USD/JPY Weekly Technical Forecast (SEP 13-17 2010)

The internal elections in Japan’s ruling party are the main theme this week, among other events. Here’s an outlook for the Japanese events and an updated technical analysis for the falling USD/JPY.

USD/JPY daily chart with support and resistance lines marked. Click to enlarge:



There has been a lot of talk about an intervention to weaken the yen. Only a coordinated intervention can have a long term effect. Will it happen this week? Or will the talk continue? Let’s start:

1. Revised Industrial Production: Published Tuesday, 4:30. Japanese industrial output showed a modest rise of 0.3% according to the initial release. This came after a drop of 1.1% drop in the previous month. The rise will probably be confirmed now.


2. Leadership elections: Tuesday. The Japanese prime minister, Naoto Kan, has been in office only for a few months, and is now challenged by Ichiro Ozawa,  a veteran politician. Mr. Ozawa raised the issue of the strong yen many times during his election campaign and put it high on the agenda. A victory by Ozawa means yet another prime minister for Japan, the third this year. Political uncertainty and the vow to fight the strong yen may hurt the yen. A victory by current PM Kan will boost the yen.


3. Tertiary Industry Activity: Published Wednesday, 23:50. This services sector indicator is a good gauge for the Japaneses economy. The past two months shows a decline of 0.9% and 0.1%. A rise of 0.7% is expected this time.


4. Masaaki Shirakawa talks: Begins speaking on Thursday, 6:00. The governor of the BOJ will speak at a conference in Tokyo and is likely to mention the high level of the yen. If he reiterates the words from previous appearances, the market will dismiss it. Only firmer talk can move the currency.

All times are GMT.

USD/JPY Technical Analysis

USD/JPY began the week by dropping lower, setting a fresh 15-year low at 83.34. It didn’t stay there too long and gradually climbed higher, to close at 84.16.

84.80, which was a support line in August and also a swing low in November, now serves a strong resistance line. Above this line, the next line that will cap the dollar in case of surge is the 86.30 line which was a support line twice in July.

Higher, 88 was a cushioned the pair in October, March and May. Higher, there are two lines close to each other – 89.15 was a resistance line in July and a support line in May, and 89.75, a weaker line, which provided support in March.

Downtrend channel – the recent descent of USD/JPY is characterized in an imperfect downtrend channel – the downtrend resistance was formed from the 89.15 line and continued with two perfect touches. The downtrend support that was formed earlier (in June) served as perfect support three times since then, but was also violated briefly once.

I am bullish on USD/JPY.

The talks about intervention are mounting – while they have proved fruitless up to now, there’s a chance of an intervention due to the depth this pair reached, and the internal political tensions that the currency is causing in Japan. Only a globally coordinated intervention will have a big long term impact.

EUR/USD Weekly Summary: Risk appetite helps Euro hold above technical support

The EUR/USD had a bearish momentum this week. Opened at 1.2892, price bottomed at 1.2643, which is the 23.6% Fibonacci retracement of 1.5140 - 1.1876, and closed at 1.2710 on Friday. On daily chart below we can see that price has been indecisive from Wednesday to Friday after dropped significantly on Tuesday. Price made some attempts to break below the trend line support but a serial of better than expected economic data from UK (Halifax HPI),  US (Trade balance, Unemployment Claims)  and Euro zone itself (French Industrial Production)  triggered risk appetite sentiment and hold the Euro above trend line support. I still believe that the major technical scenario remains bearish. Judging from the price action after the data release, the bullish reactions were short lived indicating bearish pressure is still alive and kicking. For the upcoming week, my technical focus remains to see what happen to the trend line support. Consistent move below the trend line support and 1.2643 could trigger further bearish continuation at least testing 1.2523 even lower. But if we keep seeing rejection to move below the trend line support, the bearish pressure may get exhausted and on the other hand, the upside pressure could gain some momentum testing 1.2770. Break above that area could trigger further upside pressure testing 1.2850 - 1.2930 region. Let's see what will happen and hope we can react correctly to any facts in the market.

EUR/USD Weekly Summary: Testing 1.2930, the bearish outlook is in serious threat

The EUR/USD had a significant bullish correction this week. On h4 chart below we can see price break above my minor trend line resistance (yellow) to the upside indicating potential further bullish momentum testing the key resistance level 1.2930 area. Break above that area could be seen as potential bearish failure and bullish reversal in medium term testing the major trend line resistance (red) and 1.3115 area which is the 38.2 Fibonacci retracement of 1.5140 - 1.1876. On the downside, only a violation to the downside on the bullish channel and bearish pullback below 1.2800 could stop the current strong bullish momentum and keep the medium term bearish outlook intact.

AUD/USD Weekly Technical Forecast (Sep 6-10 2010)

After a great week, another busy one expects Aussie traders. The RBA’s rate decision and employment figures are the highlights. Here’s an outlook for Australian events and an updated technical analysis for AUD/USD.

AUD/USD daily graph with support and resistance lines on it. Click to enlarge:



The Aussie enjoyed lots of good figures, with the Q2 GDP growth of 1.2% being a great positive surprise. The better-than-expected retail sales figure and especially building approvals, showed that also in Q3, the Australian economy is warming up once again. Will this lead to a renewal of rate hikes?

1. MI Inflation Gauge: Published on Monday at 12:30 GMT. The Melbourne Institute’s inflation gauge fills in for the government, that publishes an official inflation figure only once per quarter. According to MI, inflation slowed down from 0.5% three months ago, down to 0.1% last month. A similar 0.1% rise is expected this time.


2. ANZ Job Advertisements: Published on Monday at 1:30 GMT. The amount of jobs published in the media serves as a good indicator for the official employment figures released 3 days later. Last month saw a smaller growth in ads, only 1.3%, and indeed, the gain in jobs was slower than previous months. This time, the rise in ads is expected to slightly stronger.


3. AIG Construction Index: Published on Monday at 23:30 GMT. The Australia Industry Group showed that the construction sector is slowing down, even contracting in the past two months. The index was under the critical 50 point mark, and this shows an economic squeeze. This goes hand in hand with the slowdown in other housing sector figures – a result of the rate hikes. It’s expected to recover, but remain under 50 points this time.


4. Rate decision: Published on Tuesday at 4:30 GMT. 4 months have passed since the last rate hike, the sixth since the financial crisis. The hikes took their toll on the economy, and especially on real estate, so Glenn Stevens and his colleagues at the RBA decided to pause on recent months. Also now, the Cash Rate is expected to remain unchanged at 4.50%. The focus will be on the accompanying statement which will hint about future moves.


5. Home Loans: Published on Wednesday at 1:30 GMT. This important housing sector figure always rocks the Aussie. After a sharp fall of 3.9% last month and many bad months beforehand as well, the number of loans is expected to grow by 1.1% this time, boosting the Aussie.


6. Employment data: Published on Thursday at 1:30 GMT. After months of excellent figures, last month’s employment numbers were somewhat mixed. Employment Change rose by 23.5K, slightly better than expected, but the unemployment rate jumped to 5.3%, which was a quite a disappointment. A similar gain in jobs, 25.3K is expected now. The unemployment is expected to fall back down to 5.2%. Any result will rock the Aussie.


7. Guy Debelle talks: Starts speaking on Thursday at 3:00 GMT. RBA deputy governor Dr. Guy Debelle might say more about the fresh rate decision, and add prospects about the future. It’s important to note that in a speech last week, Debelle didn’t mention anything related to monetary policy.


8. Chinese Trade Balance: Published during Friday. Australia’s main trade partner has a strong impact on the Aussie. This time, the trade balance of the world’s second largest economy will be closely watched. This figure is also sensitive for the value of the Chinese yuan, which is closely monitored by the US. China’s surplus is expected to squeeze from 28.7 to 26.9 billion.

AUD/USD Technical Analysis

The Australian dollar dropped gradually at the beginning of the week, and found support at the 0.8870 line (mentioned in last week’s outlook). It then made a sharp recovery, crossing 0.90 easily, struggling with 0.9080 and finally jumping above 0.9135 to close at 0.9143.

The Aussie is now bound between the 0.9135 line which worked as support back in April, and 0.9220, which was a support line in March and also capped the Aussie at the beginning of August.

Looking down, 0.9080 is the next support line. It was a double top in July and the Aussie leaped above it during a weekend. Lower, the round number of 0.90 provides support. This psychological number was also a swing low in March.

The 0.8870 line was tested in the past week and also capped the pair twice in recent months. It now serves as strong support. 0.8735 was a low point in December 2009 and also in July – minor support now.

Lower, 0.8567 was a support line back in 2009, and also worked as resistance in May. Below, 0.8316 was a double bottom in July and provides strong support. The final line is the year-to-date low 0f 0.8066.

Looking up above 0.9220, the next line is a very strong one – 0.9327. It capped the Aussie many times in the past year. A break above this line will send the pair towards immediate resistance at 0.9366, which was a stubborn line in April.

The 2009 high of 0.9405 is the next resistance line, and it’s followed by 0.95, which was last reached only in 2008.

I remain bullish on the Aussie.

The past week’s strong GDP figures, and a good outcome from the job figures on this busy Australian week, should provide the basis for further gains.

EUR/USD Is Ending Its Bullish Correction?

Euro/Dollar had another positive week, but it failed to break above the important long term resistance line. Also the short term trends show an exhaustion. Will it turn down?

EUR/USD began a strong upwards move on last week’s Non-Farm Payrolls but couldn’t break the resistance line. These moves came on top of US weakness and not on an improvement in Europe. Yohay already wrote about these issues earlier this week on forexcrunch . Now let’s look at another technical aspect.



Looking at the hourly chart, we can see a rising uptrend channel that accompanied the Euro in the past week. This can be seen in the graph. The top of this uptrend channel was challenged more than 3 times, and is very clear. As the Euro climbed upwards, it closely followed this top border.

The bottom border of this line was approached three times. While the pair stayed away from this line during most of the week, it closed at 1.2639, quite close to it. Together with the failure to making a convincing break above 1.2672 (which was the peak on May 21st) and settling at the bottom of the uptrend channel, this shows again that EUR/USD is out of air.

Apart for the regular events that are expecting us (detailed in the Euro dollar forecasts), there’s a very important one-time event on July 23rd – results of the bank stress tests. This will determine how the European banks are dealing with the debt crisis, the big issue looming over the Euro-zone in the past few months.

AUD/USD Weekly Technical Forecast (July 12-16 2010)

A variety of Australian releases and one Chinese release will move the Aussie in the upcoming week. Here’s an outlook for the Australian events, and an updated technical analysis for AUD/USD, now in higher ground.

AUD/USD daily chart with support and resistance lines. Click to enlarge:



The Australian economy enjoys a bubbling job market. The fresh figures came out significantly better than expected, and this gave a big boost to AUD/USD. Will this continue? Let’s start:

1. Home Loans: Published on Monday at 1:30 GMT. This important housing indicator reflects the impact of the rate hikes – less people are taking loans due to the high interest rate. After 7 consecutive months of drops, the number of loans is finally expected to rise, but at a very modest scale – 0.1%. This will provide a shaky start for AUD/USD at the beginning of the new week.


2. NAB Business Confidence: Published on Tuesday at 1:30 GMT. National Australia Bank has shown a significant drop in business confidence in the past three months – a drop from 19 to 5 points, although still positive, still showing optimism. This survey of 350 businesses will probably show another drop this time.


3. Westpac Consumer Sentiment: Published on Wednesday at 1:30 GMT. Westpac’s survey deals with the consumers. 1,200 consumers have shown less confidence in the past three months, with sharp drops of 5.7% and 7% in the past two months. This time, a small rise is expected.


4. MI Inflation Expectations: Published on Thursday at 1:30 GMT. The Melbourne Institute fills in for the gap created by the government, that publishes the CPI only once per quarter. According to MI, inflation is now weaker – 3.4% in comparison to a strong 4.1% figure three months ago. A drop under 3% will weaken the Aussie.


5. New Motor Vehicle Sales: Published on Thursday at 1:30 GMT. Vehicle sales are a strong indicator of consumption, but this indicator tends to be very volatile. After a rise of 8.4% two months ago, a drop of 3.2% was seen last month. A small rise is predicted now.


6. Chinese GDP: Published on Thursday at 2:00 GMT. Australia’s main partner continued to grow rapidly while the West suffered from economic contraction. In the past two quarters, the growth rate return to double digits: 10.5% in Q4 of 2009 and 11.9% in Q1. China releases the figures for Q2 quite early. They’re expected to show a growth rate of 10.5%, still very strong. The Aussie will gain from a stronger rise.

AUD/USD Technical Analysis

The Aussie had a bad start to the week, testing the 0.8315 support line, which it also tested in the previous week. It then began a rally during which it broke many resistance lines and eventually bounced at the resistance line 0f 0.88.

The Aussie is now in a tight range between 0.8735 (December’s low) and the round number of 0.88 which it just tested. Note that some lines have changed since last week’s outlook.

Below 0.8735, the next support line is 0.8567, which served as a strong support line during many months in the past year, and recently worked as a pivotal line. Below, 0.8505 is a minor support line.

Lower, 0.8390 worked as a minor support line in recent months. It’s followed by 0.8315, which was a double bottom in the past two weeks – this makes it a strong line of support now.

Even lower, 0.8240 is an old line of resistance that now serves as a support line, and its followed by the year-to-date low of 0.8066.

Looking up above 0.88, the next line of resistance is the round number of 0.90, which was tested in March and in May. Higher, 0.9327 is a very strong line of resistance which held the Aussie back lots of times in the past year.

Even higher, 0.94 was the 2009 high and its followed by the round number of 0.95, but they’re still far.

I remain bullish on the Aussie.

Once again, we’ve seen that the Australia is doing great – the economy gained lots of jobs. We’ll now probably see that Australia’s main trade partner, China, is also doing well, and this is likely to provide further strength for the Aussie.

AUD/USD Weekly Technical Forecast (July 12-16 2010)

A variety of Australian releases and one Chinese release will move the Aussie in the upcoming week. Here’s an outlook for the Australian events, and an updated technical analysis for AUD/USD, now in higher ground.

AUD/USD daily chart with support and resistance lines. Click to enlarge:



The Australian economy enjoys a bubbling job market. The fresh figures came out significantly better than expected, and this gave a big boost to AUD/USD. Will this continue? Let’s start:

1. Home Loans: Published on Monday at 1:30 GMT. This important housing indicator reflects the impact of the rate hikes – less people are taking loans due to the high interest rate. After 7 consecutive months of drops, the number of loans is finally expected to rise, but at a very modest scale – 0.1%. This will provide a shaky start for AUD/USD at the beginning of the new week.


2. NAB Business Confidence: Published on Tuesday at 1:30 GMT. National Australia Bank has shown a significant drop in business confidence in the past three months – a drop from 19 to 5 points, although still positive, still showing optimism. This survey of 350 businesses will probably show another drop this time.


3. Westpac Consumer Sentiment: Published on Wednesday at 1:30 GMT. Westpac’s survey deals with the consumers. 1,200 consumers have shown less confidence in the past three months, with sharp drops of 5.7% and 7% in the past two months. This time, a small rise is expected.


4. MI Inflation Expectations: Published on Thursday at 1:30 GMT. The Melbourne Institute fills in for the gap created by the government, that publishes the CPI only once per quarter. According to MI, inflation is now weaker – 3.4% in comparison to a strong 4.1% figure three months ago. A drop under 3% will weaken the Aussie.


5. New Motor Vehicle Sales: Published on Thursday at 1:30 GMT. Vehicle sales are a strong indicator of consumption, but this indicator tends to be very volatile. After a rise of 8.4% two months ago, a drop of 3.2% was seen last month. A small rise is predicted now.


6. Chinese GDP: Published on Thursday at 2:00 GMT. Australia’s main partner continued to grow rapidly while the West suffered from economic contraction. In the past two quarters, the growth rate return to double digits: 10.5% in Q4 of 2009 and 11.9% in Q1. China releases the figures for Q2 quite early. They’re expected to show a growth rate of 10.5%, still very strong. The Aussie will gain from a stronger rise.

AUD/USD Technical Analysis

The Aussie had a bad start to the week, testing the 0.8315 support line, which it also tested in the previous week. It then began a rally during which it broke many resistance lines and eventually bounced at the resistance line 0f 0.88.

The Aussie is now in a tight range between 0.8735 (December’s low) and the round number of 0.88 which it just tested. Note that some lines have changed since last week’s outlook.

Below 0.8735, the next support line is 0.8567, which served as a strong support line during many months in the past year, and recently worked as a pivotal line. Below, 0.8505 is a minor support line.

Lower, 0.8390 worked as a minor support line in recent months. It’s followed by 0.8315, which was a double bottom in the past two weeks – this makes it a strong line of support now.

Even lower, 0.8240 is an old line of resistance that now serves as a support line, and its followed by the year-to-date low of 0.8066.

Looking up above 0.88, the next line of resistance is the round number of 0.90, which was tested in March and in May. Higher, 0.9327 is a very strong line of resistance which held the Aussie back lots of times in the past year.

Even higher, 0.94 was the 2009 high and its followed by the round number of 0.95, but they’re still far.

I remain bullish on the Aussie.

Once again, we’ve seen that the Australia is doing great – the economy gained lots of jobs. We’ll now probably see that Australia’s main trade partner, China, is also doing well, and this is likely to provide further strength for the Aussie.

NZD/USD Weekly Technical Forecast (July 12-16 2010)

Retail sales and the all-important CPI are the major events that will rock the kiwi this week. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD.

NZD/USD daily chart with support and resistance lines. Click to enlarge:



The kiwi advanced after crossing the round number of 0.70. It’s further steps depend now on inflation, which will determine the outcome of the next rate decision. Let’s start:

1. FPI: Published on Monday at 22:45 GMT. This monthly gap fills the gap that the government creates by releasing inflation figures only once per quarter. The prices of food, which fell in the past two months, is expected to rise this time. This will be an indicator for the CPI released later in the week.


2. Retail Sales: Published on Tuesday at 22:45 GMT. Consumers disappointed in the past three months. Sales grew less than expected, or fell more than expected. This important indicator hurt the kiwi. After a drop of 0.6% last month, a rise of 0.6% is predicted now. Also note core retail sales, which fell by 0.2% and are likely to rise by 0.6% now. We’ve seen a strong impact when retail sales fell two months ago.


3. Business NZ Manufacturing Index: Published on Wednesday at 22:30 GMT. This survey of manufacturers fell from the peak it reached two months ago and dropped from 58.6 to 54.5 points. Another drop is expected now, but the number will probably remain above 50, meaning economic expansion.


4. CPI: Published on Thursday at 22:45 GMT. A rise in the consumer price index is the key to an intense tightening cycle by the central bank, that already began. Last quarter’s rise of 0.4% will probably be followed by a rise of 0.5% this time. A jump above 1% will boost the kiwi.

NZD/USD Technical Analysis

The kiwi continued struggling with the 0.6910 line at the beginning of the week, but then made a strong move upwards and broke above the round number of 0.70 to close just under 0.71.

NZD/USD’s range is between the round support line of 0.70 and the next resistance line of 0.7160, which was a stubborn top during June. The next line of resistance is at 0.72, which capped the kiwi in the past.

Higher, May’s highs of 0.7325 provide the next strong resistance line. This was an area of resistance also in December. The last line of resistance is at 0.7440, which was a peak at the beginning of the year.

Looking down below 0.70, 0.6910 provides the next support line. It has been a pivotal line recently. Lower, 0.68 provides support very recently and also in February, and is the next line of support.

There are many lines below, but the most notable one is 0.6560, which was the year-to-date low.

I remain bullish on the kiwi.

With a stable, growing economy, and with a cycle of rate hikes that already began, it’s likely to gradually rise.

NZD/USD Weekly Technical Forecast (July 12-16 2010)

Retail sales and the all-important CPI are the major events that will rock the kiwi this week. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD.

NZD/USD daily chart with support and resistance lines. Click to enlarge:



The kiwi advanced after crossing the round number of 0.70. It’s further steps depend now on inflation, which will determine the outcome of the next rate decision. Let’s start:

1. FPI: Published on Monday at 22:45 GMT. This monthly gap fills the gap that the government creates by releasing inflation figures only once per quarter. The prices of food, which fell in the past two months, is expected to rise this time. This will be an indicator for the CPI released later in the week.


2. Retail Sales: Published on Tuesday at 22:45 GMT. Consumers disappointed in the past three months. Sales grew less than expected, or fell more than expected. This important indicator hurt the kiwi. After a drop of 0.6% last month, a rise of 0.6% is predicted now. Also note core retail sales, which fell by 0.2% and are likely to rise by 0.6% now. We’ve seen a strong impact when retail sales fell two months ago.


3. Business NZ Manufacturing Index: Published on Wednesday at 22:30 GMT. This survey of manufacturers fell from the peak it reached two months ago and dropped from 58.6 to 54.5 points. Another drop is expected now, but the number will probably remain above 50, meaning economic expansion.


4. CPI: Published on Thursday at 22:45 GMT. A rise in the consumer price index is the key to an intense tightening cycle by the central bank, that already began. Last quarter’s rise of 0.4% will probably be followed by a rise of 0.5% this time. A jump above 1% will boost the kiwi.

NZD/USD Technical Analysis

The kiwi continued struggling with the 0.6910 line at the beginning of the week, but then made a strong move upwards and broke above the round number of 0.70 to close just under 0.71.

NZD/USD’s range is between the round support line of 0.70 and the next resistance line of 0.7160, which was a stubborn top during June. The next line of resistance is at 0.72, which capped the kiwi in the past.

Higher, May’s highs of 0.7325 provide the next strong resistance line. This was an area of resistance also in December. The last line of resistance is at 0.7440, which was a peak at the beginning of the year.

Looking down below 0.70, 0.6910 provides the next support line. It has been a pivotal line recently. Lower, 0.68 provides support very recently and also in February, and is the next line of support.

There are many lines below, but the most notable one is 0.6560, which was the year-to-date low.

I remain bullish on the kiwi.

With a stable, growing economy, and with a cycle of rate hikes that already began, it’s likely to gradually rise.

AUD/USD Weekly Technical Forecast (June 28-July 2 2010)

Retail Sales as well as building approvals are the highlights in a busy Australian week. Will the Aussie continue north? Here’s an outlook for the Australian events and an updated technical analysis for AUD/USD.

AUD/USD daily chart with support and resistance lines on it. Click to enlarge:



The Chinese move on the yuan is great for Australia, that exports commodities to China. With a stronger yuan, the Chinese can buy more. As the dust settled from  this move, the political problems in Australia hurt the Aussie. With the new Prime Minister sworn in, the focus returns to fundamentals:

1. HIA New Home Sales: Publication time unknown at the moment. The Housing Industry Association showed a bit leap in prices last month – 6.2%. This comes despite the rate hikes that partially cooled the Australian housing sector. A smaller rise is expected this time.


2. MI Inflation Gauge: Published on Tuesday at 00:30 GMT. The official inflation figures are released only once a quarter. So, this unofficial release from the Melbourne Institute tends to moves the Aussie. After rises of 0.4% or 0.5% in recent months, a weaker rise in prices is predicted this time.


3. Private Sector Credit: Published on Wednesday at 1:30 GMT. More lending means more economic activity, but last month’s small rise of 0.2% was quite disappointing for the Aussie. This followed 4 stronger months. A return to higher growth rates will probably be reported by the RBA this time.


4. AIG Manufacturing Index: Published on Wednesday at 23:30 GMT. The Australia Industry Group publishes a PMI-like indicator that has been above 50 in the past 5 months. This means expectations for economic expansion. The drop from the high 59.8 points to 56.3 last month is expected to be followed by a stable number this time.


5. Chinese Manufacturing PMI: Published on Thursday at 1:00 GMT. China is Australia’s main trade partner. Growth in Chinese manufacturing translates into more imports from Australia. After peaking at 55.7 points, this Chinese indicator fell to 53.9 points this time. A rise is expected this time.


6. Retail Sales: Published on Thursday at 1:30 GMT. This major consumer-related indicator rose by 0.6% last month, showing confidence for a second month in a row, despite the rate hikes. A smaller rise is expected this time.


7. Commodity Prices: Published on Thursday at 6:30 GMT. Australia’s commodity-oriented economy enjoyed a recovery in commodity prices in June. This will be reflected in this  indicator that is expected to show a year-over-year growth rate of over 50%, boosting the Aussie.


8. Building Approvals: Published on Friday at 1:30 GMT. This indicator is very volatile, and tends to have a strong impact on the Aussie. A drop of almost 15% was reported in approvals last month, but this was merely a correction for a 17% rise beforehand. A rise in approvals will empower the Aussie.

AUD/USD Technical Analysis

The Aussie’s crazy week began with a temporary jump above 0.8735 and then 0.88, but this changed quickly. The pair deteriorated quickly and dipped below 0.86 before recovering and settling slightly higher than last week – at 0.8741. Note that most lines haven’t changed since last week’s outlook.

Looking up, 0.88 continues to be a minor line of resistance, and the break above it was false. Higher, 0.90 is a round psychological number and also was a swing low in March.

Higher, 0.9135 was a very strong line of support when the pair was trading higher, and now works as resistance. The next important line far above is 0.9327, which was a strong line of resistance many times in the past.

Looking down, immediate support is found at 0.8735, which was December’s low, and worked as a line of resistance in the previous week. Lower, 0.8360 was a pivotal line a few weeks ago.

Lower, 0.8240 was a strong resistance line in 2009 and worked when the pair was trading lower recently. Below, the year-to-date low of 0.8066 provides strong support. That’s quite far now.

I remain bullish on the Aussie.

The political crisis that rocked the Aussie is over, with a new Prime Minister, Julia Gillard, quickly assuming office. With the revaluation of the Chinese yuan, a high interest rate and strong economy, the Australian dollar continues to have good reasons to rise.

Technical Analysis for Beginners. Dow Theory

In general, technical analysis can be defined as a method of price prediction based on mathematical calculations instead of economic reports. This method has been created for applicable needs in getting profit on stock and currency market. Initially technical analysis was divided into several techniques and only in the 70-ths all these methods were united into an integral approach with common psychology, axioms and ruling principles.

Technical analysis is a way to forecast probable price movement with the help of market movement charts reflecting the history of fluctuations. Practical usage of technical analysis determines several axioms.

Axiom 1

Every price formation factor, - economical, political, psychological has been taken into account and reflected on the chart. Once news is issued, market prices will move to reflect this new information.

Axiom 2

Price movement has got its direction. This suggestion has become a basis in all the techniques of technical analysis. The main purpose of technical analysis is defining of probable rate movement (trends in other words) and to apply acquired knowledge in trading. The definition given by Dow says that during bullish trend each consequent peak and fall is higher than the previous one. This suggestion is the main fundamental principle of technical analysis. Trends are classified into three types: bullish (upside movement), bearish (downside movement) and sideway trading (the price remains practically unchanged). Each of the given types is rarely encountered in its pure form, as straight price actions occur not very often in the market.

A certain trend is seen until some signs delivering opposite direction appear. According to Dow, trends exist in spite of market noise. However, in real practice it is not easy to determine whether a reversal is a starting point for a new trend or just a temporary movement. Contemporary technical tools permit traders to define it with easy, however, different traders interpret trend signals differently.

Axiom 3

Analysts predict if a certain rule worked in the past, this rule may be applicable in future as the price is formed mostly due to human psychology. These are the main fundamental ideas of technical analysis:

Rate takes everything into account, therefore, everything needed to master this field is to study price charts. The aim is to find out trends at their initial phases, to recognize a trend and to use the knowledge in further development making right decisions. And the last idea is that if something worked in the past, it will probably work in future.

The Dow theory denotes the "main movement", the "medium swing" and the "short swing". The "main movement" is a prevailing component as it may last for several years. The "medium swing" is a correction to the main movement and should last from ten days to three months. The "short swing" or minor movement fluctuations may last up to three weeks.

According to the theory market moving averages must confirm each other and every thend should be confirmed by volume. Dow assumed that volume confirmed every price trend.

Many modern technical analysts treat Dow Theory's definition of a trend as the main basics of contemporary technical analysis.

Related Blogs

AUD/USD Weekly Technical Analysis (June 7-11 2010)

After another week of tense range trading, another busy week expects the Aussie, with employment data being the climax. Here’s an outlook for the Australian events, and an updated technical analysis for AUD/USD.

AUD/USD chart with support and resistance lines on it. Click to enlarge:



The past week saw two important releases: GDP and the rate decision that were OK. The Aussie didn’t fully enjoy them. Will employment numbers boost the currency? Let’s see:
AIG Construction Index: Published on Sunday at 23:30 GMT. This gauge for the housing sector from the Australian Industry Group jumped back above 50 points last month, indicating economic expansion. From 55.8 points last month, it’s expected to edge down.
ANZ Job Advertisements: Published on Monday at 1:30 GMT. This is often regarded as an indicator towards the official employment figures due later in the week. The amount of jobs advertised in newspapers unexpectedly fell by 1.2% last month, hurting the Aussie. A small rise is predicted this time.
Westpac Consumer Sentiment: Published on Wednesday at 1:30 GMT. This survey of 1200 consumers already reflected the recent turmoil last month, with a drop of 7%. The upcoming release should show a small correction – a small rise. This indicator tends to move the Aussie, due to its freshness.
Home Loans: Published on Wednesday at 1:30 GMT. The amount of loans given towards buying homes dropped in the past 6 months, disappointing the Aussie over and over again. This is a direct result of the tightening policy by the RBA – higher interest rates make mortgages less attractive. Another drop is due this time – 1.9%.
NAB Business Confidence: Published on Wednesday at 1:30 GMT and overshadowed by home loans. 550 businesses are polled for National Australia Bank’s survey. This important survey is already off the peak of 19 points it scored two months ago. From 13 points, another small drop is expected now.
MI Inflation Expectations: Published on Thursday at 1:00 GMT. The Australian authorities publish the CPI only once a quarter, so this indicator by the Melbourne Institute, fill the gap. After leaping to 4.1%, expectations fell back to more normal levels – 3.6%, also a result of the rate hikes. It’s expected to remain almost unchanged this time.
Employment data: Published on Thursday at 1:30 GMT. The best is kept for last. Last month’s employment figures surprised with a leap of 33,700 jobs, about 50% more than expected. But now, only half of this gain is predicted – 16,100. On the other hand, the unemployment rate ticked up to 5.4% – a figure which isn’t expected to change this time. Any outcome will rock the Aussie.

AUD/USD Technical Analysis

The Aussie traded between the0.8240 support line and 0.85 during most of the week. On Friday the pair broke under 0.8240 but the break wasn’t convincing – the pair closed at 0.8231.

Most support and resistance lines haven’t changed since last week’s outlook, but the Aussie is positioned in a sensitive spot. The opening of the new week is critical for the Aussie. If the pair bounces back above 0.8240, the drop can be disregarded. Otherwise, it will open the road to lower levels.

The next line of support is at 0.8066, the area where the Aussie fell to in the big collapse at the beginning of May. Below, minor support is found at 0.7860, which was an area of resistance about a year ago.

Below, the 0.77 line provides strong support – the Aussie fell off from this line at the height of the financial crisis. It fell to 0.7450, which is the next line of support.

Looking up, 0.8477 is still a minor line of resistance, serving as such about 9 months ago. The stronger line of resistance is at 0.8567, which worked as a convincing line of support and resistance recently.

Further up the road, 0.88 worked as a support line, and now serves as a line of resistance. Higher, 0.90 is a round number and also provided support when the pair was trading higher.

I remain bullish on the Aussie.

The strong fundamentals that we’ve seen last week, and the employment figures which are usually good, should supply the fuel the Aussie needs to overcome the risk aversive trading that is caused by trouble overseas.

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.

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).

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 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.

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.

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.

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...