite last week’s selloff to 105.44, the subsequent rebound from there left a ‘Dragonfly doji’ candlestick pattern there, suggesting consolidation above this level would take place, however, it is necessary to see a long white candlestick in order to confirm a low formation, otherwise, downside risk remains. A weekly close above the Tenkan-Sen (now at 110.08) would be the first sign that low has been made and then rebound to 111.19 (61.8% Fibonacci retracement of 114.74 to 105.44) and possibly 112.50 would follow but reckon resistance at 114.74 would cap upside.

On the downside, below this week’s low at 106.16 would revive bearishness for a retest of 105.44, however, break there is needed to confirm downtrend from 169.97 has resumed for further weakness towards 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74), however, loss of near term downward momentum should prevent sharp fall below 101.98 (61.8% projection) and risk has increased for a rebound later.

GBP/JPY Weekly Techincal Forecast (July 12-16 2010)

GBP/JPY continued to stay in converging range last week. The development argues that such range trading is part of the whole corrective rise from 126.73 only and such rise is not completed yet. Initial bias remains neutral this week. Break of 135.99 will target 61.8% retracement of 145.94 to 126.73 at 138.60 and above. On the downside, break of 131.23 will revive the case that recovery from 126.73 has completed already and will flip bias back to the downside for retesting this low.

In the bigger picture, the choppy nature of the fall from 163.05 is mixing up the outlook a bit. But in any case, such decline is still in progress as long as 145.94 resistance holds and further fall should be seen to retest 118.18 low first. Break will confirm that whole down trend from 2007 high of 251.09 has resumed for 61.8% projection of 215.87 to 118.81 from 163.05 at 103.06 next, which is close to 100 psychological level. However, break of 145.94 will indicate that fall fro 163.05 is finished. Also, this will suggest that such fall is merely the second wave of the whole consolidation pattern from 118.81 and will bring another rise to 163.05 and above before resuming the longer term down trend.

In the longer term picture, fall from 251.09 is treated as resumption of multi decade down trend. Note that the fall from 215.87 is not treated as the fifth wave, but the third wave inside the third wave that started at 241.35. Another long term decline is still expected after completion of the correction from 118.81.

EUR/JPY Weekly Technical Forecast (July 12-16 2010)

EUR/JPY's rebound from 107.30 extended further to as high as 112.65 last week. While such rebound was strong, there is no change in the view that it's a correction only. Hence, we'd still expect upside to be limited below 113.40 resistance and bring fall resumption. Below 109.13 minor support will flip intraday bias back to the downside for retesting 107.30 low first. However, note that decisive break of 113.40 resistance will argue that an important bottom might be formed and bring stronger rebound towards 119.64 key resistance.

In the bigger picture, fall from 139.21 is treated as resumption of long term down trend from 2007 high of 169.96 and should target 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 which is close to 100 psychological level. Though, we'd expect strong support between 2000 low of 88.96 and 100 psychological level to contain downside and bring reversal. On the upside, break of 119.64 support turned resistance is needed to be the first signal of medium term reversal. Otherwise, outlook will remain bearish.

In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Based on the five wave structure of the rise from 88.96 to 169.96, we're favoring that fall from 169.96 is corrective in nature. It should develop into a three wave correction with first wave completed at 112.10, second wave completed at 139.21. The third falling leg is now in progress but would be contained above 88.96 key support level. We'll hold on this this view unless fall from 169.96 shows sign of acceleration.

EUR/JPY Weekly Technical Analysis (June 7-11 2010)

EUR/JPY Weekly Outlook

EUR/JPY's sharp recover on Friday and break of 109.76 minor support suggests that consolidation from 108.82 has completed at 114.13 already. Initial bias is on the downside this week and break of 108.82 will confirm down trend resumption for 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 next. On the upside, in case of another rise, we'd expect strong resistance at 38.2% retracement of 127.88 to 108.82 at 116.10 to conclude the consolidation and bring fall resumption finally.

In the bigger picture, fall from 139.21 is treated as resumption of long term down trend from 2007 high of 169.96 and should target 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 which is close to 100 psychological level. Though, we'd expect strong support between 2000 low of 88.96 and 100 psychological level to contain downside and bring reversal. On the upside, break of 119.64 support turned resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.

In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Based on the five wave structure of the rise from 88.96 to 169.96, we're favoring that fall from 169.96 is corrective in nature. It should develop into a three wave correction with first wave completed at 112.10, second wave completed at 139.21. The third falling leg is now in progress but would be contained above 88.96 key support level. We'll hold on this this view unless fall from 169.96 shows sign of acceleration.

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.

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.

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).

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).

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:

1. We use two time frames, long time frame - 4 hour and short time frame - 15 minute.


2. We identify the support and resistance price levels on the longer timeframe a day before.


3. 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:

1. 
   
   We can enter short at 116.70, when the price retrace toward the resistance line.


2. 
   
   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...