Friday, June 29, 2012

Friday’s Forex Trading Setups: Will the EURUSD Spike Hold?


The EURUSD is higher on an agreement among EU leaders at its Economic Summit to allow repayment obligations of bank bailout funds to be junior to existing sovereign debt.  As such, the EURUSD is currently trading around 1.2600.  However, as seen by previous spikes higher in the EURUSD after EU related headlines that faded quickly, the pair could be vulnerable again today.  As such, before getting too excited about today’s EURUSD strength, Forex traders should watch where the EURUSD ends up today and opens next week.   If the pair falls back into its previous downward channel (see chart) it would reveal that Forex traders remain skeptical towards the pair and would be vulnerable to further weakness next week.  On the other hand, it the EURUSD manages to close the week above 1.2600 and holds onto its current strength, this would be a bullish signal for the pair.  Such a scenario would bode well for continued upside next week.

Thursday, June 28, 2012

EU Economic Summit Preview: What to Watch

The EU Economic Summit is upon us.  However, even though things got started today, the real fireworks are expected to occur tomorrow as these events never lead to agreements on the first day.  Until the conclusion we can expect lots of rumors and volatility in the Euro.  Overall, this probably isn’t a time to be over leveraged with Euro positions as the risks are just too high. 

That being said, the real opportunities are after the Summit.

Wednesday, June 27, 2012

Dollar Rally Pauses

On the big surprises yesterday was the GBPUSD as it traded higher on negative remarks from the Bank of England's Governor Mervyn King.  The pair hit a high of 1.5650, and has since stayed comfortably above 1.5600.  The move was part of an overall drop in the USD yesterday which also saw the USDJPY trade lower, the AUDUSD higher, and the EURUSD going sideways, even as the Euro was weaker against other major currencies.

This leads us to today's trading where US economic data will be headlining the events later on in the day, as US Durable Goods Orders and Pending Homes Sales numbers will be released.  Depending on the outcome, it could cause a continuation of yesterday's dollar weakness.

EURUSD: As the chart below shows, the EURUSD hit a new low for the week yesterday on negative news from Italy, but quickly rebounded back around 1.2500.  The lack of selling momentum even with the Italian news indicated that Forex traders may not yet be ready to go full throttle on selling the pair.  As such, if today's US figures are worse than expected the EURUSD could be positioned to breakout higher if it trades above its 1.2520 intraday resistance.  

GBPUSD: After holding most of its post Inflation Report gains, the next step for the GBPUSD is to trade and hold above yesterday's highs.  On such a scenario, it would reveal that yesterday's buying momentum has staying power and could trigger a longer rally towards the 1.5800 figure.

Monday, June 25, 2012

Forex Today & The Week Ahead

While not much news is expected today other than the US’s New Homes Sales the week is slated to possibly be pretty exciting for Forex traders. Firstly, following today’s US housing figures, we will see further housing numbers from the US along with Durable Goods orders on Wednesday.  The US data will be critical to whether the USD will extend its rally following last week’s FOMC Meeting.

The big event for the week will be the EU Summit which starts on Thursday.  EU leaders will be discussing the future of bailouts, Eurobonds, and collective responsibility.  The Euro is expected to see volatility before and during the summit as Forex traders will be reacting to  news and rumors of the potential EU actions.

Tuesday, June 19, 2012

USDCAD & USDJPY Two Breakout Candidates

This morning we have two potential breakout trades taking form.  The USDJPY is once again below 79.00 and has fallen back towards yesterday’s lows. In a similar vein, the USDCAD has been trendling lower but has been unable to break below 1.0190.  Both of these pairs could see a downside breakout if their support levels are broken.

USDJPY: The pair jumped higher to open the week following the Greek election triggered risk rally.  However, with fear returning to the EU, the pair has been unable to above the 79.00 figure.  Last week, we saw the USDJPY also find support above 79.00 before finally breaking below that level and hitting a low of 78.60.  As such, if the current short term support at 78.82 fails to hold, it could trigger a downside breakout to last week’s lows.  Beyond that level, momentum could take it to the low 78.00’s.

USDCAD: Unlike the NZD & AUD which have been breaking out against the USD, the CAD’s gains have been limited.  Currently, the pair is finding support just below the 1.0200 figure, even as it has been trending lower.  The current trading conditions have created a triangle trading pattern which could ultimately lead to a breakout lower if 1.0200 support fails (see chart).  Its worth watching price of Gold which have been range bound over the last few days, but are currently trading at 1630, their upper range.  If Gold finds momentum, it could lead to demand to in the CAD and trigger a move lower in the USDCAD.

Friday, June 15, 2012

Greek Election Preview

Its election time in Greece.  I’ll start out by saying that so far, the best piece of commentary I have seen was from a Bloomberg video “Here’s What Happens If Greece Leaves the Euro.” In just over a minute the video quickly surmises the pain that Greece will feel if it retruns to the drachma.  Its financial system will be paralyzed, inflation rises, and lots of unanswered questions will follow.  However, the video ends with the realization that at the end, a devalued drachma could just be what Greece needs to finally turn itself around.  Overall, regardless of the election, all paths appear to point to Greece leaving the Euro, however it’s all a matter of when.

Forex price action analysis NZD/JPY

The cross price action did exactly what we have been expected and wrote about on 13 of June. The pair started a bearish move after breaking the H4 candle’s low at 61.82. Further pressure was seen just before the rate decision of RBNZ. The NZD/JPY reached the support of the rising trend line and recorded a daily low at 61.32 and bounced back. From there bearish pressure was diminishing leading the pair to trade above 62.20 and closing our deal with a minimal lose. A re-entry could have been taken once the pair spiked creating a bearish candlestick right on the resistance line of the wedge. According to price action analysis of the NZD/JPY, the pair is zigzagging in a tight trading range with no clear direction for the next move. Meanwhile, It is highly recommended to stay out and to wait for the results of the election in Greece.

Wednesday, June 13, 2012

The NZD/JPY pair is sending a bearish signal

Following the technical analysis of the Kiwi from yesterday, the cross NZD/JPY is likely to share the same scenario. The pair also reached the 31.8% Fibonacci level as a correction to the long bearish move. Additional resistance is seeing at the upper BB currently at 62.10. The pair created a H1 Macd divergence which is likely to add some bearish pressure on the cross. Lower than expected economic data from the US could easily lead to a negative sentiment which definitely will cause flight to safety. A sell order could be placed below H4 low at 61.82 while SL should be placed above H4 high. Exit plane can include 2 targets, the first near 61.50 and the second target near 60.80 or open. Don’t forget to keep low risk as the market is very volatile lately.

Tuesday, June 12, 2012

Technical analysis of the NZD/USD

The kiwi is recovering since it reached the support at 0.7460. The pair created a double bottom with stochastic divergence around that area. The pattern triggered some profit taking and opened the way to a bullish move. The pair reached a resistance at 0.7785 and that is due to upper BB as well as 31.8% Fibonacci retracement to the move 0.8317 – 0.7460. in case that the pair reaches again 0.7785 level, it could be a nice opportunity to a short position. SL should be place above the high of bearish candlestick, while TP should be placed at the support of the rising trend line on the H4 graph. If opposite scenario will take place and the pair will close above 0.7785 than it will be a bullish sign for a further correction move towards 0.7885.

Monday, June 11, 2012

Are you a trader or a gambler?

How can you be 100% sure that what you are doing in the financial markets is trading rather than gambling? Well, surprisingly, the answer to this critical issue lies in a much simpler question:

Do you keep a track record of all your trades?
Keeping good records is a key factor to your success in trading. In fact, record keeping defines if you are heading toward success or failure in trading.
Why is that?
By keeping good records a trader will learn from his mistakes and hopefully he will not repeat them in the future. By doing so a trader can develop a trading strategy from his own trading experience. Records will also help a trader to reach a high level of self-discipline which is crucial in trading. Keeping a track record will contribute to your awareness helping you know yourself better as a trader.
So, what’s a track record and what it should include?
A track record is an excel sheet with all your trades. To make it easier every sheet will represent one month of trading, each line will represent a single trade and every column will represent a different data of the trade. The basic version must include: Trade number, strategy or reason for entering, time basis or chart (weekly, daily, hourly etc.), Entry date, Deal type (Long or Short), Symbol, Size, Entry price, Stop loss, Take Profit, Exit date, Exit price, Profit or Loss and Conclusions. A trader may include additional information that he consider as important and valuable.

Market is closing the gap, but where is it heading?

Almost all major pairs, commodities and leading indexes opened the trading session with a nice gap. During the last trading hours, all gaps are being close one after another. The million dollar question now is where the market is heading after closing the gap. The index which delivered the best bearish signal was the Dow Jones, that’s why it is recommended to follow it to get some clues and hopefully spill some light. The Dow traded with a clear bearish divergence on the monthly chart. The index broke the critical support at 12700 points, and the brake triggered a strong down move. This level is now expected to become a resistance area and a clear evidence to that was delivered today. The fact that upper BB is at 12765 and 61.8% Fibonacci retracement is at 12785 will add additional pressure. Therefore, the Dow is highly expected to close the gap and to reach 12580.

EURUSD Gaps Higher on Spanish Debt Deal

After vehemently denying on Friday that Spain was on the verge of receiving a bailout, surprise surprise, over the weekend Spain made a formal request for €100 billion to shore up its troubled banks.  The funds are expected to thwart a run on Spanish funds and allow companies to continue having access to credit.

Wednesday, June 6, 2012

A quick update to the CAD/CHF trade from last Friday

As you remember, last Friday we at CMTrading shared a trading idea regarding the CAD/CHF pair. The pair formed an H&S pattern right on a stiff daily resistance. The bad GDP reading from Canada triggered a massive sell of the pair. The first target at 0.9315 was reached quickly completing patter’s target, and the pair closed at 0.9276 next to weekly’s low. On Monday the pair reached a trend line support where profit taking orders stopped the bearish momentum. If you are still holding this trade, you can move SL to 0.9315, above last 2 daily highs.

Tuesday, June 5, 2012

Germany Trying to Have its Cake and Eat it too?

Its funny how quickly things change when we talk about money.  For months, mention of fiscal integration or Euro Bonds was quickly met with a “yeah right, we aren’t guaranteeing anyone’s loans” from Germany.  Their stance made sense as they had already committed billions towards EU bailouts and funding and the last thing they wanted to do was guarantee debt for their fellow spend happy EU brothers.  Just the thought of backing it would probably end German Chancellor Angela Merkel’s leadership, along with many in her ruling party.

Monday, June 4, 2012


Starting the Forex week, Forex traders should keep their eyes on the Highs/Lows following last Friday’s Non Farm Payrolls report.  The NFP figure was much worse than expected and triggered an across the board exit from the USD.  As such, if we see Forex pairs trading beyond the spikes of Friday, it could trigger further momentum, as will show that the exodus from the USD continues.  On the other hand, if Forex pairs from Friday’s moves it will indicate that risk and fear continue to be embedded in the Forex market, and until some encouraging data or solution emerges from the EU, traders will favor risk selling.


Friday, June 1, 2012

A classic head and shoulder pattern ahead of the GDP in Canada

A classic H&S pattern is spotted on the CAD/CHF pair just a few hours before the GDP in Canada. The pattern, right on a stiff weekly and daily resistance, is a reliable bearish sign for the pair. A clear break of the neck line at 0.9374 will be the trigger to a down move. Conservative SL should be placed above the right “shoulder” of the pattern at 0.9409 (today’s high). First target will be around 50 pips below entry point, and second target can remain open. Watch GDP reading that has the potential to trigger a strong move.