Tag: Price Action

Categories
Forex Market Analysis

US Dollar Index – Technical Overview

The US Dollar Index (DXY) jumps on Thursday trading session after the FED’s policymakers decided to keep unchanged the rate at 0.25%

The US Dollar Index (DXY) jumps on Thursday trading session after the FED’s policymakers decided to keep unchanged the rate at 0.25%

The US Dollar Index (DXY) jumps on Thursday trading session after the FED’s policymakers decided to keep unchanged the rate at 0.25%

Market Sentiment Overview

In its weekly chart, the US Dollar Index exposes a downward movement with an accelerated bearish momentum that brought it to decline for the sixth week in a row, falling to its lowest level since mid-June 2018 when the DXY found support at 93.19.

 

The price action observed in the 52-week high and low range places DXY in the strong bearish zone. This market context leads us to expect more declines in the long-term. Simultaneously, in the short-term, we could see a limited recovery, which could find resistance at the 95.67 zone.

From an institutional activity perspective, the net positioning informed by the COT report released by the CFTC last Friday, reveals that speculative traders (green line) continue favoring a bearish-side positioning. 

In consequence, the long-term market sentiment for the US Dollar index remains bearish. At the same time, a short-term recovery could signify only a retracement of the primary bearish trend.

Elliott Wave Outlook

The short-term Elliott wave perspective for DXY illustrated in its 4-hour chart reveals the advance in a bearish trend that began on the last March 19th high at 102.99. Once the Greenback found fresh sellers, the bearish market participants took the price down in an incomplete descending sequence.

In the figure, we observe the US Dollar index moving in an incomplete wave ((c)) or ((iii)) of Minute degree labeled in black. At the same time, the price advances in its wave iii of Subminuette degree identified in green, this move belongs to the fifth wave of Minuette degree labeled in blue, which began on June 30th when the price made a lower high at 97.80.

Although the third wave in green touched the bearish target area located in the blue box and started to bounce, there is no evidence to support the end of the bearish cycle. Neither does the bullish divergence observed on the RSI oscillator bring us a signal of exhaustion or reversal trend. On the other hand, considering the alternation principle and that the current bearish movement has strong downward momentum, the fourth wave in green should likely evolve as a sideways sequence, possibly as a triangle pattern. This technical formation could find resistance at 94.65, corresponding to the last March 09th low. Even, the move could extend until the 95.72 level, where the price might reverse towards the primary bearish trend.

In summary, the US Dollar index currently runs in a bearish five-wave sequence, which seems incomplete. There exist a possibility that the Greenback starts to develop its fourth wave of Subminuette degree identified in green, which could find resistance in the area between 94.65 and 95.72. The current bearish scenario will be valid as long as the price stays moving below 96.37.

 

Categories
Forex Market Analysis

Daily F.X. Analysis, July 29 – Top Trade Setups In Forex – FOMC in Focus! 

On the news front, the focus will be on the FOMC and Fed policy decision which is expected to be 0.25%. Since no change in rate is expected, there’s is likely to be a neutral sentiment in the market. Besides, the investors will also focus on the Pending Home Sales from the U.S. which is expected to have dropped sharply. The dollar can stay weaker on this news.

On the news front, the focus will be on the FOMC and Fed policy decision which is expected to be 0.25%. Since no change in rate is expected, there’s is likely to be a neutral sentiment in the market. Besides, the investors will also focus on the Pending Home Sales from the U.S. which is expected to have dropped sharply. The dollar can stay weaker on this news.

On the news front, the focus will be on the FOMC and Fed policy decision which is expected to be 0.25%. Since no change in rate is expected, there’s is likely to be a neutral sentiment in the market. Besides, the investors will also focus on the Pending Home Sales from the U.S. which is expected to have dropped sharply. The dollar can stay weaker on this news.

Economic Events to Watch Today  

    

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.17166 after placing a high of 1.17734 and a low of 1.16984. Overall the movement of the EUR/USD pair remained bearish throughout the day.

After rising for eight consecutive days, the EUR/USD pair dropped on Tuesday and posted losses for the day as the U.S. dollar rose marginally across the board but remained under pressure ahead of the Fed meeting.

The U.S. Dollar Index was also up on Tuesday and posted a high of 94.0. The recovery in the greenback could be because of correction after losing ground significantly over a few days. Or the recovery could also be because of the rising hopes of the U.S. stimulus package and the economic recovery hopes associated with it.

The Republicans made a proposal on Monday for a stimulus package worth about $1 trillion. The Senate Republicans plan to issue another round of stimulus checks of $1200 while it also cut the emergency unemployment benefit from $600 to $200 per week.

More than 100 billion dollars were allocated to reopen schools in the presented proposal of coronavirus relief fund by Republicans. The proposal is yet to be approved by the Democrats. On the data front, the Spanish Unemployment Rate was decreased to 15.3% from the expected 16.6% and supported Euro. From the American side, at 18:00 GMT, the S&P/CS Composite-20 Housing Price Index for the year was also dropped to 3.7% from the expectations of 4.1%. At 19:00 GMT, the C.B. Consumer Confidence from America dropped to 92.6 in July from 94.0and weighed on the U.S. dollar.

However, the EUR traders ignored the macroeconomic data on Tuesday, and the pair EUR/USD continued to follow the improved U.S. dollar movements.

A two-day Federal Reserve meeting started on Tuesday, during which investors expected reaffirmation on the outlook. Though no monetary policy changes were expected, traders were speculating about a change in emphasis in the Fed’s forward guidance at the meeting.

On the other hand, the bearish correction in EUR/USD pair on Tuesday was due to the rise in its prices for eight consecutive days. The trend in the EUR/USD pair was still positive, and even a sharper slide could have been normal.

On the previous day, the pair EUR/USD posted the highest daily close since June 2018 near 1.1780 level, confirmed that both single currencies had a solid momentum. And despite falling and posting losses on Tuesday, the pair EUR/USD continued to hold just below 1.18 level, which shows that it has a key multi-year trend resistance.

Daily Technical Levels

Support Pivot Resistance
1.1686 1.1730 1.1762
1.1654 1.1806
1.1610 1.1837

EUR/USD– Trading Tip

The EUR/USD is trading at 1.1728 level, holding above resistance to become a support level of 1.1715. On the hourly timeframe, the EUR/USD was previously forming highers high and highers low pattern, but now the recent cycle seems to change the trend. A bearish breakout of 1.1715 can drive more sales until the 1.1683 level. On the higher side, the resistance can stay at 1.1780.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.29316 after placing a high of1.29526 and a low of 1.28379. Overall the movement of GBP/USD pair remained bullish throughout the day. The GBP/USD pair extended its previous day’s gains and maintained its bullish streak for the 8th consecutive day on Tuesday amid improved market mood on vaccine hopes. The U.S. Dollar struggled on Tuesday after hopes of a COVID-19 vaccine boosted the risk sentiment. As in result, the greenback suffered as markets inclined towards riskier assets. The positive news about vaccine development supported the risk sentiment.

The pharma firms worldwide are working on treatment and vaccine development that provides multiple routes to success. Companies like Moderna, Pfizer, and AstraZeneca were all pushing to get their vaccines across the line.

Meanwhile, the U.S. Dollar was also supported ahead of the 2-days Federal Reserve meeting that started on Tuesday. Though no change in interest rate is expected, the traders were cautious to know about the statement of meeting to find more clues about the U.S. economy.

However, the release of S&P/Case-Shiller Home Price Indices for May fell below the forecast of 3.9% to 3.7%. It is because investors have become concerned about America’s economic recovery from the coronavirus pandemic.

The Richmond Manufacturing Index was released at 18:59 GMT as 10 for July against the expectations of 5 and supported the U.S. dollar. However, the C.B. Consumer Confidence also dropped to 92.6 from the forecasted 94.0 and weighed on the U.S. dollar that eventually added in the currency pair gains.

From the GBP side, the Pound was benefited from a stronger than expected CBI Distributive Trades Survey that rose to 4% from the expected -37% and gave hopes to investors that the British economy could be on the road to recovery.

Meanwhile, the Sterling traders were cautious after Prime Minister Boris Johnson warned of the possible signs of the pandemic’s second wave in parts of Europe. This raised concerns that the U.K. could also suffer from a second wave of coronavirus in the month ahead. The London School of Economics has also reported that Brexit could prove a double-shock to the economy. As a result, GBP traders remained cautious as UK-EU post-Brexit trade talks continue despite a lack of progress.

The GBP/USD pair traders will look forward to the Fed’s interest rate decision and the statement of the meeting. If fed in notably downbeat in s monetary policy statement, the GBP/USD pair would edge higher as concerns about the global economy grow.

The Brexit developments will also drive the GBP/USD pair in the coming days of the week as there will be a lack of macroeconomic data until next week. If the talks between the E.U. & U.K. show any progress, then Sterling would rise.


Daily Technical Levels

Support Pivot Resistance
1.2863 1.2908 1.2978
1.2792 1.3024
1.2747 1.3094

GBP/USD– Trading Tip

On the 4 hour chart, the GBP/USD has completed 23.6% retracement at 1.2927 level, and closing below this level has the potential to lead GBP/USD prices towards 1.2910, which marks 38.2% Fibonacci retracement level. On the lower side, the GBP/USD pair can find support at 1.2810 and 1.2765 level. Conversely, the resistance stays at 1.2975. Let’s consider taking buying trade over 1.2760 until 1.2860 level today.  

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 105.073 after placing a high of 105.684 and a low of 104.954. Overall the movement of the USD/JPY pair remained bearish throughout the day. The USD/JPY pair extended its bearish trend and losses on Tuesday amid U.S. dollar weakness and struggled with 105 level. The haven was on the bid, which supported the Japanese Yen and caused a decline in the USD/JPY pair.

The rising numbers off coronavirus cases in the U.S. and the Federal Reserve Interest Rate decision event were the market’s dominating sentiment. Meanwhile, the U.S. stimulus negotiations and mixed earnings reports sent the investors to the sidelines.

The greenback managed to correct some of its oversold conditions during the past sessions; however, the USD/JPY pair remained still on the bearish path on Tuesday. The reason behind it was that background picture containing the concerns about the spread of coronavirus, and the ongoing US-China tensions did not change.

The U.S. Senate Republicans revealed the new coronavirus aid proposal that will need Democrats’ support. The package would include another round of $1200 in direct payments to individuals and a reduction in federal unemployment benefits from $600 to $200 per week and also more than $100 billion for reopening schools.

In remarks, Nancy Pelosi, a white house speaker, criticized it and called it a “pathetic” offer that was not enough to support the country.

On the data front, Japan published the June Corporate Service Price Index, which improved to 0.8% from 0.5% in May. On the U.S. side, the Richmond Manufacturing Index raised to 10 from the expected five and supported the U.S. dollar. The S&P/CS Composite-20 HPI dropped to 3.7% from the expected 4% and weighed on the U.S. dollar. The C.B. Consumer Confidence also dropped to 92.6 from the expected 94.0 and weighed on the U.S. dollar.

The poor than expected Consumer Confidence and HPI data added further losses in the USD/JPY pair on Tuesday. Furthermore, despite the prospects of a prolonged U.S. recession, the U.S. dollar will favor any breakdown in the market confidence due to its dominance in the global payment system. On JPY front, the currency is sensitive to geopolitical news in the Asian region, and with the ongoing conflict between U.S. & China, JPY is set to remain firm for the time being. JPY was the third worst-performing currency this month after the USD and Canadian Dollar.


Daily Technical Levels

Support Pivot Resistance
104.80 105.25 105.55
104.50 106.00
104.05 106.30

 

USD/JPY – Trading Tips

The USD/JPY trades with a selling bias around 105.526 level, trading within a downward channel that provides an immediate resistance at 106.120. On the lower side, the USD/JPY may find support at 105.375 level, and closing of candles below 105.375 can open further selling bias until 104.850. Overall the pair is forming lowers low and lowers high pattern, which signifies selling sentiment among traders. The RSI and MACD suggest selling signals; for instance, the RSI is holding below 50, and the MACD is staying below 0. Today, let’s look for buying trade above 105.200. Good luck! 

Categories
Forex Daily Topic Forex Price Action

Even a Fragile Breakout Makes the Price Move

In today’s lesson, we are going to demonstrate an example of a chart producing a double top and offering entry. The breakout does not look that promising though. However, the price heads towards the breakout direction and makes a long bearish move. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart producing a double top and offering entry. The breakout does not look that promising though. However, the price heads towards the breakout direction and makes a long bearish move. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart producing a double top and offering entry. The breakout does not look that promising though. However, the price heads towards the breakout direction and makes a long bearish move. Let us get started.

The chart shows that the price has a rejection at a level and makes a bearish move. Upon finding its support, it produces a bullish engulfing candle and heads towards the North. The chart produces a bearish inside bar around the level of double top resistance. It may attract the sellers to keep their eyes on the chart to go short upon a neckline breakout.

The price heads towards the South with good bearish momentum. The last candle comes out as a bullish inside bar. It is a sign that the chart may get choppy instead of making a breakout at the neckline. However, we never know. The sellers may keep patience and wait for a bearish breakout.

The price consolidates for a while and makes a bearish move. The last candle closes below the neckline. It is a kind of breakout that the sellers are waiting for, but it is a breakout. Let us wait and see what the price does here.

The chart produces a spinning top. The candle closes within the breakout level. Thus, it is a valid breakout. The sellers may wait for the chart to produce a bearish engulfing candle closing well below the last swing low. Let us proceed to the next chart.

Look at the last candle. The candle comes out as a bearish engulfing candle closing well below the last swing low. The sellers may trigger a short entry right after the last candle closes by setting stop-loss above the breakout level and take profit with 1R.

The price heads towards the South with excellent bearish momentum. It hits the target of 1R in a hurry too. This means the trade setup has worked for the sellers nicely. Considering the breakout factor, the trade setup is not an A+ trade setup. However, we may consider two important factors here.

  1. Double Top
  2. The signal candle.

These two factors are significant to make the price move. Yes, when an A+ momentum breakout goes with two of them, it gives us more chances to make a profit out of the trade. Today’s example shows that as long as it’s a breakout, upon the breakout confirmation, the price may head towards the trend direction with good momentum if the mentioned two factors meet all the requirements.

 

Categories
Forex Daily Topic Forex Price Action

To Hold It or Not?

In today’s lesson, we are going to demonstrate an example of an H4 chart offering entry after consolidation. The price does not head towards the breakout direction after triggering the entry as expected. It is Friday and the market is going to close. The question is whether we hold the position during the weekend or close the position. Let us find this out.

In today’s lesson, we are going to demonstrate an example of an H4 chart offering entry after consolidation. The price does not head towards the breakout direction after triggering the entry as expected. It is Friday and the market is going to close. The question is whether we hold the position during the weekend or close the position. Let us find this out.

In today’s lesson, we are going to demonstrate an example of an H4 chart offering entry after consolidation. The price does not head towards the breakout direction after triggering the entry as expected. It is Friday and the market is going to close. The question is whether we hold the position during the weekend or close the position. Let us find this out.

This is an H4 chart. The chart shows that the price heads towards the North with good bullish momentum. The last candle comes out as a bearish inside bar. The chart belongs to the buyers. The price may make a bearish reversal from here. The sellers must wait to get a strong bearish reversal pattern to go short in the pair.

The chart produces another bearish candle followed by a doji candle. The buyers may wait for the price to make a breakout at the wave’s highest high to go long in the pair.

The price heads towards the North but does not make a bullish breakout. If the chart produces a bearish reversal candle around the level, it may get bearish. On the other hand, the buyers may still be hopeful that they get a bullish breakout to push the price towards the North further.

The chart produces a bearish engulfing candle right at the double top resistance. It makes a breakout at the neckline as well. Thus, the sellers may keep their eyes on the chart to go short and drive the price towards the South.

The price consolidates for a while. It produces a bearish reversal candle, but it does not make a bearish breakout to offer a short entry. The last candle comes out as a bullish candle. Both the buyers and the sellers must wait and let the price decide to give them a direction.

The chart produces a bearish engulfing candle closing well below consolidation support. The sellers may trigger a short entry right after the last candle closes by setting take profit with 1R. Let us proceed to the next chart to find out how the trade goes.

The price consolidates again. The chart upon producing a bearish engulfing candle at a double top resistance and getting consolidation, it does not move towards the trend’s direction. The sellers do not expect that. However, this is how the market goes. The market is going to close within three hours. Do the sellers close the position?

It is an H4 chart. If it were other intraday charts such as the H1, 15 M, 5M, we may close the position. In this case, the reversal candle is an engulfing candle; the reversal pattern is a double top; the price consolidates accordingly, and the signal candle comes out as a bearish engulfing candle as well. Thus, considering these factors the sellers may hold the position.

 

Categories
Forex Basic Strategies Forex Daily Topic

Trading Three-Point Reversal and Continuation Patterns

Introduction

Introduction

Introduction

The fundamental question that any technical investor asks it is where a trend begins and ends? The final aspiration of the analyst is to identify the start of a new market direction as early as possible, enter the market, and make money with the trend.

A technical tool that could aid in the reversal trend identification process is the reversal chart patterns, which we will review in this educational article.

Three-Point Patterns

Three-point patterns are chart formations that can be broken into two categories, identified as reversal and continuation patterns. But, in this regard, the technical trader should consider that sometimes reversal chart formations may act as continuation patterns.

Stop-Loss Setting: In general terms, the stop-loss level should be located above (or below) of the nearest peak or valley of the entry-level of the chart formation.

Take Profit Setting: There is a broad range of methods available to the technical trader to establish a profit target level. Some of the options to establish this level are:

  • A Fibonacci ratio projection.
  • Parallel trend lines defining a trend channel.
  • An equivalent length to the previous impulsive wave.
  • A range extent similar to the previous move.

Trailing Stop Use: A trailing stop is an added method to protect profits. The trail stop advances as the move progresses in favor of the trade, but the stop level holds during retracements.  This method not always improve the results, although it is an excellent psychological anchor. The downside of using trailing stops, however, is that it could generate a premature closure of the trade, thus not allowing a trade to mature properly while the current trend is still progressing.

Classical Three-Point Patterns

In the technical analysis literature, there exists a wide variety of chart patterns. However, both Thomas Bulkowski, as Fischer and Fischer, agree on a reduced group of trend reversal patterns as the best indicators of a reversal. These are identified as follows.

Head and Shoulder Pattern: The H&S pattern is the most popular trend reversal pattern. H&S tends to appear regularly in the financial charts. However, in some cases, the H&S formation fails, and the market action continues developing with its previous trend. An ideal Head and Shoulder pattern should have the right shoulder at the same level as the right shoulder.

A market entry might be taken once the price action breaks and confirms the close below (or above) the neckline. The stop-loss should be placed above the second shoulder. The profit target level is assumed to be placed at an equivalent distance taken from the head to neckline, and projected from the breakout level.

Triple Top and Bottom: These formations rarely appear in financial markets. However, when they do, they tend to be profitable. 

The entry signal is to be set once the price breaks and closes above (or below) the top (or the low) price range. The stop-loss level should be placed below (or above) the triple top (or bottom) range. As a profit target, it is recommended a range equivalent to the length of the high and low, projected from the breakout level.

Rectangle Pattern:  In this formation, the price moves between two parallel trend-lines that progress horizontally. A trade signal will trigger after the price breaks and closes above (or below) the rectangle range. 

A conservative way to confirm the entry signal consists of waiting for the closeout of the rectangle formation range. The stop-loss and profit target levels hold the same arrangement as in a triple top and bottom pattern.

Key-Reversal Days: Although a Hammer Candlestick pattern offers poor performance, it tends to increase when the price action develops a hammer in a third peak or valley at the end of a fast market.

This pattern does not have any specific entry setup; however, Fischer and Fischer considers that for the pattern to be considered, the shadow’s length of the hammer should be at least three times its body.

The stop-loss should stay below (or above) the low of the key-reversal day. The profit target level may be set at the same distance as the previous trading range.

Three Ascending Valleys and Three Descending Peaks: These formations are usually the most reliable three-point patterns.

The essence of these formations, higher (or lower) highs and lows, indicate the continuation of the trend. Generally, a long position signal will trigger if the price rises above the highest peak and a short position when the price settles below the lowest valley.

The stop-loss should be located above (or below) the recent peak (or valley.) Finally, the profit-target level should be set at the equivalent distance of the previous range projected from the entry-level.

Triangles: Triangle patterns shows three basic variations, symmetric, descending, and ascending. The symmetric triangle could be both a reversal and a continuation formation; however, the ascending and descending triangles usually are continuation patterns.

The entry signal happens when the price breaks the triangle base-line. A stop-loss order may be located above the triangle top. In the opposite case, the protective stop should be placed below the triangle.

As profit-target level, a range from the highest to the lowest level of the triangle can be projected from the breakout level.

Conclusions

The identification of the beginning of a new trend and how to make money from it has been the primary investor’s quest since Charles Dow’s era. Three-point patterns are useful tools not only to identify trend reversals but also to recognize continuation patterns.

In this context, Bulkowski’s work cited by Fischer and Fischer provides a useful statistical study, illustrating the failure rate of a broad range of chart formations. For example, the rectangle top pattern when the price breaks up has a 2% failure rate. On the other hand, the top key-reversal pattern has a 24% failure rate.

Lastly, Bulkowski’s ranking study could be a powerful tool for the technical trader, seeking ways to reduce the risk of his market entries. In this regard, identifying the patterns and their execution requires practice and confidence when placing the order on a breakout.

Suggested Readings

  • Fischer, R., Fischer J.; Candlesticks, Fibonacci, and Chart Patterns Trading Tools; John Wiley & Sons; 1st Edition (2003).
  • Bulkowski, T.; Encyclopedia of Chart Patterns; John Wiley & Sons; 2nd Edition (2005).
Categories
Forex Fibonacci

Fibonacci Levels: How Much Does 50% Level Influence the Market?

In today’s lesson, we are going to demonstrate an example of a chart, in which the price makes a reversal from 50% Fibonacci level. We know if the price makes a reversal from 61.8%, it usually goes up to 161.8%; if it makes a reversal from 38.2%, it goes up to 138.2%. In both cases, traders get good risk-reward. Do you ever wonder what happens if the price makes a reversal from 50%? Let us find this out through an example.

In today’s lesson, we are going to demonstrate an example of a chart, in which the price makes a reversal from 50% Fibonacci level. We know if the price makes a reversal from 61.8%, it usually goes up to 161.8%; if it makes a reversal from 38.2%, it goes up to 138.2%. In both cases, traders get good risk-reward. Do you ever wonder what happens if the price makes a reversal from 50%? Let us find this out through an example.

In today’s lesson, we are going to demonstrate an example of a chart, in which the price makes a reversal from 50% Fibonacci level. We know if the price makes a reversal from 61.8%, it usually goes up to 161.8%; if it makes a reversal from 38.2%, it goes up to 138.2%. In both cases, traders get good risk-reward. Do you ever wonder what happens if the price makes a reversal from 50%? Let us find this out through an example.

The chart shows that the price heads towards the South with good bearish momentum. It produces two bullish candles and heads towards the South. Look at the last candle. It comes out as a bullish inside bar. It makes a bullish correction. However, the sellers may wait for a bearish engulfing candle to go short in the pair.

The price has been in a bullish correction. It produces some bearish reversal candles, but it does not create any bearish momentum. The last candle comes out with a little bullish body having a long upper shadow. Let us proceed to the next chart to find out what happens next.

The last candle comes out as a bearish engulfing candle. It is a strong sign that the price may head towards the South again. The sellers may flip over to the minor chart to trigger entry.

The price heads towards the South with extreme bearish pressure. The last candle comes out as a bearish Marubozu candle. It seems that the price may continue its bearish journey towards the South further. Let us find out what actually happens.

It does not continue its bearish journey. It finds its support. Upon producing a hammer, it heads towards the North with one more bullish candle. It seems that it may continue its bearish journey considering bearish engulfing candle as a reversal candle. Next, two candles come out as strong bearish candles too. What may be the reason that the price makes a bullish reversal here? Let us find this out with Fibonacci levels.

If we calculate, we find that the price makes a bearish reversal from Fibonacci 50% level. It then heads towards the South with extreme bearish momentum. However, it finds its support at the Fibonacci 100.00 level. Usually, this is what happens when the price trends from the 50% level. A question may be raised here whether we should take entry if the price trends from the 50% Fibo level. It depends on risk-reward. If it offers a good reward, then we may take an entry. In most cases, it does not offer a good reward; thus, we may skip taking those entries.

 

Categories
Forex Market Analysis

Daily F.X. Analysis, July 22 – Top Trade Setups In Forex – COVID19 Boosts Safe Haven!  

On the news side, the Canadian inflation rate will be in highlights, while the U.S. will release its existing home sales, which can drop as people may not have invested in the fixed assets amid covid19. The market can exhibit retracements from yesterday’s price actions.

On the news side, the Canadian inflation rate will be in highlights, while the U.S. will release its existing home sales, which can drop as people may not have invested in the fixed assets amid covid19. The market can exhibit retracements from yesterday’s price actions.

On the news side, the Canadian inflation rate will be in highlights, while the U.S. will release its existing home sales, which can drop as people may not have invested in the fixed assets amid covid19. The market can exhibit retracements from yesterday’s price actions.

Economic Events to Watch Today  

  

 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.15283 after placing a high of 1.15395 and a low of 1.14227. Overall the movement of the EUR/USD pair remained bullish throughout the day. The EUR/USD pair extended its bullish streak for 3rd day and reached the highest level since January 2020 after crossing 1.1500 level. The pair surged based on an agreement on a massive stimulus plan and broad-based U.S. dollar weakness.

The U.S. Dollar Index traded at its lowest since March at 95.37level on Tuesday and posted the third decline in a row. It dragged the U.S. dollar, which ultimately pushed EUR/USD higher. The U.S. dollar was weak due to hopes for a potential second set of the stimulus package from Congress and a rising number of coronavirus cases in the U.S. The broad-based U.S. dollar weakness gave a push to EUR/USD pair prices.

On Europe front, the long-awaited 750 billion euros stimulus package from the European Commission was agreed on by all member countries with some changes in its initial proposal. The 750 Euros worth package included 500 billion for grants and 250 billion for loans, but it was changed to 390 Billion in grants and 360 Billion in loans on Monday.

The agreed package sends tens of billions of euros to countries hardest hit by the virus, most importantly Spain and Italy, that has suffered hardest from the pandemic against its E.U. counterparts.

After the E.U. stimulus plan was approved by its member states, the hopes for E.U. economic recovery, after being hit by the pandemic, raised and boosted risk-on market sentiment in the market. As in result, the risk-perceived Euro currency gained and pushed EUR/USD pair higher.

The risk sentiment in the market was also supported by the hopes of a potential virus vaccine. The trials of coronavirus vaccine from the U.K. and China gave positive results in early-stage tests. Both countries claimed that the vaccine developed by their companies induced an immune response in the studied participants.

The increased risk sentiment after the potential vaccine news added further in the gains of EUR/USD pair. In the absence of any macroeconomic data release on Tuesday, the pair continued to follow the good news reaction and U.S. dollar weakness and reached above 1.1500 level.

Daily Technical Levels

Support Resistance

1.1454    1.1572

1.1379    1.1615

1.1335    1.1690

Pivot point: 1.1497

EUR/USD– Trading Tip

The EUR/USD is trading within a bullish channel, providing resistance at 1.1556 level. Below this, the EUR/USD may find support at 1.1501 level. While the bullish breakout of 1.1556 can lead EUR/USD prices further higher until 1.1613 levels. The MACD and RSI are holding in a bullish zone, and these may drive bearish correction in the market today. Let’s expect selling bias below 1.1550 level today until 1.1500 and 1.1465. 

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.27329 after placing a high of 1.27677 and a low of 1.26484. Overall the movement of GBP/USD pair remained bullish throughout the day. The GBP/USD pair extended its bullish rally and rose to its 5-week highest level since June 10 above 1.2700 level. The bullish rally in currency pair was caused by the risk sentiment and broad-based U.S. dollar weakness.

In the absence of any Brexit headline or major macroeconomic data release, the currency pair GBP/USD followed the U.S. dollar’s selling bias and continued its bullish streak for 3rd day. The continuous surge in coronavirus cases in the U.S. raised worries that the economic recovery is expected to take much longer than expected and kept the U.S. dollar bulls defensive. The sentiment was coupled with the optimism in the market about vaccine development and further decreased the safe-haven greenback.

As for the virus vaccine, the leading British drugmaker AstraZeneca and Oxford University revealed that their COVID-19 vaccine induced an immune response in its first clinical trials on humans. Two other potential vaccines, developed by Cansino Biologics in teamwork with China’s military establishment and the German drugmaker Biotech in collaboration with U.S. drugmaker Pfizer, also showed positive results early stages of the trials.

The risk sentiment was again boosted by the potential virus vaccine positive news and lead the pair GBP/USD on the upside. On the data front, the Public Sector Net Borrowing from the U.K. reached 34.8 B against the expected 34.5 B and gave almost null-effect to GBP/USD as it came as expected. On the U.S. front, there was no macroeconomic data on Tuesday.

On the virus front, the British economy has been hit hard by pandemic as last week, the Office for Budget Responsibility forecasted that the U.K. economy would contract between 10.6% -14.3%. However, the Chief Economist, Andy Haldane, maintained the optimistic tone in her speech and said that the economy had recovered about half of the fall seen in March & April after the pandemic. He added that the economy had produced a V-shaped bounce back.

These positive notes by Andy Haldane not only added in the risk sentiment but also pushed the currency pair GBP/USD gains even higher towards a 5-week top level.

Daily Technical Levels

Support Resistance

1.2664     1.2782

1.2597     1.2835

1.2545     1.2901

Pivot Point: 1.2716

GBP/USD– Trading Tip

The GBPUSD is also holding in an overbought zone, and now it can drop until 1.2685 level, which marks 23.6% Fibonacci retracement below this the next support will be found around 1.2670 level. At the same time, resistance stays at 1.2730 and 1.2760. The RSI and MACD are in the bullish zone, but they form smaller histograms that suggest odds of selling bias in the market. Let’s consider taking selling trade below 1.2740 until 1.2675 level today.  

USD/JPY – Daily Analysis

The USD/JPY pair reached under resumed bearish pressure during the U.S. session as another USD selling-wave knocked the markets. Currently, the USD/JPY pair is trading at its weakest level in 5 days at 106.85, losing 0.35% daily. The risk-on market sentiment initially got support from the fresh, upbeat report that Bloomberg has just reported about a COVID-19 vaccine developed; as the Russian Defense Ministry stating that they completed Phase 2 trials, leading First Deputy Defense Minister Ruslan Tsalikov to say the first domestic inoculation is ready for use, the article reads. Also, Japan approved the usage of dexamethasone to be included in Japan’s basket of cures to the pandemic, after earlier passing Gilead’s redelivery for its use. 

However, the vaccine news suggests that the pandemic’s cure is nearby, which favored the risk sentiment. There are approximately 16 other vaccines that are in the progress of clinical trials in Australia, France, Germany, India, South Korea, the U.K., the U.S., and China.

The European Union (E.U.) leaders agreed on late Monday for a possible €1.8 trillion ($2.06 trillion) coronavirus spending package but with some changes in the proposal that was meant to reverse the coronavirus-induced slump in the European economies.

This news boosted the risk-on market sentiment and strengthened the bid tone around riskier assets. An additional boost on the risk sentiment was derived from negotiations for a second stimulus package in the U.S. after the sustained rise in the pandemic cases from the U.S., which increased hopes of America’s Phase 4 stimulus. Consequently, the safe-haven assets are facing boosted demand to expect Japanese yen as Japan is facing an increased number of COVID19 cases. 

Daily Technical Levels

Support Resistance

106.99     107.51

106.74     107.78

106.47     108.03

Pivot point: 107.26

 USD/JPY – Trading Tips

The USD/JPY has violated the symmetric triangle pattern, supporting the pair at 107 levels. Besides, the pair has also dropped below 50 periods EMA, which is suggesting further selling bias in the USD/JPY pair. On the lower side, the USD/JPY is facing support at 106.700 level, and closing of candles above this may drive slight bullish correction until 107 and 107.100 level before it continues with its selling bias. A bearish breakout of 106.700 level can drop until 106.535 level. Good luck! 

Categories
Forex Market Analysis

Daily F.X. Analysis, July 21 – Top Trade Setups In Forex – Weaker Dollar Sentiment! 

The U.S. dollar continued to struggle because of the previous week’s latest U.S. consumer confidence data release. The less consumer confidence over the U.S. economy weighed on the greenback as the economy struggles to overcome the coronavirus situation. Today, the market is likely to focus on the Canadain retail sales figures, but these may not have any impact on gold and other currency pairs. Technical levels will matter today.

The U.S. dollar continued to struggle because of the previous week’s latest U.S. consumer confidence data release. The less consumer confidence over the U.S. economy weighed on the greenback as the economy struggles to overcome the coronavirus situation. Today, the market is likely to focus on the Canadain retail sales figures, but these may not have any impact on gold and other currency pairs. Technical levels will matter today.

The U.S. dollar continued to struggle because of the previous week’s latest U.S. consumer confidence data release. The less consumer confidence over the U.S. economy weighed on the greenback as the economy struggles to overcome the coronavirus situation. Today, the market is likely to focus on the Canadian retail sales figures, but these may not have any impact on gold and other currency pairs. Technical levels will matter today.

Economic Events to Watch Today  

 

 

EUR/USD – Daily Analysis

The EUR/USD was closed at 1.14473 after placing a high of 1.14676 and a low of 1.14022. Overall the movement of the EUR/USD pair remained bullish throughout the day. The EUR/USD exchange rate extended its gains on Monday and reached the highest level since March 9. The Euro rose against many rival currencies on hopes over a crucial milestone as the Eurozone’s governments showed consensus on a COVID-19 recovery fund. Although lower than the initial proposal of 500 billion euros in grants, the new agreed grant is now 390 billion euros, which is still a significant boost for the Eurozone’s struggling economy. 

On Monday, the European Council President Charles Michel said that he was confident a deal on the bloc’s coronavirus recovery package could be reached after putting forward a new proposal. The latest proposal offered by him provided significant concessions to the so-called frugal four countries, Austria, Denmark, Netherlands, and Sweden. In the new proposal fund, the grants were decreased to 390 Billion euros from the initial 500 billion euros, and the Loans became 360 Billion Euros from 250 billion euros.

In Eurozone economic data, Germany’s Producer Price Index for June fell below consensus at 0% and weighed on single currency Euro. As a result of EUR/USD, pair investors became increasingly concerned about the Euro zone’s largest economy’s ability to recover from the COVID-19 crisis.

On the U.S. front, the U.S. dollar continued to struggle because of the previous week’s latest U.S. consumer confidence data release. The less consumer confidence over the U.S. economy weighed on the greenback as the economy struggles to overcome the coronavirus situation.

Furthermore, the U.S. Congress was set to announce a new stimulus measure as the previous unemployment benefits package will expire at the end of July. The U.S. dollar remained weak because of the investors were looking ahead of the Congress announcement. The weak U.S. dollar added gains in the EUR/USD pair on Monday.

The next day, the U.S. investors will be looking ahead to the release of June’s Chicago Fed National Activity Index. Any improvement in the index will indicate better economic conditions and would prove positive for the U.S. dollar. The single currency euro will continue to be driven by the news surrounding the European Summit’s discussions on the COvid-19 recovery fund. The euro investors will also await Luis De Guindos, the Vice President of the ECB. Any dovish comments from ECB would cut the Euro gains.

Daily Technical Levels

Support Resistance

1.1410     1.1477

1.1372     1.1506

1.1342     1.1544

Pivot point: 1.1439

EUR/USD– Trading Tip

The EUR/USD continues to follow the same technical outlook as before. It has tested the double top resistance at 1.1446 level, and now it’s finding support at 1.1410 level. The upward trendline on the hourly chart is also likely to support the pair around 1.1375 level. Chances of bullish trend seem solid today. Therefore, the bullish breakout of the 1.1445 level can lead the EUR/USD prices towards the 1.1490 level.

GBP/USD – Daily Analysis

The GBP/USD pair closed at 1.26611 after placing a high of 1.26652 and a low of 1.25180. Overall the movement of GBP/USD pair remained strongly bullish throughout the day. The GBP/USD posted its biggest daily gains since June 30 on Monday and recovered all of its previous five day’s losses on the back of positive comments from England’s FPC and JP Morgan.

Cable found its foot against the U.S. dollar on Monday after the JPMorgan Bank said that the UK was the largest capital importer within G10. The Bank added that as the Brexit process was heading to an end of the transition period, the Cable was becoming rather less dependent on general risk sentiment and started to decouple from other high-beta currencies.

The rise in Sterling was further supported by the latest comments from Jonathan Hall, an appointee to the Bank of England’s Financial Policy Committee (FPC) on Monday. According to him, Brexit will make markets less efficient, but it will not be disastrous for Britain’s economy.

Hall said that Brexit would cause fragmentation, inefficiency, and problems with regulations, but it will not be disastrous.

Meanwhile, on Monday, the Bank of England policymaker Silvana Tenreyro said that Britain might avoid an economically damaging loss of skills in its labor market as long as the rise in unemployment does not drag on.

Tenreyro said that uncertainty persisted in the economy related to COVID-19 and that the crisis may even have led some workers to upskill to adapt to new ways of working remotely. She added that as long as the current period of high unemployment remains temporary, the loss in skills would be only limited.

In contrast to this, the Bank of England economist Andy Haldane warned inflation could be a problem after the coronavirus crisis. He insisted that Britain was enjoying a V-shaped recovery and was in the middle of a quick turnaround as the economy recovered about half of the immense fall in output in March & April when the crisis was most intense. Haldane told that the economy had been growing on an average of about 1% a week since May.

The upbeat comments from all the sides surrounding Britain gave a massive push to the GBP/USD prices on Monday. Adding in the currency pair’s gains was the U.S. dollar weakness backed by the increasing number of infected cases in the U.S. U.S. reported a record-high number of infected cases in past days with death tolls crossed 140,000, and the total number of COVID-19 cases reached 3.8 Million.

On the data front, there was no macroeconomic data to be released on the day, and hence, the pair’s movement was followed by the comments related to the U.K. economy and coronavirus headlines.

Daily Technical Levels

Support Resistance

1.2564     1.2713

1.2466     1.2764

1.2415     1.2861

Pivot Point: 1.2615

GBP/USD– Trading Tip

The GBPUSD has violated the triple top resistance level at 1.2660 level, and bullish crossover of this level opens further room for buying until 1.2729, but before this, the Sterling can retrace until 23.6% Fibo level of 1.2645 level. Below this, the next support can be found at the 1.2625 level. Above 1.2625, the GBP/USD can be showing a buying trend. Let’s consider taking buy trades over 1.2615 level today. 

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 107.270 after placing a high of 107.541 and a low of 106.999. Overall the movement of the USD/JPY pair remained bullish throughout the day. The USD/JPY pair rose to 8 days the highest level on Monday on the back of Japan’s risk sliding back into deflation and the rising numbers of coronavirus cases in the U.S.

Bank of Japan released its minutes of June meeting in which the policymakers debated at the risk of the country sliding back into deflation but stopped short of supporting stronger steps to prevent companies from going bankrupt due to coronavirus pandemic.

More companies were facing the risk of insolvency with the impact of coronavirus pandemic likely to last for a prolonged period of time, even if the companies receive immediate liquidity support. But the members of BOJ differentiate on the opinion of injecting capital into firms to help recover and prevent insolvency.

Some members insisted that injected direct capital to save the struggling firms is an action that should come from the government, and few members said that it was the role of BOJ to provide liquidity and also to cooperate with the government while clarifying the respective role.

The Bank of Japan kept its interest rates unchanged in June after easing monetary policy in March and April. Minutes revealed that the Bank maintained its view over the economy as it will gradually recover from the pandemic’s damage.

However, many members showed concern as the pandemic was picking its pace once again. Japan lifted its lockdown measures in late May, and Tokyo has seen a renewed spike in infections lately. Japan has reported over 25,000 cases, including 1,000 deaths. The downbeat comments from the latest issued meeting minutes by Bank of japan pushed the USD/JPY pair higher on Monday.

On greenback front, the currency was down on Monday as the U.S. Dollar Index decreased by 0.6% to 95.85 level. The currency was suffering from its economy’s struggle to fight the coronavirus crisis as the nation was leading in reporting infected cases worldwide.

U.S. figures related to infected people raised to 3.8 Million, and death toll count reached 140,000 making the U.S. the most affected economy by the pandemic. Despite the safe-haven status of U.S. dollar investors, they were getting out of it due to the U.S. economy’s gloomy outlook.

The rising number of cases urged some states to introduce renewed lockdown measures that weighed on economic recovery hopes, and hence, the U.S. dollar became weak. However, the weak U.S. dollar failed to turn USD/JPY’s gains on Monday.

Daily Technical Levels

Support Resistance

106.99     107.51

106.74     107.78

106.47     108.03

Pivot point: 107.26

 USD/JPY – Trading Tips

The USD/JPY is consolidating in a broad trading range of 107.400 – 107, while the overall bias seems neutral at 107.191. The USD/JPY pair has recently crossed over 50 EMA, which extended resistance at 107 level, including now the same level will work as a support. The bearish breakout of the 107 level can extend the selling trend until 106.580. Simultaneously, the bullish breakout of the 107.400 level can extend the buying trend until 107.600. The MACD and RSI support bearish bias, and we may take a selling trade below 107 and buying above the same level today. Good luck! 

Categories
Forex Market Analysis

NZDJPY Shows Long-Term Bullish Signals

The NZDJPY cross continues its recovery after the massive sell-off that made it lose over 18.6% in the first quarter of the year when it plummeted until 59.49. From this yearly low, NZDJPY raised near to 17.9% to date.

The NZDJPY cross continues its recovery after the massive sell-off that made it lose over 18.6% in the first quarter of the year when it plummeted until 59.49. From this yearly low, NZDJPY raised near to 17.9% to date.

The NZDJPY cross continues its recovery after the massive sell-off that made it lose over 18.6% in the first quarter of the year when it plummeted until 59.49. From this yearly low, NZDJPY raised near to 17.9% to date.

Market Sentiment Overview

The market sentiment of NZDJPY exposed in its weekly chart reveals the market action showing bullish reversal signals after surpass and consolidate above the 26-week moving average. 

At the same time, we observe that, last week, the price closed in the upper zone of its 52-week range. This context leads us to conclude that the market participants might continue pushing the price higher.

The following figure shows the net positioning of the New Zealand Dollar and Japanese Yen futures. In the chart, we observe that institutional participants maintain a bullish pressure on the kiwi. At the same time, big participants on the Japanese currency continue having a net positioning to the long-side under 50% of the 52-week high and low range.

Consequently, considering the market sentiment on both the NZ Dollar and Japanese Yen futures, we could expect more upsides for the NZDJPY cross.

The Elliott Wave Outlook

The long-term Elliott wave perspective of the NZDJPY cross illustrated in the following chart shows a bullish structural series in progress. The upward sequence began on March 18th when the cross found fresh buyers at 59.49, where the price action developed a V-turn bounce movement.

Once the NZDJPY cross started its bounce movement, the price began to develop an impulsive sequence subdivided into five internal segments of the Minuette degree identified in blue. According to the Elliott wave theory, the structural series drawn by the NZDJPY cross corresponds to a leading diagonal formation, which tends to appear in the first wave of an impulsive sequence or corrective structure. This pattern usually follows an internal structure subdivided into 3-3-3-3-3 or 5-3-5-3-5.

After the leading diagonal completion on April 30th, high at 66.103, when the cross ended its wave ((i)) of Minute degree identified in black, the price made a higher low at 63.46 on May 17th corresponding to its wave ((ii)). Once this second wave ended, the NZDJPY cross began to rally on the wave ((iii)), which remains incomplete.

Currently, the NZDJPY cross advances in its wave (iv) of Minuette degree in blue of the incomplete third wave of Minute degree.

Our outlook for the NZDJPY cross, based on the Elliott Wave perspective, anticipates a limited decline into five waves, which could complete the wave (iv) of the Minuette degree in blue. Once this sequence ends, the market action should find fresh buyers expecting to continue pushing the cross higher. This way, the NZDJPY cross should complete the wave ((iii)) of Minute degree.

Considering that the next movement will correspond to wave ((iv)) of Minute degree, we could expect the price moving mostly sideways before starts climbing on its fifth wave of Minute degree.

Finally, considering that the market sentiment reveals an increasing bullish momentum for the New Zealand Dollar, and the Japanese Yen exposes a neutral bias that seems to start turning bearish, long-term, NZDJPY could experience more rallies.

In consequence, our preferred positioning for the NZDJPY cross still remains on the bullish side. Any time the price drops could be an opportunity to join the long side.

Categories
Forex Price Action

Price Action Trading: Factors that you should Remember

In today’s lesson, we are going to demonstrate an example of a chart offering an entry upon producing a bullish reversal candle followed by a breakout. The chart produces a bullish reversal candle earlier too, but that did not make the price move towards the North. We’ll try to find out why it does not head towards the North at its first attempt. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart offering an entry upon producing a bullish reversal candle followed by a breakout. The chart produces a bullish reversal candle earlier too, but that did not make the price move towards the North. We’ll try to find out why it does not head towards the North at its first attempt. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart offering an entry upon producing a bullish reversal candle followed by a breakout. The chart produces a bullish reversal candle earlier too, but that did not make the price move towards the North. We’ll try to find out why it does not head towards the North at its first attempt. Let us get started.

The chart shows that the price heads towards the North upon producing an ABC pattern. We may notice that we have four significant points here, such A, B, C, and D. The price most likely reacts at these levels again. Let us proceed to the next chart.

The price heads towards the South at a moderate pace. The last candle comes out as a bearish Marubozu candle. It seems that the price may remain bearish for a while. Let us proceed to the next chart to find out what happens next.

The chart produces an inverted hammer. It is a sign of a bullish reversal. However, considering point B, the price makes a bearish breakout at the level. Thus, the pair may continue its bearish move. The sellers may look for short opportunities in the minor chart.

The next candle does not make a bearish breakout. It comes out as a bullish candle. The last candle comes out as a Doji candle. Ideally, neither the bull nor the bear dominates in the pair. The sellers are to wait for the price to make a breakout at the last swing low. The buyers are to wait for the price to make a bullish reversal candle closing above consolidation resistance. Let us see what the price does.

The price comes down. It produces a bullish engulfing candle. Some sellers may have to encounter a loss here. Upon creating the bullish engulfing candle, the price heads towards the North with good bullish momentum. Now a few questions may be raised here.

  1. Why does the price not head towards the North but comes down?
  2. Why does the price not continue its bearish move but produces a bullish engulfing candle?
  3. Why does not price head towards the North at its second attempt?

 

Have a look at the chart below with some drawings in it.

At its first attempt, the price does not make a breakout at the level of resistance drawn. The price reacts at this level several times. Thus, this is a crucial level, which is to be counted by the buyers before taking long entries. The price finds its resistance here and makes a bearish move. It finds its support at the drawn line, where the price reacts to it earlier as well. The reversal candle comes out as a Doji candle, and the chart takes four candles to make the breakout. This is one of the reasons that the price does not continue its bearish move.

At its last attempt, it produces a bullish engulfing candle, the candle is produced at a key level, the price makes a breakout at the last swing low, and the breakout candle comes out as a strong bullish candle. These factors attract more buyers and make the price move towards the North with good bullish momentum. We need to remember such factors every time we take entries as far as price action trading is concerned.

Categories
Forex Basics

Avoiding the Price Action Prediction Trap

Price action is a vital part of trading forex. It can be an extremely powerful ally or a devastating enemy depending on how you have approached it. Unfortunately, a trap that a lot of traders fall into is the thought that they are able to predict the price action within the markets, you may have […]

Price action is a vital part of trading forex. It can be an extremely powerful ally or a devastating enemy depending on how you have approached it. Unfortunately, a trap that a lot of traders fall into is the thought that they are able to predict the price action within the markets, you may have […]

Price action is a vital part of trading forex. It can be an extremely powerful ally or a devastating enemy depending on how you have approached it. Unfortunately, a trap that a lot of traders fall into is the thought that they are able to predict the price action within the markets, you may have been trading for the past few months to a year, on occasion you have stated that it will move one way and it has, this can give you confirmation biases towards your own abilities to predict the movement.

If you have ever watched a football (soccer) match on TV and predicted a goal, or a penalty, or anything like that and you are right. The next game you watch you predict it again and it is right again. The third game comes along and once again, your prediction is right. So you decide on the 4th match to put down some money, you are confident because every other prediction you had was right, well not this time, it goes against you and you lose.

This is exactly the same mentality that a lot of traders get when it comes to predicting price action within the markets. It is possible to gauge and see small price movements, we won’t deny that, but the overall trend and changes in that trend require far more analysis and knowledge than just looking at previous and current charts can give you.

Predicting without analysis is gambling, that is the simplest way to put it. When you analyze something you are looking at the various probabilities that are available, stacking them on one side, eventually you have enough probabilities to work out exactly which way the markets will move. Making that choice gives you an advantage over the other side, however, this does not mean that it will always go your way.

Many newer traders actually need this experience, a boost in their confidence and then a loss based on their precision, it is a humbling experience that can help to cement the idea that further analysis is actually needed and that predicting price action is not easy, ultimately bringing them back down to earth and allowing them to start learning how to analyze rather than predict.

There is the catchphrase saying of, “Say what you see”, so in Forex, it is important to trade what you see, and not what you think. Getting that I know better mentality out of the way is vital if you wish to become a successful trader. Remember that it is the markets that are in charge and not you, so it doesn’t matter where you think it will go. That may seem harsh, but it is a lesson that a lot of newer traders need to learn.

Categories
Forex Market Analysis

GBPCHF Could Start a New Bullish Cycle

The GBPCHF cross during this year underperforms over 7.3% YTD easing over 940 pips. Although the market action made it decline until lower levels since 2011, the cross could experience a recovery that could propel it toward fresh highs.

The GBPCHF cross during this year underperforms over 7.3% YTD easing over 940 pips. Although the market action made it decline until lower levels since 2011, the cross could experience a recovery that could propel it toward fresh highs.

The GBPCHF cross during this year underperforms over 7.3% YTD easing over 940 pips. Although the market action made it decline until lower levels since 2011, the cross could experience a recovery that could propel it toward fresh highs.

The Market Sentiment

The GBPCHF cross in its weekly chart illustrates the price moving below 50% of the 52-week high and low range, which reveals that market participants maintain its bearish bias for the cross. At the same time, we distinguish the 26-week moving average acting as dynamic resistance at 1.19298.

On the previous chart, we distinguish a bearish sequence that began in mid-November 2016 when the price topped at 1.5572 and looked ended on last March 19th, when the cross found support at 1.1113. Once the GBPCHF dropped until the lowest level since August 2011, the price bounced, finding a short-term resistance in the zone of 1.2212, which coincides with 50% of the 52-week high and low range.

During the previous two weeks until now, the market action moved it down, finding resistance at the 26-week moving average, which leads us to conclude that bear traders still maintains the market control.

Consequently, while the GBPCHF keeps moving below the 26-week moving average, the market sentiment bias continues being bearish.

The Elliott Wave Outlook

The GBPCHF cross under the long-term Elliott wave perspective exposes a broadening diagonal formation that began on April 17th, 2018, when the price found fresh sellers at 1.3855.

In the previous figure, we distinguish an expanding sequence that follows a 3-3-3-3-3 internal subdivision of Minuette degree identified in blue. This structural series could have its fifth wave of Minute degree (labeled in black) concluded on March 19th, when the price found support at 1.1113.

After the market participants took down the price to the lowest level of the year, the pair reacted mostly upward, developing a bounce in a five-wave sequence. This bullish movement may correspond to a wave (i) of the Minuette degree, which ended last June 05th, from where the GBPCHF cross started to develop an incomplete corrective corresponding to wave (ii) in blue, which remains in progress.

On the other hand, the RSI oscillator, which moves below the level-60, confirms the short-term bearish bias that GBPCHF maintains.

However, considering that the price action advances in an incomplete bearish wave (ii), our preferred near-term positioning remains neutral until the current bearish structure completion expects the potential rally corresponding to wave (iii), which could raise until 1.28 area.

Categories
Forex Daily Topic Forex Fibonacci

Tweezer Top/Tweezer Bottom and Fibonacci Levels

In today’s lesson, we are going to demonstrate an example of a Tweezer Top forming at a significant Fibonacci level. We’ll find out the impact of a tweezer top in the chart. Let us get started.

In today’s lesson, we are going to demonstrate an example of a Tweezer Top forming at a significant Fibonacci level. We’ll find out the impact of a tweezer top in the chart. Let us get started.

In today’s lesson, we are going to demonstrate an example of a Tweezer Top forming at a significant Fibonacci level. We’ll find out the impact of a tweezer top in the chart. Let us get started.

The chart shows that the price has a rejection at a level of resistance twice. At the second bounce, it produces a doji candle. A doji candle is not considered a strong reversal candle. If the next candle comes out as a bearish engulfing candle, the sellers may keep their eyes in the pair to look for short opportunities.

The next candle comes out as a bearish engulfing candle. It makes a strong statement that the bear has taken control. Double top support, along with a bearish engulfing candle, usually attracts more sellers to look for short opportunities.

The price consolidates and finds its resistance. The chart produces a bearish engulfing candle. The sellers may go short right after the last candle closes with 1R. Let us proceed to the next chart to find out how the entry goes.

The chart shows that the price heads towards the South with good bearish momentum. It hits 1R at a moderate pace. It finds its support again and heads towards the North to make a bullish correction. Look at the last two candles. The first candle comes out as a bullish candle, and the last candle comes out as a bearish candle, both having a long upper shadow. The combination of these two candles is called “Tweezer Top”. Tweezer Top is considered one of the strongest bearish reversal patterns. Those two upper shadows suggest that the price has a strong rejection at the level of resistance. The bearish body of the last candle suggests that the bear may take over. Another point we may consider whether it is produced at a significant level or not. By drawing the Fibonacci extension, we may find this out. Let us draw Fibonacci extension and find out how far the price travels towards.

We see that Tweezer Top is formed right at the 61.8% level. Usually, the 61.8% level drives the price towards the level of 161.8%. This is what happens here, as well. The price hits the level of 161.8% within the next candle.

We know how handy drawing Fibonacci level can be in trading. Especially, 61.8% and 38.2% level plays a very significant role in driving the price with good momentum. If we get a strong reversal pattern such as Tweezer Top or Tweezer Bottom, it adds more pressure. Thus, the traders do not have to wait long to achieve their target.

Categories
Forex Daily Topic Forex Price Action

Reversal Breakouts Offer a Lot

The trend is traders’ friend. Breakout is traders’ best friend. In today’s lesson, we are going to demonstrate an example of an H1 breakout, which makes a reversal even in the daily chart. Thus, the price heads towards the breakout direction with good momentum ending up offering an excellent reward. Let us get started.

The trend is traders’ friend. Breakout is traders’ best friend. In today’s lesson, we are going to demonstrate an example of an H1 breakout, which makes a reversal even in the daily chart. Thus, the price heads towards the breakout direction with good momentum ending up offering an excellent reward. Let us get started.

The trend is traders’ friend. Breakout is traders’ best friend. In today’s lesson, we are going to demonstrate an example of an H1 breakout, which makes a reversal even in the daily chart. Thus, the price heads towards the breakout direction with good momentum ending up offering an excellent reward. Let us get started.

The chart shows that the price makes a strong bearish move and finds its support. Upon producing a bullish engulfing candle, the price heads towards the North at a moderate pace. The price does not make a breakout at the last swing high. Thus, the chart is still bearish biased. Please note, the H1 chart does not show, but the daily trend has been bearish in this chart.

The chart shows that one of the candles breaches through the last swing high, closing well above the level. The last candle comes out as a bullish candle as well. It confirms the breakout. The buyers may wait for the price to consolidate and get a bullish reversal candle to go long in the pair.

The last two candles come out as bearish candles. The spinning top closes within the level of support. If the level produces a bullish engulfing candle, the buyers may go long in the pair.

The last candle comes out as a bullish engulfing candle closing well above consolidation resistance. The buyers may trigger a long entry right after the candle closes by setting stop loss below the level of support and by setting take profit with 1R.

The price heads towards the North with extreme bullish momentum. The way the chart looks, it seems it may continue its journey for a while. The chart shows that the buyers achieve their target within the next two candles after triggering the entry. Let us proceed to the following chart to see what the price does.

The last candle comes out as a bearish engulfing candle. It is produced at the second rejection as well. This means the chart forms a double top here. A double top resistance forming a bearish engulfing candle suggests that the price may make a bearish move here. However, if we calculate the length of the bullish move, it ends up being a very good one. This is what usually happens when the price makes a breakout at the last daily candle’s highest high when the daily chart is bearish and if the breakout takes place at the lowest low when the daily trend is bullish. Make sure the price consolidates and produces a strong reversal candle at the breakout level. If that happens, it often ends up offering an excellent reward in the end.

Categories
Candlestick patterns

Trading with Confidence Using Candlestick Patterns

Introduction

Introduction

Introduction

Previously, we had discussed how a group of different candlestick formations provides the necessary information to comprehend the market sentiment and evaluate the probability of a trend reversal, which could help traders in joining the start of the new trend. 

In this educational article, we’ll review how candlestick formations can be used to establish a trading strategy and which patterns could bring more confidence in the trading setups.

The Candlestick Patterns’ Usefulness

Candlestick patterns arise as a result of the price action at a determined range of time. Independently of the timeframe under visualization, e.g., weekly, daily, hourly, or even minute timeframe, the price never is a lagging indicator.  Furthermore, candlestick patterns tend to appear in every market and timeframe.

Trading Signals with Candlesticks Patterns

There exist a set of candlestick patterns that frequently appears in the financial markets across time, although the technical trader must consider the market context before consider if the candlestick represents a continuation or a reversion of the trend.

Hammer and Hanging Man

The hammer characterizes itself by presenting a large shadow and a small body located near the high of the day. When this pattern appears at the end of a bearish trend, it tends to be a bullish reversal signal.

When a hammer pattern shows up after a substantial descent, the technical trader may place a buy position on the next trading bar above the high of that hammer, placing its stop-loss below the low of the last day.

On the opposite side, the hanging man pattern arises when an uptrend ends. The sell setup will take place in the next session candle using the low of the hanging man candle as entry level, with a stop-loss above its high.

Engulfing Candlestick Pattern

The engulfing pattern is a formation constituted by two candles. The bullish engulfing pattern will occur at the end of a downtrend. During the trading session, the action takes place in a wide range. The price opens near the low of the day and closes near the high of the day, erasing the losses of previous trading session or sessions.

A bullish position will take place at the high of the previous day, with a stop-loss located below the low of the last trading session. A bearish position will occur at the low of the previous trading session, with a stop-loss order placed above the highest level of the engulfing candle.

Harami Pattern

The harami pattern tends to indicate the change of the trend only when it appears at the end of a bull or bear leg. The Harami is the weakest form of a reversal pattern. 

A buy position will trigger if the price breaks and closes above the high of the day of the narrow range candle during the next trading session, the stop loss is to be placed below the low of the session in progress.

A sell position will occur if the price breaks and closes below the narrow range candle, and its stop-loss may be located above the highest level of the harami candle.

Morning Star and Evening Star Pattern

Both the morning star as the evening star pattern are formations that hold three candlesticks for its configuration.

The Morning star pattern is a bullish trend formation, which will activate a buy position above the high of the last trading session, with its stop-loss below the low of the previous day or candle.

The evening star pattern is a bearish formation, which will trigger a sell position below the third candle of the pattern, its stop-loss placed above the high of the last trading session.

Conclusions

In this educational article, we presented a group of candlestick patterns, which could increase the confidence in an entry setup. However, although the formation provides an entry-level and stop-loss, these formations don’t identify a profit target level. This context could not ensure the technical trader a risk to reward ratio at least one to one, reducing the profitability of any candlestick pattern.

To reduce this variability on the expected results, we remark the Fischer and Fischer conclusions; they unveil the advantage of the use of candlestick formations compared to bar charts, stating that candlesticks are easier to understand and most useful for short-term traders.

Finally, they conclude that the most reliable candlestick formations are the engulfing pattern, hammer, and hanging man. In this context, the technical trader should consider that before ramping up a trading strategy based on candlestick formations, it’s recommended to evaluate its performance, developing a statistical backtest before jumping in the real-market.

Suggested Readings

  • Fischer, R., Fischer J.; Candlesticks, Fibonacci, and Chart Patterns Trading Tools; John Wiley & Sons; 1st Edition (2003).
Categories
Forex Price Action

H1-15M Combination Trading: Consolidation Level May Vary

In today’s lesson, we are going to demonstrate an example of an H1-15 chart combination trading. The price makes a strong bearish move in the daily chart. Then, it is trapped within two horizontal levels. Next, it makes a bullish breakout and ends up offering an excellent entry. Let us get started.

In today’s lesson, we are going to demonstrate an example of an H1-15 chart combination trading. The price makes a strong bearish move in the daily chart. Then, it is trapped within two horizontal levels. Next, it makes a bullish breakout and ends up offering an excellent entry. Let us get started.

In today’s lesson, we are going to demonstrate an example of an H1-15 chart combination trading. The price makes a strong bearish move in the daily chart. Then, it is trapped within two horizontal levels. Next, it makes a bullish breakout and ends up offering an excellent entry. Let us get started.

This is the H1 chart. The chart shows that the price is trapped within two horizontal levels. Upon having a bounce, the price heads towards the North. The buyers are to wait for the price to make a bullish breakout at the level of resistance. Let us proceed to the next chart.

The chart shows that the price heads towards the North and trades above the level of resistance upon making a bullish breakout. The H1-15M chart combination traders are to wait for the price to consolidate and produce a bullish reversal candle to offer them a long entry.

Here it comes. One of the candles comes out as a bearish engulfing candle. However, the next candle comes out as a bullish engulfing candle closing above consolidation resistance. The H1-15M combination traders may flip over to the 15M chart to trigger a long entry.

This is how the 15M chart looks, and it looks very bullish. The buyers are to wait for a bullish candle to close above the last candles to trigger a long entry. As far as the recent price action is concerned, it may not take too long to produce a 15M signal candle.

The chart produces two bearish candles and consolidates. The last candle comes out as a bullish engulfing candle closing well above consolidation resistance. The buyers may trigger a long entry right after the last 15M candle closes by setting a stop-loss order below consolidation support and by a take-profit target with 1R. Let us find out how the trade goes.

The price heads towards the North with good bullish momentum and hits 1R in a hurry too. It keeps going towards the North. It may extend its bullish wave as well. Ideally, the price is to consolidate around the breakout level.

In this example, the price consolidates way above the breakout level. It often happens in the H1 chart. It does not mean that we do not get the opportunity to take an entry. Chart combination trading may help us take entries in such a situation. Once a breakout takes place (H1 chart), we are to wait for the price to consolidate and produce a reversal candle. Then, we are to flip over to the 15M chart and wait for the trend continuation to trigger entry.

Categories
Forex Daily Topic Forex Price Action

If Double Bottom/Top Does Not Offer Entry, Wait for Triple Bottom/Top

In today’s lesson, we are going to demonstrate an example of double bottom support, which does not end up producing entry. However, the price comes back to the level of support again, and upon producing a triple bottom, support offers a beautiful trade setup. Let us get started.

In today’s lesson, we are going to demonstrate an example of double bottom support, which does not end up producing entry. However, the price comes back to the level of support again, and upon producing a triple bottom, support offers a beautiful trade setup. Let us get started.

In today’s lesson, we are going to demonstrate an example of double bottom support, which does not end up producing entry. However, the price comes back to the level of support again, and upon producing a triple bottom, support offers a beautiful trade setup. Let us get started.

This is the daily chart. The price makes a strong bearish move and bounces off at a level of support. It produces a bullish inside bar and heads towards the North. The price comes back to the level of support again upon producing a bullish engulfing candle. The buyers may flip over to the H4 chart for the price to consolidate and produce a bullish engulfing candle to trigger a long entry.

We are still on the daily chart. The H4 chart does not consolidate or produce a bullish reversal candle. On the daily chart, the price comes down again and consolidates around the level of support. Both the buyers and the sellers are to wait for the price to see what it does. Does it produce a bullish reversal candle, or does it make a bearish breakout?

The chart produces a bullish engulfing candle at the level of support again. It has become a level of triple support. Thus, the buyers may be more interested in going long in the pair. The buyers may flip over to the H4 chart now.

This is how the H4 chart looks. The last candle comes out as a hammer. The buyers are to wait for a bullish engulfing candle to trigger a long entry. Let us proceed to the next chart to find out what the price does.

The price consolidates for four more H4 candles. At last, it produces a bullish engulfing candle closing well above consolidation resistance. It takes a long time to produce the signal candle, but it does just before the day ends. It is a valid signal. The buyers may trigger a long entry right after the last candle closes by setting take profit with 1R.

The price heads towards the North with good momentum and hits the target. The extreme bullishness of the signal candle makes the price hit the target in a hurry.

If we look back, when the chart produces the first bullish engulfing candle at the level of double bottom support, it does not end up offering an entry. When it bounces again at the same level of support, it ends up offering an entry. This is what may happen more often than traders think. If a buyer leaves the chart when it does not offer entry, he will lose the chance to make a profit from the trade setup that we have demonstrated here.

Categories
Forex Market Analysis

Daily F.X. Analysis, July 09 – Top Trade Setups In Forex – Trade Plans to Follow! 

On the news front, traders will keep their focus on the German trade balance, and U.S. Jobless Claims data in order to predict further price action in the market. Both events are expected to perform better than before and may help positive moves in the U.S. dollar.

On the news front, traders will keep their focus on the German trade balance, and U.S. Jobless Claims data in order to predict further price action in the market. Both events are expected to perform better than before and may help positive moves in the U.S. dollar.

On the news front, traders will keep their focus on the German trade balance, and U.S. Jobless Claims data in order to predict further price action in the market. Both events are expected to perform better than before and may help positive moves in the U.S. dollar.

Economic Events to Watch Today 

 

EUR/USD – Daily Analysis

A day before, the EUR/USD pair was closed at 1.13294 after placing a high of 1.13516 and a low of 1.12621. Overall the movement of the EUR/USD pair remained bullish throughout the day. The EUR/USD pair rose on Wednesday due to the U.S. economy’s gloomy look after a rising number of infection cases from the U.S. Despite growing fears over a possible second wave of coronavirus in the U.S., the market’s risk sentiment improved. Investors have weighed hopes in favor of a swift economic recovery despite signs of a pandemic resurgence.

The Greenback has been increasingly compromised by the growing doubts over its safe-haven status, as the Chinese economy was improving quickly while the U.S. was still facing the prospect of the second wave. The EUR/USD pair edged higher on Wednesday against the U.S. dollar despite concerns that Eurozone’s economy could be headed for an additional recession than previously forecasted.

According to E.U. Commission Vice President Valdis Dombrovski, the European economy was facing many risks, including the second wave of coronavirus. The report of the E.U. Commission indicated that the rising number of infection cases in the U.S. and other markets had deteriorated the global outlook, and it could drag the European economy with itself.

However, in the absence of Eurozone economic data on Wednesday and the presence of safe-haven demand, the investors lost confidence in the U.S. dollar because of America’s struggling economy. And with the Euro being a direct competitor of the U.S. dollar, investors turned towards it and benefited single currency Euro, which ultimately pushed the EUR/USD pair.

On Wednesday, Spain and Italy’s leaders called for a strong response from the European Union to the economic crisis triggered by COVID-19. Ten days ahead of the E.U. Summit, where leaders of member countries will try to reach a deal on 750 B euros COVID-19 recovery package and the long-term E.U. budget, Italian PM met its Spain counterpart on Wednesday. 

On the other hand, German Chancellor Angela Merkel on Wednesday urged E.U. countries to show unity and overcome differences to approve a massive coronavirus recovery plan in E.U. Summit. However, the gains were limited due to recent forecasts of and 8.7% contraction in the Eurozone economy this year. This weighed on the single currency and limited the daily gains in EUR/USD pair.

On Thursday, Euro traders will look forward to the release of German Trade data. Any improvement in the Eurozone powerhouse economy export will push the pair EUR/USD higher further. Meanwhile, the U.S. employment data will be under close observation by the traders to take fresh impetus. The EUR/USD pair will be driven by Eurozone economic data for the rest of the week. Any signs of economic recovery in the Eurozone area will provide support to the persisting gains.

Daily Support and Resistance

  • R3 1.1459
  • R2 1.1406
  • R1 1.1368

Pivot Point 1.1315

  • S1 1.1278
  • S2 1.1224
  • S3 1.1187

EUR/USD– Trading Tip

The EUR/USD pair has violated the triple top resistance level of 1.1340 level, and above this, the pair has the potential to go after the 1.1405 resistance area. A bullish breakout of 1.1405 level can extend buying until 1.1489. Stay tuned to our forex signals; we will share more signals as soon as the market shows some movement. 

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.26092 after placing a high of 1.26229 and a low of 1.25085. Overall the movement of GBP/USD pair remained bullish throughout the day. The GBP/USD exchange rate rose for the 4th consecutive day on Wednesday and reached 1.26229 level on the back of decreased demand for the U.S. dollar and a new stimulus package from the U.K. government.

The UK Chancellor Rishi Sunak said on Wednesday that U.K. would cut VAT on hospitality as part of a 3 Billion British Pound plan to prevent mass unemployment that was caused by the coronavirus pandemic.

He also announced that the U.K. government would pay firms a 1000 pounds bonus for every staff member they kept for three months when the furlough scheme will end in October. He also announced a scheme which will give 50% off to the people dining out in August. He added that he would cut VAT on food, accommodation, and attractions from 20% to 5% from next Wednesday. Mr. Sunak warned that hardships were ahead but also vowed that no-one would be left without hope.

The Chancellor refused to extend the furlough scheme beyond October as it would provide false hope to people that they will return to their jobs. Longer, the people remain on furlough; the more likely their sill could fade.

Mr. Sunak said that the U.K. would cut stamp duty on house purchases of up to 500,000 British pounds. The government will also invest an extra 1B pound in the work & pension department to support unemployed people.

After the 30 B pound stimulus package announcement, the GBP currency got some support and lifted GBP/USD pair a little.

On Brexit front, the U.K. government was seeking to agree “special provisions” with the European Union over food supply to Northern Ireland from the U.K. This provided some optimism over the Brexit and compromised deal. However, prospects of no-deal were also there in the market as the U.K. has said that it would go for Australian-style agreement if the end of the transition period secured no deal.

Meanwhile, the U.S. dollar was under pressure as its safe-haven status was compromised due to the pandemic’s struggling American economy. The U.S. Dollar Index was slipped 0.5% at 96.40 on Wednesday and weighed on the U.S. dollar. The weak U.S. dollar in the wake of an increased number of coronavirus cases from the U.S. gave a push to the already increasing GBP/USD pair on Wednesday.

 Daily Support and Resistance

  • R3 1.277
  • R2 1.2697
  • R1 1.2654

Pivot Point 1.2581

  • S1 1.2538
  • S2 1.2465
  • S3 1.2421

GBP/USD– Trading Tip

The GBP/USD is trading with a bullish bias, especially after violating the resistance level of 1.2570 level. For now, this level is working as support, and the Cable can show further bullish bias above 1.2570 level to lead the GBP/USD pair towards 1.2680 level. The MACD and RSI are holding in a buying zone and the 50 EMA, which also supports the pair’s buying trend. The recent candles are also bullish, as it seems like the traders are looking to enter fresh long entries over 1.2630 level. Let’s consider taking buying trades today. 

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 107.257 after placing a high of 107.709 and 107.200. Overall the movement of the USD/JPY pair remained bearish throughout the day. On Wednesday, at the Department of Education, U.S. Vice President Mike Pence claimed progress against COVID-19 even the infections topped 3 Million in numbers. In reply to the hiked number of cases from Florida, Arizona, and Texas, Mike Pence said that these were the early indications of a percent positive testing.

Pence joined President Trump in his push for reopening schools as it was needed not just for educating kids but also for the workforce and providing essential services. He also announced plans for new CDC guidelines after President Trump criticized public health agency for its impractical instructions to reopen schools. Donald Trump warned schools on Wednesday that if they do not open in fall 2020 due to coronavirus pandemic, he may cut off government funding.

Pence said that the national death rate from coronavirus was lowered compared to before and said that early indications for positive testing from three major states were flattening. Pence and Trump’s statement pushed he equities back into upward trend and decreased the demand for safe-haven U.S. dollar, downed the U.S. Dollar Index to 96.47 level, and added in the downward trend of USD/JPY.

The U.S. dollar was already under pressure due to the rising number of coronavirus cases, which affected the U.S. economic outlook as it was struggling heavily to fight the pandemic. This compromised the safe-haven U.S. dollar status, and hence U.S. dollar lost its demand in the market, which dragged the USD/JPY pair with itself.

However, the safe-haven Japanese Yen was stronger against the U.S. dollar on the back of increased demand for safe-haven during uncertainty related to coronavirus and positive macroeconomic data from Japan on Wednesday, which helped to add losses in USD/JPY pair. On the data front, at 4:50 GMT, the Bank Lending for the year from Japan surged to 6.2%from the forecasted5.0% and supported the Japanese Yen, which ultimately pushed the already rising USD/JPY pair prices further.

The Current Account Balance from Japan showed a surplus of 0.82T against the forecasted 0.71T and supported the Japanese Yen. At 10:00 GMT, the Economy Watchers Sentiment for June from Japan also increased to 38.8 from the forecasted 24.7 and supported Japanese Yen that added in the bearish trend of USD/JPY pair.

Support and Resistance    

  • R3 108.1
  • R2 107.91
  • R1 107.59

Pivot Point 107.39

  • S1 107.07
  • S2 106.87
  • S3 106.55

 

USD/JPY – Trading Tips

The USD/JPY is consolidating in a wide trading range of 107.800 to 107.250. At the moment, the pair is trading with a selling bias of below 107.80 resistance. On the hourly charts, the USD/JPY is dropping below 50 periods EMA, which supports the Japanese pair’s selling bias. It seems like we have a margin to capture quick 25 pips in USD/JPY as the pair moves within a sideways range and has odds of the testing support level of 107.250. Good luck! 

Categories
Forex Chart Basics Forex Daily Topic Forex Price-Action Strategies

Spotting Out Support/Resistance is an Art

Support/Resistance levels are one of the most important factors in trading. In today’s lesson, we are going to demonstrate an example of adjustment in determining the support/resistance level.

Support/Resistance levels are one of the most important factors in trading. In today’s lesson, we are going to demonstrate an example of adjustment in determining the support/resistance level.

Support/Resistance levels are one of the most important factors in trading. In today’s lesson, we are going to demonstrate an example of adjustment in determining the support/resistance level.

Forex market gets volatile from time to time. It often produces spikes. Sometimes traders have to count those spikes to determine support/resistance level, and sometimes they do not have to do that. We try to learn when we have to count, and when we do not have to count those.

This is an H1 chart. However, any chart may look like this. If we are to draw support/resistance levels here, we may find out the two most significant points where the price bounces and where it gets a rejection from. Let us proceed to the next chart with those two lines.

Look at the level of drawn support. The price bounces at the level and produces a bullish inside bar. It comes back at the level and bounces twice. At the second bounce, it produces a long lower shadow and heads towards the North. We may skip counting the spike here and draw the level of support at where the price produces a bullish inside bar and bounces twice later.

Look at the level of resistance. This is where we have counted spikes since the price reacts at the level earlier. However, we may have to adjust it later. We will be able to find this out later as far as price action is concerned.

When the price comes back down, it breaches the level of support and produces a good bullish candle. However, there is a gap, and the price goes back within the previous level of support. Thus, we may still consider the drawn level as a significant level of support.

The price heads towards the North and breaches the level of drawn resistance. The price comes back within the drawn level again. The drawn level is still a significant level of resistance since the price reacts to it. However, we have a new highest high, which must be counted.

The price heads towards the South and reacts to the level of drawn support again. Upon producing a bullish inside bar, it heads towards the North again. Here are two questions.

  1. Where would you set your take profit level as a buyer?
  2. Do you have anything else to do here?

As a buyer, you may consider taking your profit at the previously drawn level. Here we have drawn the level of resistance with a little adjustment. Have you noticed it? Yes, this is what you have to do. Spotting out significant points and monitoring price action around them are two most important things to be able to make adjustments with the support/resistance level. To be able to trade accordingly, we often need to do this. Thus, we must learn the art of adjusting the support/resistance level.

Categories
Forex Assets

Examining The Volatility Of CHF/TRY Forex Exotic Pair

Introduction

Introduction

Introduction

The abbreviation of CHF/TRY is Swiss Franc, paired with the Turkish Lira. In this pair, CHF is the official currency of Switzerland and is also the fifth highly traded currency in the Forex Exchange market. In contrast, TRY stands for the Turkish Lira, and it is the official currency of Turkey. This pair is classified as an exotic pair.

Understanding CHF/TRY

In the Foreign exchange market, to determine the relative value of one currency, we need an alternative currency to evaluate. Hence, when we are buying a currency (base) we are simultaneously selling one (the quote currency). The market value of CHF/TRY helps us to understand the power of TRY against the CHF. So, if the trade rate for the pair CHF/TRY is 7.1972, it means to buy 1 CHF, we need 7.1972 TRY.

CHF/TRY Specification

Spread

Spread is the distinction between the ask-bit price that is set at the exchanges. Below are the spread values of the CHF/TRY currency pair in both ECN & STP accounts. The spread charges for ECN and STP brokers for the CHF/TRY pair can be found below.

ECN: 35 pips | STP: 40 pips

Fees

For every position, a trader enters the stockbroker charges some fee for it. Traders must know that this fee is charged only on ECN accounts and not on STP accounts.

Slippage

Slippage is the price difference between the trader’s execution and at which the broker executed the price. The difference is because of the high market volatility and slow execution speed.

Trading Range in CHF/TRY

A trading range is the interpretation of the volatility in CHF/TRY in several timeframes. The values are obtained from the Average True Range indicator. One can use the table as a risk management tool to identify the profit/loss that a trader is possessed.

Below is a table indicating the minimum, average, and max volatility (pip movement) on various timeframes.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

CHF/TRY Cost as a Percent of the Trading Range

The total cost of the trade fluctuates based on the volatility of the market. So, we must figure out the occasions when the costs are less to place ourselves in the market. Below is a table demonstrating the variant in the costs based on the change in the volatility of the market.

Note: The percentage rates represent the relative scale of costs and not the fixed costs on the trade.

ECN Model Account

Spread = 35 | Slippage = 5 | Trading fee = 8

Total cost = Slippage + Spread + Trading Fee = 5 + 35 + 8= 48

STP Model Account

Spread = 40 | Slippage = 5 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 5 + 40 + 0 = 45

The Ideal way to trade the CHF/TRY

Volatility and cost are the two components traders take into consideration for trading any security in the market. With the assistance of the above tables, let us evaluate these two factors to trade the CHF/TRY Forex pair.

As we can see, the pip variation is significantly high between the minimum volatility and the average volatility in each timeframe. As a day trader, our aim is to make income from the market’s pip movement. But, if there is hardly any movement in the price, it becomes tricky to make profits from the market. Thus, it is ideal to trade when the volatility is at the average value.

The cost of trade rises as the volatility decrease. They are inversely proportional. In other words, highly volatile markets have minimum costs. Though it is quite risky to trade markets with higher volatility, it can be considered by aggressive traders with optimal money management techniques in place as the costs are low. Hence, to retain a balance among the cost and volatility, traders may find trading occasions when the volatility is near the average values or a little above it.

Categories
Forex Price Action

Do Not Abandon a Chart with Choppy Price Action

In today’s lesson, we are going to demonstrate an example of a chart where the price gets caught within two horizontal levels and makes a bullish breakout. We try to find out what it has to offer and how the price action goes. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart where the price gets caught within two horizontal levels and makes a bullish breakout. We try to find out what it has to offer and how the price action goes. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart where the price gets caught within two horizontal levels and makes a bullish breakout. We try to find out what it has to offer and how the price action goes. Let us get started.

The price makes a strong bullish move. Upon finding its resistance, it is in a bearish correction. The buyers may eagerly wait to go long in a chart like this if the chart makes a breakout at the last highest high. The last two candles come out as bullish candles. It seems that the price may have found its support.

The chart shows that two lines may be drawn by using significant levels, where the price reacts several times. The buyers may eye on the price and hope that the chart makes a breakout at the level of resistance to offer them a long entry.

The chart shows that it does not make a breakout at the highest high. However, it gets rejection and makes another bearish move towards the level of support. Here is an interesting thing. The sellers may wait for the chart to make a breakout and offer them a short entry here since the level is a double top resistance.

The chart does not make a breakout, but it produces a long bullish engulfing candle. It gets rejected again and heads towards the South. Upon having a bounce, it heads towards the North. Two horizontal levels may be drawn, which is called horizontal channel or box channel. The price may go either way. Now, the buyers are to wait for a bullish breakout and go long in the pair.

After a long while, the chart makes a bullish breakout. The buyers may wait for the price to make a correction/consolidate and produce a bullish reversal candle to offer them a long entry.

The price makes a bearish correction and seems to have found its support. It produces a doji candle. The buyers may get ready to trigger a long entry. Some buyers may flip over to the smaller chart to trigger a long entry, and some may go long above the last highest high. Some may wait for a bullish engulfing candle closing above resistance. It depends on their trading strategy.

The chart produces a bullish engulfing candle closing above consolidation resistance. The price may head towards the North with good bullish momentum as far as the last candle’s attributes are concerned.

The price heads towards the North and hits 1R within the next candle. The last candle comes out as a bearish inside bar. It suggests that the price may consolidate and make a bearish correction. In the end, the buyers have made some green pips.

The market ranges most of the time. When it makes a breakout, it does not take too long to offer an entry. In today’s lesson, we have seen that the price makes us wait for a long. It takes a long time to make a breakout. Traders must keep their eyes on such charts and wait for the price to take a direction. In the end, even a choppy chart may end up offering a good entry too.

Categories
Forex Daily Topic Forex Price Action

Double Top or Double Bottom Often Offers More

In today’s lesson, we are going to demonstrate an example of a chart offering multiple entries upon producing the double bottom. We know the double bottom is one of the strongest bullish reversal patterns. When a chart produces a double bottom, price action traders keep their eyes on the chart to keep going long. Usually, a double top or a double bottom ends up offering multiple entries. Let us now have a look at today’s example of how it offers us multiple entries.

In today’s lesson, we are going to demonstrate an example of a chart offering multiple entries upon producing the double bottom. We know the double bottom is one of the strongest bullish reversal patterns. When a chart produces a double bottom, price action traders keep their eyes on the chart to keep going long. Usually, a double top or a double bottom ends up offering multiple entries. Let us now have a look at today’s example of how it offers us multiple entries.

In today’s lesson, we are going to demonstrate an example of a chart offering multiple entries upon producing the double bottom. We know the double bottom is one of the strongest bullish reversal patterns. When a chart produces a double bottom, price action traders keep their eyes on the chart to keep going long. Usually, a double top or a double bottom ends up offering multiple entries. Let us now have a look at today’s example of how it offers us multiple entries.

This is an H4 chart. The chart shows that the price heads towards the South with good bearish momentum. It makes a long bearish move too. However, look at the last candle in the chart. It comes out as a bullish inside bar, which is produced at double bottom support. The buyers are to wait for a breakout at the neckline and go long in the pair.

The chart shows that one of the candles breaches through the neckline level. The next candle comes out as a bullish candle. The buyers are to wait for the price to consolidate and produce a bullish reversal candle to go long in the pair.

Upon producing a bearish inside bar, the price produces a bearish candle. The last candle looks very bearish. However, the buyers must keep their eyes on the chart since it may produce a bullish reversal candle anytime as far as double bottom and neckline breakout are concerned.

The chart produces a bullish reversal candle followed by another bullish candle breaching through consolidation resistance. The buyers may trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R.

The price heads towards the North with good bullish momentum. It hits 1R within the next candle. The price consolidates and produces a bullish reversal candle closing above the last swing high. Do you notice anything here? Yes, this is another entry. The buyers may trigger a long entry right after the last candle closes. Let us have a look at the trade setup with two horizontal lines on the chart.

The price heads towards the North again and hits 1R within the next candle. It seems that the buyers are having a feast here. The way it has been going, they may wait for the price to consolidate again and produce another bullish reversal candle to offer them one more entry. In a word, this is a chart that is going to be closely monitored by the buyers until it produces a strong bearish reversal pattern such as a double top or a bearish engulfing candle on the daily chart (this is an H4 chart). Next time when you see a double top or bottom on a chart, keep eyeing on the chart to make full use of that.

 

Categories
Forex Elliott Wave Forex Market Analysis

DAX Remains Bullish

The German index DAX 30 advances in an upward Elliott wave sequence that suggests more upsides in the following trading sessions.

The German index DAX 30 advances in an upward Elliott wave sequence that suggests more upsides in the following trading sessions.

The German index DAX 30 advances in an upward Elliott wave sequence that suggests more upsides in the following trading sessions.

DAX, in its mid-term Elliott wave outlook illustrated in the 4-hour chart, reveals the recovery that the German index develops in an incomplete zigzag pattern, which corresponds to wave B of Minor degree.

According to the Elliott Wave theory, a zigzag pattern is a corrective formation subdivided into a five-three-five sequence (5-3-5)

Once DAX 30 price had topped at its all-time high of 13,828.8 pts, it began a sharp selloff that ended on the March 19th low at 7,957.6 pts. Then, the German index began to show recovery signals, developing a bullish sequence into five waves of Minuette degree labeled in blue, which ended on April 30th at 11,340.1 pts. This movement led the DAX 30 to complete wave ((a)) of Minute degree labeled in black.

On the other hand, as the price advanced in the first part of the corrective wave, on the RSI oscillator, we observe that the leading indicator surpassed the 60 level and found support at 40, confirming the bullish bias of the corrective structure. At the same time, the progress in the wave ((b)) of Minute degree labeled in black pierced bellow the 40 level, leading us to confirm the end of the three-wave movement.

Once the German index completed its wave ((b)), the market participants kept pushing the price upwards, increasing the bullish momentum of wave (iii) of Minuette degree which jumped up to 12,398 pts on June 08th, reaching its highest level since February 26th. After this high, DAX 30 started to develop its wave (iv) that elapsed until June 29th when the price began to advance in a new upward sequence, which currently looks incomplete.

In the 4-hour chart, we distinguish the DAX30 moving in an incomplete bullish sequence, which could be advancing in its wave iii of Subminuette degree labeled in green. On the other hand, the bullish breakout and consolidation observed in the RSI oscillator over the 60-level lead us to maintain our outlook for further upsides on the German index for the following trading sessions.

The projection made using the Fibonacci extension from the wave ((a)) lead us to foresee a rally continuation that could find resistance at 13,544.3 pts, which coincides with the 100% of Fibonacci extension. In other words, this bullish continuation could complete the 100% of equal waves between waves ((a)) and ((c)). There exists a possibility that the German index continues advancing further to 14,464.3 pts, corresponding to 127.2% of the Fibonacci extension.

In conclusion, our main outlook foresees more upsides for the following trading sessions. Furthermore, the bullish outlook will be valid while the German index remains above 12,085.5 pts, which coincides with the end of wave ii of Subminuette degree identified in green. If this scenario happens, it would be indicative that the wave (iv) is incomplete, and DAX 30 will continue consolidating, as the bullish pressure would decrease over time.

Categories
Forex Chart Basics

How to Establish a Trading Strategy Using Trend Lines and Channels

Introduction

Introduction

Introduction

On financial markets, the price moves basically in three types of trends identified as bullish, bearish, and sideways. Both trend lines as channels allow the “trend following” investor to recognize if the market’s direction changed or if the price action accelerated.

In this educational article, we’ll review how trend lines and channels can help establish a trading strategy.

Trend Lines and Trend Channels

In a price chart, the trend can be described as a price variation across time in a specific and identifiable direction. A trend is said to be bullish when the price creates a succession of higher peaks and higher valleys. On the contrary, in a bear trend, the price action tends to create a sequence of lower peaks and lower valleys. If the market runs in a consolidation stage, developing an overlapped structure, the price moves in a sideways or lateral trend.

When the price action develops an uptrend, the chart analyst projects the trend line connecting the lower highs sequence. In a bearish trend, it is customary that the projection links the lower highs sequence. The following figure illustrates how to trace a trend line. 

In the above figure, the 1-2-3 sequence represents the movement developed by the price action in an uptrend (left) and downtrend (right). When price breaks below (or above) of the trend line, as shown in (4), the price action reveals the potential change in the primary trend. The confirmation of this change comes determined by the retracement that experiences the price, which here tests the trend line and continues in the new trend’s direction, making a higher high.

Trend channels could be considered as a dynamic price range that follows the rhythm of a trend; this technical formation could be bullish or bearish. To draw a trend channel, it’s necessary three points, in an uptrend, two lows and one peak. The channel baseline is the trend line that connects the origin of the movement with the second low. The upper line will be the projection of the baseline traced from the peak between two lows as exposes the following figure.

In an uptrend, the breakout after the second low completion (see figure 01) provides a confirmation signal of the bullish trend continuation. This entry setup for the third movement has its potential target located at the upper line of the channel, acting as a dynamic resistance.

Phi-Channels

Phi-channels is a different type of channel and varies from the trend channel. The main difference with trend channels is that on Phi-channels, the guideline connects the extremes from the origin of the movement with the top of the move identified as 3. Then, parallel lines are projected, creating the channel, using point 2 to trace the channel’s parallel line, as shown in the next figure. 

The resulting projection provides potential turning points, which could offer entry setups combined with other technical tools.

Conclusions

In this educational article, we have seen the use of trend lines and channels that can help establish a trading strategy based on tracking the trend.

In general, the use of trend lines and channels is aimed at seeking to take advantage of the continuity of the trend over the turn of the market’s direction. In this sense, it is convenient to recall the Dow Theory principle, which states that a trend will remain in effect until there is confirmation of its change.

In this context, the use of Phi-channels provides potential areas where the price could react to continue the course of the primary trend, although its use should be supported with other analysis tools.

In the next article, we will look at how to apply the analysis tools to create trading signals.

Suggested Readings

  • Fischer, R., Fischer J.; Candlesticks, Fibonacci, and Chart Patterns Trading Tools; John Wiley & Sons; 1st Edition (2003).
Categories
Forex Price Action

How Market Tests You and What You May Learn from It

In today’s lesson, we are going to demonstrate an example of a daily-H4 chart combination trading, which has a good lesson to give us. Usually, daily-H4 combination traders look for a strong reversal candle in the daily chart. Then, they flip over to the H4 chart to trigger entry upon consolidation and a signal candle. We get all these in our today’s example, but the price acts a bit differently after triggering the entry. Let us proceed to find out what happens there.

In today’s lesson, we are going to demonstrate an example of a daily-H4 chart combination trading, which has a good lesson to give us. Usually, daily-H4 combination traders look for a strong reversal candle in the daily chart. Then, they flip over to the H4 chart to trigger entry upon consolidation and a signal candle. We get all these in our today’s example, but the price acts a bit differently after triggering the entry. Let us proceed to find out what happens there.

In today’s lesson, we are going to demonstrate an example of a daily-H4 chart combination trading, which has a good lesson to give us. Usually, daily-H4 combination traders look for a strong reversal candle in the daily chart. Then, they flip over to the H4 chart to trigger entry upon consolidation and a signal candle. We get all these in our today’s example, but the price acts a bit differently after triggering the entry. Let us proceed to find out what happens there.

It is the daily chart. The chart shows that the price produces a bullish engulfing candle at a level of support where the price bounces several times. The combination traders may flip over to the H4 chart now and wait for the price to consolidate and produce a bullish reversal candle.

This is how the H4 chart looks. It looks very bullish. The last candle comes out as a bullish candle closing within a level, where the price gets rejection twice. The pair may consolidate here.

The pair produces a bearish engulfing candle. This is a strong bearish reversal candle. However, the H4 buyers must not lose their hope since the last daily candle comes out as a bullish candle. They must wait with hope.

The next candle comes out as a bullish engulfing candle closing above the level of resistance. The buyers may go trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R. Typically, this is an ideal price action to go long for the daily-H4 chart combination traders. Let us proceed to the next chart to find out what happens next.

The next candle comes out as a bullish pin bar. Look at the lower shadow. The price is about to hit the stop loss. However, if the stop loss is set here accordingly, the entry is safe. Nevertheless, the last candle comes out as a surprise for the buyers. It has three lessons to give us. We will learn them in the conclusion. Meanwhile, let us find out how the entry goes.

The price then heads towards the North with a moderate pace and hits the target. The combination traders make some profit out of the trade. It is good. Let us now find out what those three lessons are.

  1. Look at the daily chart again. See the price consolidates within two horizontal levels. There are two resistances. It means the price does not have enough space to travel towards the North as far as the daily chart is concerned. It may have held some buyers in the H4 chart back to go long in the pair.
  2. Set your stop loss accordingly with some safety pips as well.
  3. Be patient. If a trade does not go according to your expectation, do not panic.

 

Categories
Forex Videos

Forex Expiry Options Review 19-06- 2020! Making Forex Easy!

https://youtu.be/U4Ku8-fx5xU

https://youtu.be/U4Ku8-fx5xU

 

FX Options Market Combined Volume Expiries. A weekly retrospective review for the financial week ending: 19, 06, 2020

 

Hello everybody and thank you for joining us for the daily FX Options Market Combined
Volume Expiries review for the trading week ending on Friday, 19th June 2020. Each week we will bring you a video taking a look back at the previous week’s FX option expiries and how they may have attributed to price action leading up to the maturities which happen at 10 a.m. Eastern Time, USA.

If it is your first time with us, the FX currency options market runs in tandem with the spot FX market, but where traders typically place Call and Put trades on the future value of a currency exchange rate and these futures contracts typically run from 1 day to weeks, or even months.


Each morning, from the FA website, our analyst, Kevin O’Sullivan, will bring you details of the notable FX Options Market Combined Volume Expiries, where they have an accumulative value of a minimum of $100M + and where quite often these institutional size expiries can act as a magnet for price action in the Spot FX arena leading up to the New York 10 a.m. cut, as the big institutional players hedge their positions accordingly.

Kevin also plots the expiration levels on to the relevant charts at the various expiry exchange rates and colour codes them in red, which would have a high degree of being reached, or orange which is still possible and where these are said to be in-play. He also labels other maturities in blue and where he deems it unlikely price action will be reached by 10 a.m. New York, and thus they should be considered ‘out of play.’ Kevin also adds some technical analysis to try and establish the likelihood of the option maturities being reached that day. These are known as strikes.
Please bear in mind that Kevin will not have factored in upcoming economic data releases, or policymaker speeches and that technical analysis may change in the hours leading up to the cut.
So let’s look at a few of last week’s option maturities to see if they affected price action. Firstly, there were no notable options for Monday 15th June.


There were two expiries for the Euro US Dollar pair at 1.1260 and 1.1300.
Kevin said that the pair was oversold during the early morning session. And that the likeliest candidate would be a strike for the 1.1260 one.


Here we can see that price action gravitated around the 1.1260 level during the late morning and early US session.


And we can see that the spot price was 1.1277 at the cut. Just 17 pips away.

The second set of option expiries were with the USD Japanese Yen pair. And here is the early market analysis. Kevin suggested the price action would remain at the current levels as the two expiries were close to the spot price, and they were large in value.

And here we can see price action did as expected.


And here we can see the price action at the 10 a.m. cut was 107.38 which was 23 pips
above the 107.15 option.


Tuesday the 16th saw two maturities at 1.1300 and 1.1250 and where the emphasis was placed on the bull trend with the caveat that there was ZEW data coming from Germany and Retail sales from the USA, which came in much stronger than expected and gave the Dollar a lift. As such, the pair’s bull run faded.


The price action left a huge void, and the pair drifted lower, reaching 1.1269 at the cut, just 31 pips lower than the 1.1300 maturity.


There was also a maturity at 107.30 for the USD Japanese yen pair, and the analysis was that the pair was in a tight consolidation phase.


At the time of the cut, the pair hit 10742, just 12 pips away from the maturity and in line with the analysis as provided by Kevin


On Wednesday, there were two option expiries for the USD Japanese yen pair as e can see here, and Kevin suggested that price action was in a continual sideways consolidation period and likely to remain there.


At the time of the cut, the exchange rate was 107.26. Just a single pip away from the maturity at 107.25. remember some brokers will have been quoting 107.25 in which case this is likely to have been a strike.


DolCAD had a maturity at 1.3500 on Wednesday.


Price action maintained the downward pressure but eventually broke out of the wedge to the
upside and hit 1.3563 at the cut.


Also, on Wednesday, there was a maturity for the EUR GBP pair. Kevin’s analysis suggested

that the pair was overbought and likely to pull back to the 0.8925 option maturity.


Here we can see that price action did indeed pull lower. A nice trade had you gotten in and sold the pair in the morning. Price fell to within 13 pips of the maturity and remained in a downward trend well into the European and US session.


However, here we can see that the exchange rate at the cut was 0.8946, just 20 pips higher.


Turning our attention to Thursday, we have three option expiries for the USD Japanese Yen pair. And this is Kevin’s analysis at around 8 a.m. BST, where he calls all three as out of play and suggests price action will conform to the support becoming resistance theory.


Let’s fast forward, and we can see price action did exactly what was expected, it followed the support becoming resistance pattern, and all three options remained out of play.


And here, we can see that the exchange rate was 106.76 at the cut.

Still, with Thursday, there were three options with EURO USD, and Kevin’s early analysis was that price would likely come for a retest of the 1.1200 level if the 1.1250 could be breached. If not, the two red options would remain in play.


Fast forward a few hours, and we can see that 1.1250 was breached, and that price action did test the 1.12 level.


Before the exchange rate hit 1.1212 at the time of the cut.

Please remember, Kevin’s technical analysis is based on exchange rates, which may be several hours earlier in the day and may not reflect price action at the time of the maturities.
We suggest you get into the habit of visiting the FA website each morning just after 8 a.m. BST and take the levels and plot them onto your own trading charts and incorporate the information into your own trading methodology in order to use the information to your advantage.
Remember, the higher the amount, the larger the gravitational pull towards the exchange rate maturity at 10:00 a.m. Eastern time.
For a detailed explanation of FX options and how they affect price action in the spot forex market, please follow the link to our educational video.

Categories
Forex Daily Topic Forex Price Action

Evaluate Whether the Chart Belongs to Your Strategy or Not?

In today’s lesson, we are going to demonstrate an example of an H1 chart, where the price makes a bearish breakout and produces a bearish reversal candle upon making a bullish correction. However, things do not go as the sellers would like. Let us find out what happens and what the reason may imply.

In today’s lesson, we are going to demonstrate an example of an H1 chart, where the price makes a bearish breakout and produces a bearish reversal candle upon making a bullish correction. However, things do not go as the sellers would like. Let us find out what happens and what the reason may imply.

In today’s lesson, we are going to demonstrate an example of an H1 chart, where the price makes a bearish breakout and produces a bearish reversal candle upon making a bullish correction. However, things do not go as the sellers would like. Let us find out what happens and what the reason may imply.

The chart shows that the price produces two bearish candles consecutively. The level of support seems to be a strong one. It may produce a bullish reversal candle and push the price towards the North. However, the sellers may wait for the price to make a bearish breakout at the level of support.

Here it comes. The next candle breaches the level of support closing well below the level. This is one good-looking breakout candle. The sellers are to wait for the price to consolidate or make a bullish correction to produce a short signal.

The price makes a bullish correction. The last candle closes within the breakout level. Please pay attention to the number of candles the chart uses to make the bullish correction. The chart takes five candles to complete the correction. It means the level of support has become H4 support. Let us proceed to the next chart.

The chart produces a bearish inside bar. This is a bearish reversal candle, of course. However, the question may be raised here whether the sellers take a short entry depending on the H1 chart or not? Let us assume that a seller triggers a short entry by setting stop-loss above the breakout level.

The next candle comes out as a bearish candle. However, the last candle comes out as a bullish engulfing candle. The level is H4 support now. Thus, the buyers may look to go long in the pair and drive the price towards the North. It does not look good for the seller. The price may hit stop loss.

The next candle comes out as a strong bullish candle closing well above the breakout level. The short entry has been wiped off. If we consider the sequence bearish breakout, bullish correction, bearish reversal candle at the breakout level, it seems perfect to go short in the pair. What goes wrong here? In the Forex market, any entry may go wrong. However, over here, the H1 sellers may miss the point that the support is not H1 support anymore. It is H4 support since the level of support holds five candles. This is why the H1 traders may skip taking the short entry in this chart. It often happens in combination trading that traders forget to calculate or synchronize the chart that they are trading at. However, to be successful in trading, traders must not miss this point.

Categories
Forex Signals Forex Videos

Free Forex Signals App! – Forex Academy’s FA Signals App Now Available For Android & IOS

https://youtu.be/bHdkd101dHw

https://youtu.be/bHdkd101dHw

Welcome to our Forex Academy Signals app!

 

It is a pleasure to announce the FA signals app! Available in iOS and Android, the FA Signals app is a terrific complement to our Forex Academy Signals service, that started on March 20 and which has currently accumulated a total of 3,319 pips and 68.53% winning accuracy.

The FA Signals app will allow our users to get timely signal notifications for them to profit from our pro approach to trading. In this article, we will explain the symbols and working of the app so that you can benefit from it.

The app was devised as a notification tool; therefore, it is quite simple. But we wanted to pack as much information as possible in it, so we created specific icons to compress the information and make it available at a glance.

In the figure below, we can see the main layout of the FA Signals app. We can see a series of icons on the left column that explain the type and direction of the trades. The top of the app shows the legend:

Spot Buy: Buy at the current price
Spot Sell: Sell at the current price
Pending BL: Pending order, Buy Limit
Pending SL: Pending order, Sell Limit
Pending BS: Pending order, Buy Stop
Pending SS: Pending order, Sell Stop

We see also that the app has two tabs: Primary Info and More Info. In the primary Info tab, we have packed the needed information to make the trade:

Assets: The Forex Pair that is the subject of the trade
Entry: Entry price. This value can be the spot price at which the entry has been taken, or, in Pending orders, the limit or stop level at which the order should be placed.
Stop: The stop-loss level
Target: The Take-profit level
Pips: the current pip count of the live and closed trades. In a green rectangle, the pips are gains, in a red one, losses.

The More info tab shows the following information:
Assets: The Forex Pair that is the subject of the trade
Exit Price: The price at which the trade was closed or blank in the case of live signals
Exit Date: The date and time of the close
Method: This is a link to our article explaining the trade setup. We recommend our traders to look at the articles because not only is it a practical lesson on trading, but we also give detailed information on the risk and reward figures of every trade. Position size is critical to succeeding in the Forex markets; thus, it is an integral part of our trade reports.

R/R: The reward/risk ratio of the trade.

Finally, at the top of the page, we present our current total stats: Pips:3,319.99, the pip balance of our trades since the beginning. Gainers: 69.53% the percent gainers since the beginning.

How does this work?

You will receive notifications on new signals, modifications of a live signal, and the close of the signal. The closing will occur by reaching the target, by manual closing, or if the price hits the stop loss. If you follow the instructions, you would have set the stop and target levels at the beginning of the trade; thus, you need only to take care of the modifications and manual closing of a signal.
When you receive a notification and click on it, the app will open and show the referred signal highlighted, so it is more easily identified. By touching the highlighted signal, you acknowledge the notification and will be de-highlighted. Therefore, we recommend that you do that after doing your mods.

We wish you successful trading, helped by our integral signal service. But, please take this as an opportunity to learn and be self-sufficient. Our philosophy is not to give signals, but to help you achieve your own by learning through practical examples, which are supported by our vast educational resources.

Categories
Forex Daily Topic Forex Price Action

The H1-15M Charts Combination Trading: Watch Out for Signal Candle’s Attributes

Reversal candle’s attributes play a significant role in driving the price towards the trend. An Inside Bar is considered to be the weakest reversal candlestick. However, in combination trading, even an Inside Bar may create good momentum as a reversal candle. In today’s lesson, we are going to demonstrate an example of that.

Reversal candle’s attributes play a significant role in driving the price towards the trend. An Inside Bar is considered to be the weakest reversal candlestick. However, in combination trading, even an Inside Bar may create good momentum as a reversal candle. In today’s lesson, we are going to demonstrate an example of that.

Reversal candle’s attributes play a significant role in driving the price towards the trend. An Inside Bar is considered to be the weakest reversal candlestick. However, in combination trading, even an Inside Bar may create good momentum as a reversal candle. In today’s lesson, we are going to demonstrate an example of that.

This is an H1 chart. The chart shows that the price heads towards the South with good bearish momentum. The price has a bounce at a level of support and makes a bullish correction. The sellers are to wait for a bearish breakout at the lowest low of the wave.

The chart produces a bearish reversal candle that comes out as a bearish engulfing candle. The last candle comes out as a bearish candle as well. However, it has a long lower shadow.

The chart makes a breakout at the lowest low of the wave. The last candle comes out as a bullish engulfing candle, which is a strong bullish reversal candle. However, the sellers may still keep their hope. If the breakout level produces a bearish reversal candle, they are right on the track.

This is what the H1-15M combination traders are waiting for. It produces a bearish reversal candle. Now they have to wait for a 15 M bearish candle to go short in the pair. It is time for the combination traders to flip over to the 15M chart.

This is how the 15M chart looks. The sellers are to wait for the price to produce a bearish candle closing below the last 15M candle. Let us wait and see what the price does. Let us proceed to the next chart.

The last candle comes out as a bearish candle without having any lower shadow.

The sellers would love to see a candle like this every time as a signal candle.  The combination traders may trigger a short entry right after the last candle closes. Let us find out how the entry goes.

This is the H1 chart again. The price heads towards the South with extreme bearish momentum. The last candle comes out as a doji candle. The price hits 1R within two candles. Those who love letting their winners run, they may close their entry right after the last candle closes.

If we notice, the bearish reversal candle at the breakout level comes out as an Inside Bar. However, it creates a strong bearish momentum. It is because the 15M signal candle comes out as a strong bearish continuation candle. Thus, combination traders may focus more on the signal candle. Signal candle’s attributes are more important than the reversal candle’s attributes as far as chart combination trading is concerned.

 

Categories
Forex Course

135. All About The Trending Market

Introduction

Introduction

Introduction

In the previous chapter, we understood the different states that exist in the market, which were trends, ranges, and channels. In this and the upcoming lessons, we shall go over each one of the types in detail.

What is a Trending Market?

A trending market is the type of market where the prices move in one specific direction. Of course, the prices change the direction temporarily, but the overall direction will still be in one direction.

Since there are two directions in the market, there are two types of trends: one facing upward and the other facing downward. The former is referred to as an uptrend, and the latter is called a downtrend. Having that said, there are some rules and criteria to confirm a market is trending.

How to Identify a Trend?

There are quite a number of ways to identify and confirm a trend. One can use price action patterns or technical indicators to identify if a market is trending.

Price Action pattern

The concept of highs and lows on the price charts is used to determine if the market is trending upwards or downwards.

Uptrend

In an uptrend, the market makes higher highs and higher lows. Multiple sequences of this pattern confirm that the market is trending up.

Downtrend

In a downtrend, the price makes multiple sets of lower lows and lower highs.

ADX Indicator

Another way to determine if a market is trending is by applying the Average Directional Index (ADX) indicator. It was created by J. Welles Wilder, where the indicator has values between ranging between 0 and 100. The magnitude of the value determines the strength of the trend. The larger the number is, the stronger the trend.

Typically, a value greater than 25 indicates that the market is in a strong trend, either uptrend or downtrend. It is a non-directional indicator, where the value is always positive irrespective of the direction.

Note that ADX is a lagging indicator and does not really determine the future of the market. Thus, it cannot be employed for timing your entries and exits.

Moving Average

Simple moving averages can also be used to determine if the market is in a trending state. Add the 7 period, 20 period, and the 65-period MAs on the price chart. When all three MAs compresses and fans out, and if 7 period MA is below the 20-period MA and 20 period MA is below the 65-period MA, then it confirms that the market is in a downtrend.

Conversely, if the 7 period MA is above the 20 period MA and the 20 period MA is above the 65-period MA, then the market is officially in an uptrend.

These were some of the most popular techniques to identify and verify whether the market is trending. However, they are not strategies to trade a trend. Nonetheless, they can be used to give heads up to any trend trading strategies.

[wp_quiz id=”78831″]
Categories
Forex Price Action

One Minute Down, Next Minute Up

The Double Bottom is one of the strongest bullish reversal patterns. When the price gets its second bounce at the same level and makes a breakout at the last swing high, the pattern it produces is called the double bottom. In today’s lesson, we are going to demonstrate an example of a double bottom in the H1 chart. At the end of the wave, an interesting thing happens. Let us proceed and find out how the double bottom offers entry and what that interesting thing is.

The Double Bottom is one of the strongest bullish reversal patterns. When the price gets its second bounce at the same level and makes a breakout at the last swing high, the pattern it produces is called the double bottom. In today’s lesson, we are going to demonstrate an example of a double bottom in the H1 chart. At the end of the wave, an interesting thing happens. Let us proceed and find out how the double bottom offers entry and what that interesting thing is.

The Double Bottom is one of the strongest bullish reversal patterns. When the price gets its second bounce at the same level and makes a breakout at the last swing high, the pattern it produces is called the double bottom. In today’s lesson, we are going to demonstrate an example of a double bottom in the H1 chart. At the end of the wave, an interesting thing happens. Let us proceed and find out how the double bottom offers entry and what that interesting thing is.

This is an H1 chart. The chart shows that the price has its second bounce and produces a bullish engulfing candle. Since the same level of support produces a bullish engulfing candle at the second bounce, it is going to have a strong impact on the market if it makes a breakout at the last swing high.

Here is the level of resistance, which the buyers are going to wait for a breakout to go long in the pair upon breakout confirmation. The price reacted at the drawn level earlier as well. Thus, this has been a significant level. The last rejection signifies it more.

Look at the next candle. The candle comes out as a bullish Marubozu candle. The candle closes well above the level where the price had a rejection earlier. Some buyers may want to trigger a long entry right after the last candle closes. Some buyers may wait for the breakout confirmation to go long in the pair.

The next candle comes out as a spinning top with a tiny bullish body. The price closes above the last candle’s highest high. It confirms the breakout. The buyers may trigger a long entry right after the last candle closes since they have the breakout confirmation.

See how the price heads towards the North with good bullish momentum. The price hits 1R within one candle. The last candle suggests that the price may continue its move towards the North. Let us see what happens next.

The chart produces a bearish inside bar. It suggests that the price is still bullish. If the next candle comes out as a bullish engulfing candle, the price may resume its journey towards the North with good bullish momentum. However, many buyers may come out with their profit and wait for the next bullish reversal candle to go long.

The price gets choppy within two horizontal levels. The last candle comes out as a bearish engulfing candle. Do you notice anything interesting here? Yes, the chart produces a Double Top this time, and it produces a bearish engulfing candle at the second rejection. The sellers may want to go short if the price makes a breakout at the last lowest low. This is how things change in the Forex market. It is interesting, is not it?

Categories
Forex Harmonic

Head and Shoulders Often Comes with a Different Look

The Head and Shoulders formation is one of the most traded patterns in the financial market. It offers an excellent risk-reward, thus it is very fruitful if we understand and get well acquainted with it. A typical Head and Shoulders pattern that we usually see in the trading lesson is very easy to be spotted out. However, the financial market makes a lot of adjustments. Thus, the traders need to make some adjustments as well. In today’s lesson, we are going to demonstrate an example of a Head and Shoulder pattern, which is a bit different in its looks.

The Head and Shoulders formation is one of the most traded patterns in the financial market. It offers an excellent risk-reward, thus it is very fruitful if we understand and get well acquainted with it. A typical Head and Shoulders pattern that we usually see in the trading lesson is very easy to be spotted out. However, the financial market makes a lot of adjustments. Thus, the traders need to make some adjustments as well. In today’s lesson, we are going to demonstrate an example of a Head and Shoulder pattern, which is a bit different in its looks.

The Head and Shoulders formation is one of the most traded patterns in the financial market. It offers an excellent risk-reward, thus it is very fruitful if we understand and get well acquainted with it. A typical Head and Shoulders pattern that we usually see in the trading lesson is very easy to be spotted out. However, the financial market makes a lot of adjustments. Thus, the traders need to make some adjustments as well. In today’s lesson, we are going to demonstrate an example of a Head and Shoulder pattern, which is a bit different in its looks.

The price heads towards the North with good bullish momentum. It seems that it has found its resistance, where it has produced a double top. At its second rejection, it has produced a bearish engulfing candle followed by another bearish candle. Thus, we have drawn a line to show the lowest low and the highest high.

The price makes a bearish correction. It seems to have found its support. It has produced a bullish engulfing candle followed by another one. Let us assume this is the last wave’s lowest low.

The price heads towards the North and makes a breakout at the wave’s highest high. So far, it seems like an ABC pattern. However, the price produces another bearish engulfing candle followed by a bearish candle. It suggests that the price may head towards the South for a bearish move.

It makes a bearish move and seems to have found its support. The level of support produces three consecutive bullish candles. Let us draw another line here. Here is a question. Do you see anything here? If you do, you are well known with Head and Shoulder pattern. If you do not, you may have to study and work with your Head and Shoulder pattern more.

The price makes another bearish move upon producing two consecutive bearish candles. Some Head and Shoulder pattern sellers may want the price to go further down to have its support at the same neckline level. However, the price does not go towards the same neckline level. It makes a breakout at the very last lowest low. What do the sellers do here? Let us find the answer from the next chart.

The chart shows that the price heads towards the South with good bearish momentum. It may continue its move up to the first swing low from where the Head and Shoulder is initiated. The most important point here is the price gets bearish once it makes a breakout at the level of support drawn by the black line. This is the neckline of the Head and Shoulder. It may get difficult to find out since many sellers may wait for the price to have a bounce at the around the same level where the price produces its neck. As mentioned, this world is not perfect, neither the Forex market is. We often need to adjust in the market to trade. Today’s lesson is one of the examples of that.

Categories
Forex Price Action

Traders are to be Artists

In today’s lesson, we are going to demonstrate an example of the daily-H4 chart combination trading. The H4 chart offers a long entry. The chart’s breakout and level of support are to be spotted with some calculation. We try to learn those from today’s lesson.

In today’s lesson, we are going to demonstrate an example of the daily-H4 chart combination trading. The H4 chart offers a long entry. The chart’s breakout and level of support are to be spotted with some calculation. We try to learn those from today’s lesson.

In today’s lesson, we are going to demonstrate an example of the daily-H4 chart combination trading. The H4 chart offers a long entry. The chart’s breakout and level of support are to be spotted with some calculation. We try to learn those from today’s lesson.

This is the daily chart. The chart shows that the price makes a very strong bullish move. It then makes a bearish correction. At the correction, it produces a bullish engulfing candle once but continues its journey towards the South. The daily-H4 chart combination traders may have flipped over to the H4 chart upon having that bullish engulfing candle. Anyway, look at the last candle. It is a strong bullish reversal candle. The buyers may flip over to the H4 chart to go long in the pair.

This is how the H4 chart looks. The last candle comes out as a doji candle. The buyers are to wait for the price to consolidate and produce a bullish candle to trigger a long entry.

The chart shows that the price consolidates and produces a bullish engulfing candle. Let’s focus on those two drawn levels. We may not count the lower spike of that spinning top to draw the support line. We try to draw the line by using a flipped level that holds some candle’s wicks and bodies of all the candles. To draw the level of resistance, we count the spike of the spinning top (the last rejection) but skip some part of the upper shadow of a candle. Yes, it is not a bad idea to draw a breakout level by using spikes to some extent. In most cases, however, significant rejection, along with candles’ bodies, matters a lot. Let us assume that we trigger a long entry in this chart.

The price heads towards the North with good bullish momentum. The last candle does not hit the target of 1R, but the price is almost there. It seems that the buyers may not have to wait too long to achieve their target.

The last candle comes out as a bearish candle with a long upper shadow (the body is relatively thicker though). However, the upper shadow shows that the price hits the target. However, it is a bearish reversal candle because the body closes within the last bullish candle, suggesting that the price may continue its bullish move.

If we look back and study with the flipped H4 chart, we find that the buyers are to count some factors to draw consolidation support and resistance. They are to count some spikes and to skip some of those. As we know, trading is not science; it is an art. Thus, traders are to be artists. To be an artist (successful trader), one needs a lot of practice and experience.

Categories
Forex Price Action

Make Full Use of a Strong Reversal Candle

An engulfing candle makes a strong statement about the price reversal. The longer the body, the stronger the statement is. In today’s article, we are going to demonstrate an example of the daily-H4 chart combination trading, where the daily chart produces a bearish engulfing candle with a long bearish body. We find out what it has to offer to the sellers in the end.

An engulfing candle makes a strong statement about the price reversal. The longer the body, the stronger the statement is. In today’s article, we are going to demonstrate an example of the daily-H4 chart combination trading, where the daily chart produces a bearish engulfing candle with a long bearish body. We find out what it has to offer to the sellers in the end.

An engulfing candle makes a strong statement about the price reversal. The longer the body, the stronger the statement is. In today’s article, we are going to demonstrate an example of the daily-H4 chart combination trading, where the daily chart produces a bearish engulfing candle with a long bearish body. We find out what it has to offer to the sellers in the end.

The chart shows that the price produces a bearish engulfing candle having a tiny lower spike. The body of the candle is a long one closing well below the last bullish candle. This is one good-looking bearish engulfing candle. Since it is the daily chart, the daily-H4 chart combination traders may flip over to the H4 chart to look for short entries.

The above figure shows the H4 chart. We can see that the last candle comes out as a bullish inside bar. It means the price in the H4 chart may consolidate. The sellers are going to wait to get a bearish reversal candle to go short in the pair.

The last candle comes out as a bearish engulfing candle closing well below consolidation support. The sellers may trigger a short entry right after the last candle closes by setting stop-loss above consolidation resistance and by setting take profit with 1R. Let us now find out how the entry goes.

The next two candles come out as bearish candles. However, the price does not head towards the South as expected. Moreover, the last candle comes out as a doji candle having a long upper shadow. The sellers are to wait for the price to hit the target. The last candle does not convey a good message to the sellers.

Here it comes. The last candle hits the target of 1R. The reversal candle in the daily chart is a very strong one. Do the sellers get anything extra out of it? Let us proceed to the next chart to see what the price does in the chart.

The price makes a long bearish move. It heads towards the South upon having consolidation. The sellers can make a handful of pips by eying in the chart. One of the reasons may be the bearish reversal candle in the daily chart. As far as a candlestick pattern is concerned, an engulfing candle is the most reliable reversal pattern. When you get an engulfing candle like the one we have seen here, it does have a lot to offer. Okay, here is a question. What do you see in the H4 chart here? Yes, the last candle comes out as a strong bullish engulfing candle. This has a lot to offer to the H4-H1 chart combination traders. Therefore, if you are an H4-H1 combination trader, flip over to the H1 chart and make full use of it.

Categories
Forex Education

Setting up a Trading Strategy using Candlesticks

Introduction

Introduction

Introduction

Candlestick Analysis is likely the most popular analysis method to read the market and allow the market analyst to understand the traders’ sentiment over time.

In this educational article, we will review some candlestick patterns, which could be used as technical formations to spot market turn, recognize and enter early in the new trend.

Candlesticks Basics

Candlesticks use the same information that OHLC bars; however, candlestick charts show the market information differently. The components of candlesticks are the open price, high, low, and close in a specific range of time, such as weekly, daily, and intraday. The following figure represents the structure of a candlestick in a bullish and bearish context.

In the previous figure, we observe that the range between the open and close prices of the candlestick forms the body of the candle. If the close of the session is higher than the open, then the candle is bullish (white). If the close price level is lower than the open price level, then the candle will be bearish (Black).

The range of the prices that moves above and below the body of the candle is called the shadow or wick, whose length can be from very short to quite long. The span between the high and low of the candle reveals how volatile it has been the trading session or intraday period.

Candlesticks Formations to Trade

Candlesticks formations provide a variety of information concerning the market movements. For instance, it can reveal when the price is in a slowdown, in trend, or soon to reverse in the next trading sessions. The understanding of these formations is essential to chart analysis because candlesticks charts can be analyzed without lag.

Hammer and Hanging Man

A Hammer is a candlestick pattern that shows a small body and a long shadow, with its close is near the high of the day. When the Hammer is located at the end of a bearish trend, the Hammer is considered a bullish reversal signal.

The Hanging Man is similar to the Hammer, but it appears at the end of an uptrend; this pattern reveals the possibility of a reversion of the uptrend.

Both Hammer and Hanging Man should have a large shadow compared to its body. The shadow extension will be indicative of the volatility of a trading session where the price plummeted and then recovered to close the session at the top of the trading range.

Belt-Hold Pattern

The Bullish Belt-Hold pattern is a formation in which the opening price is at the low of the session. Prices start to rally and close near the top of the session’s range with higher momentum. The opposite occurs on the bearish pattern, where the price opens at the high of the range and closes near the low.

If the next open is higher than the close of the bearish belt-hold candle, then it is likely that the price will continue moving higher. If the price opens below the bullish belt-hold close, then it is likely the market will continue moving bearish.

Engulfing Pattern

The engulfing pattern is a formation that requires a pair of candlesticks to complete the formation. The bullish engulfing pattern is a formation that suggests the reversion of the downtrend and surges at the end of a bearish trend. The opposite case occurs when the market moves in an uptrend. An engulfing pattern is one of the most powerful of the candlestick reversal signals.

The formation is completed once that large bullish candlestick body completely covers the body of a smaller candle of the previous trading session. The larger is the timeframe where the engulfing pattern appears, the more significative will be the reversal. The following figure represents the bullish and bearish engulfing pattern.

Harami Pattern & Harami Cross

The harami pattern, also known as an inside bar, requires two candlesticks to complete the formation—however, the harami pattern, or inside bar, the weakest of the reversal patterns.

The harami pattern is a formation with a small body that fits entirely into a large body candle. This pattern is indicative of the reversion of the trend, and its importance grows if the formation appears after a prolonged trend. The harami cross is a particular case of the harami pattern; the pattern consists of almost identical opening and closing levels.

The Doji Pattern

The doji pattern appears when the trend moves in an exhaustion stage. This pattern is characterized by a vanishing body, where the session’s open and close prices are almost identical.

The importance of a doji grows after an extended uptrend or downtrend. If following a doji, it appears an engulfing pattern, the possibility of a potential reversal move will increase.

Piercing Pattern and Dark-Cloud Cover

The piercing formation has similarities with the bullish engulfing pattern and is characterized by its appearance at the bottom of a downtrend. The main difference from the bullish engulfing pattern is that the bullish candle on the Piercing Pattern does not fully cover the previous candlestick. Instead, it closes above the 50% level.

The dark cloud cover is a bearish reversal formation. In this case, the bearish candle is a big body candlestick that covers at least 50% of the previous trading session’s candle. The strength of the reversal signal will be stronger, as more extension is covered.

Morning Star and Evening Star

The star candlestick pattern is a formation where a price gap separates a small body candle from the body of the previous candlestick. The star could be a doji or a narrow range candle. This formation warns the market analyst of an imminent reversion of the trend.

A Morning Star pattern is a bullish reversal formation that appears in the bottom of a downtrend and requires three candlesticks. The first candle is a powerful bearish candle with a body of wide range. The second candle corresponds to the star, and it is a candlestick of a narrow range, separated by a gap with the previous candle. The third candle is a bullish candle with upward momentum. The body of this candle should surpass 50% of the first candlestick.

The Evening Star pattern is a bearish reversal formation that appears at the end of a bullish trend. similarly to a morning star pattern, the range of the third candle will be indicative of the strength of the reversal movement

Conclusions

In this educational article, we reviewed seven candlesticks patterns that show trend reversals in a specific range of time. One of the pros of these candlestick patterns is that it is not a lagging indicator, and its analysis could provide the information the market sentiment without delay.

However, although the candlestick analysis could provide an entry setup, they can not provide a target level by itself. This type of study should be accompanied by complementary techniques to improve the odds of success and determine potential profit targets.

In the following article, we will review the use of chart patterns to determine the trend.

Suggested Readings

  • Fischer, R., Fischer J.; Candlesticks, Fibonacci, and Chart Patterns Trading Tools; John Wiley & Sons; 1st Edition (2003).
Categories
Forex Price Action

H1-15M Chart Combination Trading: Mind the Weekend

In today’s lesson, we are going to demonstrate an example of H1-15M chart combination trading. Usually, the H1-15M chart combination trading offers 1:2 risk-reward. However, in this example, the buyers may need to come out with their profit with 1:1 risk-reward. We find out why they shall do that so.

In today’s lesson, we are going to demonstrate an example of H1-15M chart combination trading. Usually, the H1-15M chart combination trading offers 1:2 risk-reward. However, in this example, the buyers may need to come out with their profit with 1:1 risk-reward. We find out why they shall do that so.

In today’s lesson, we are going to demonstrate an example of H1-15M chart combination trading. Usually, the H1-15M chart combination trading offers 1:2 risk-reward. However, in this example, the buyers may need to come out with their profit with 1:1 risk-reward. We find out why they shall do that so.

This is the H1 chart. The price heads towards the North with good bullish momentum. The price breaches the last swing high and continues its journey towards the North upon confirming the breakout. Look at the last candle. It comes out as a strong bearish candle. The buyers are to keep their eyes on the pair to get a bullish reversal candle to go long.

The price makes a long bearish correction. Look at the last candle in the chart. It comes out as a bullish candle. The combination of the previous three candles is not a morning star since the last candle does not close above the bearish candle. Nevertheless, the last candle comes out as a bullish engulfing candle. It is a strong bullish reversal candle. It is time for the buyers to flip over to the 15M chart.

This is how the 15M chart looks like. A bullish candle closing above the last candle’s body would be a good signal to go long in the pair. The buyers must keep their eyes in the chart. Let us proceed to the next chart to find out how it comes out.

Look at the last candle. This is one beautiful bullish engulfing candle closing well above the last candle’s wick. A signal candle like this attracts more buyers and usually brings good liquidity. The H1-15 chart combination traders may trigger a long entry right after the last candle closes by setting stop loss below the support level and by setting take profit with 2R. Let us now flip over to the H1 chart again to see how the trade goes.

The price heads towards the North with good bullish momentum. It hits 1R in a hurry. The last candle comes out as an inside bar, which is the weakest bearish reversal candle. In most cases, H1-15 chart combination trading offers 1:2 risk-reward. The question is whether the buyers keep holding the trade or not. I may mention that it is Friday and only three/four hours to go to shut down the market. I think now you know what buyers should do here. Yes, they should close the trade and come out with the 1R profit. The H1-15M chart combination traders should not keep holding their trade during the weekend. In some cases, it may bring them some extra pips. However, in many cases, it may hurt them badly.

 

Categories
Forex Price Action

Chart Combination Trading: Even an Inside Bar Has a Lot to Offer

An Inside Bar is considered the weakest reversal candle as far as candlestick trading is concerned. However, in today’s article, we find out the significance of a daily Inside Bar in the daily-H4 chart combination trading. Let us get started.

An Inside Bar is considered the weakest reversal candle as far as candlestick trading is concerned. However, in today’s article, we find out the significance of a daily Inside Bar in the daily-H4 chart combination trading. Let us get started.

An Inside Bar is considered the weakest reversal candle as far as candlestick trading is concerned. However, in today’s article, we find out the significance of a daily Inside Bar in the daily-H4 chart combination trading. Let us get started.

This is the daily chart. The chart shows that the last candle comes out as a bearish Inside Bar. The daily chart traders may still think that the chart is bullish biased. However, the daily-H4 chart combination traders are to flip over to the H4 chart and look for short entries since it is a bearish reversal candle after all.

The H4 chart looks to be tailor-made for the sellers. The chart produces a double top, and the price breaches the neckline. The last candle comes out as a doji candle. The price may consolidate now.

The chart produces another bearish candle closing within the same resistance. Then, it creates a bullish engulfing candle. Let us draw two lines here. The level of support looks very evident. However, the level of resistance still has a lot to prove.

The level of resistance produces a bearish reversal candle. To be precise, it creates a bearish engulfing candle, closing below the level of resistance. The sellers may trigger entry right after the last candle closes by setting stop-loss above the level of resistance and by setting take profit with 1R.

The price heads towards the South in the next candle as well. It seems that the sellers may not have to wait too long to achieve their target. Let us proceed to the following chart to find out how it goes.

As expected, the next candle comes out as another bearish candle. This time it has even a longer body. Look at the last candle. The candle comes out as a bullish inside bar. Technically, the chart is still bearish biased. Do not forget that for the H4-H1 chart combination trading, they may have to flip over to the H1 chart to go long in the pair. This is what we have just demonstrated in the daily-H4 chart combination trading.

To sum up the lesson, an Inside Bar may not be a strong reversal signal in the chart. For the chart combination traders, it is a bit different. As long as it is a reversal candle does not matter how weak it is. The combination traders may flip over to the counterpart and wait for consolidation and a signal candle to trigger entry.

Categories
Forex Daily Topic Forex Trading Strategies

Principles of Trading Strategies

Introduction

Introduction

Introduction

A trading strategy is a systematic methodology of investment that can be applied in any financial market, for example, bonds, stocks, futures, commodities, forex, and so on. In this context, a profitable trading strategy is more than a system that provides an entry signal on the long or short side with a stop-loss and a profit target.

Big traders make money to take their investment decisions systematically, reducing their risk with the diversification of the assets that make up their portfolio.

In this educational article, we’ll present a set of elements that can be part of a trading strategy.

The Elements of a Trading Strategy

A systematic trading strategy should be tested and validated with historical data, and its execution in the real-market should be done with the same accuracy as when using paper money.

The strategy should provide a setups series that allow us to recognize where to locate the market entry and in which direction. Finally, the trading strategy should allow market positioning in the long and short sides. This positioning should require identifiable stop-loss and profit target levels.

In particular, in this article, we’ll present the use of Fibonacci, candlesticks formations, chart patterns, trend lines, and trend channels.

Fibonacci Analysis

Likely, Fibonacci retracements and extensions are the most used tools in the world of retail and institutional trading. The Fibonacci series has its origin from the mathematical problem of the rabbits’ population solved by Leonardo da Pisa “Fibonacci” in his work “Liber Abaci” published in 1202.

The sequence discovered by Fibonacci not only can be applied in the rabbits’ population growth, but this series also solves other growth problems in nature and also on the financial markets.

Fibonacci and Corrections

One application of the Fibonacci tools in financial markets is the measurement of a retracement size that an impulsive wave may experience in its corrective move.

The rationale of this strategy considers that when the initial impulsive movement ends and following the subsequent corrective move, the market will develop a second impulsive move in the same direction of the first move.

The selection of the asset is linked to the timeframe under analysis; for example, the structure developed in a weekly chart will require more time than an hourly chart formation.

The following figure illustrates two potential entry setups using the Fibonacci retracement tool. The first scenario considers a retracement of 38.2% of the first move. The second scenario will occur when the price experiences a retracement of 61.8% from the top of the first impulse. 

The stop-loss will be placed at the origin of the previous impulsive movement.

Setting Targets with Fibonacci Extensions

Prices extensions are movements that resume the progress of a previous trend. Generally, the extensions occur in the third wave, and the correction corresponding to the second wave does not move beyond the origin of the first impulsive movement. The next figure exposes the extension of a regular three-wave pattern. Consider that the wave identification does not correspond to an Elliott wave labeling.

The analytic process follows the next steps:

  1. After an impulsive move, the price action must develop a minimum retracement of the first move.
  2. The size of the swing must be multiplied by the Fibonacci ratio of 1.618.
  3. The resulting level will correspond to the price target of the third wave.

The analysis in a five-wave pattern is similar to the three-wave case. The difference in this pattern is the seek the length of an additional impulsive move.

The five-wave pattern includes three impulsive movements and two corrective moves. The following figure illustrates the Fibonacci measures of this formation.

The Phi-Ellipse

The Phi-Ellipse is a countertrend trading method based on the oscillation of price with time. Its goal is to reduce the noise of falses breakouts and increase the stability of the investment strategy. The drawing process of a Phi-Ellipse requires to identify three points, as shown in the next figure.

After identifying the points A, B, and C, in a regular three-wave pattern, there should place the Phi-Ellipse in these points. We should expect a new impulsive move as the first impulse. There are three ways to trade against the trend at the end of the Phi-Ellipse, which are:

  1. Enter in a position when the price breaks outside the perimeter of the Phi-Ellipse.
  2. Entry based on a chart pattern at the end of the Phi-Ellipse.
  3. Place an order when the price action when the price moves outside a parallel line to the median line of the Phi-Ellipse.
  4. A buy position is recommended at the end of the Phi-Ellipse when it has a descending slope, and a sell position is recommended when the Phi-Ellipse has an upward slope.

Conclusions

In this educational article, we discussed the elements that should contain a trading strategy. The application of a systematic trading strategy or a combination with a strategy across time in a diversified portfolio could help the investor reduce the risk in its investment decisions.

On the other hand, the strategy’s analysis methodology should provide entry-setups for both long and short-side positions. In this context, in this article, we presented the use of Fibonacci retracements and extensions to offer entry setups inlcuding its stop loss and profit target level. Finally, we introduced the Phi-Ellipse method, which allows the investor to reduce the risk of falses breakouts in its investment portfolio.

In the next educational article, we will review the use of candlesticks formations, chart patterns, trend lines, and trend channels.

Suggested Readings

– Fischer, R., Fischer J.; Candlesticks, Fibonacci, and Chart Patterns Trading Tools; John Wiley & Sons; 1st Edition (2003).

Categories
Forex Price Action

Mark Significant Levels and Watch out Price Action around Them

In today’s lesson, we are going to demonstrate an example of the H4-H1 chart combination trading where the breakout takes place, but the traders have to be sensible to spot out the breakout. Let us get started.

In today’s lesson, we are going to demonstrate an example of the H4-H1 chart combination trading where the breakout takes place, but the traders have to be sensible to spot out the breakout. Let us get started.

In today’s lesson, we are going to demonstrate an example of the H4-H1 chart combination trading where the breakout takes place, but the traders have to be sensible to spot out the breakout. Let us get started.

This is an H4 chart. The chart shows that the price heads towards the North upon having its second bounce at the level of support. Look at the last candle. The candle comes out as a bullish engulfing candle since it closes well above the body of the last candle. Can you spot something out here?

The candle closes well above the level where the price had a rejection earlier. The price reacted around the same level before producing the last candle. If we draw a level by using the significant level, which has been working as the level of resistance, we see that the last candle breaches the level. This means the piercing may be considered a breakout. Let us now flip over to the H1 chart.

This is how the H1 chart looks. The chart shows that the last candle comes out as a Spinning Top. The H4-H1 buyers are to wait for the price to consolidate and to get a bullish reversal candle to go long in the pair. Let us wait and see what the price does.

The chart produces a bearish engulfing candle closing within the breakout level. Look at the last candle. The last candle came out as a long bullish engulfing candle. The buyers may get huge confidence about the earlier H4 breakout and trigger a long entry right after the last candle closes. Let us now find out how the entry goes.

The price heads towards the North with good bullish momentum. The last candle comes out as a bearish Inside Bar. This action suggests that the Bull may continue its run. It is a bearish reversal candle (the weakest one). Thus, the buyers may consider closing their entry. In the end, this comes out as an excellent trade setup.

If we concentrate on the breakout, it is to be found out by the traders. Without drawing the horizontal line, it would be difficult to found that out. Thus, mark the points that are significant and keep looking at our charts. It would help you find out breakout and make the trading decision easily. Some breakouts may not seem like a breakout without drawing lines on the chart. Thus, pick your drawing tool to mark significant levels with horizontal lines/trend lines/channels on your trading chart and watch out how the price reacts around them.

Categories
Forex Course

125. Trading The ‘Crab’ Pattern Like A Pro

Introduction

Introduction

Introduction

Crab is the last pattern that we are going to discuss in the harmonic group. Just like other patterns, the Carb is also identified and traded using the Fibonacci levels in order to determine the precise turning points. The Crab is a reversal pattern and is composed of four legs – XA, AB, BC, and C-D. Let’s understand them in detail below.

The Four Legs Of Crab Pattern

XA – In its bullish version, the first leg forms when the price action rises sharply from the point X to point A.

AB – The AB move goes against the actual market direction and retraces between 38.2% to 61.8% of the distance covered by the XA leg.

BC – In the BC leg, the price action resumes its original direction and retraces between 38.2% to 88.6% of the distance covered by the AB leg.

CD – The CD is the final leg that confirms the formation of the Crab pattern. Place the sell order when the CD leg reaches the 161.8% Fibs extension of the AB leg.

Trading The Crab Pattern

Bullish Crab Pattern

In the below GBP/USD Forex pair, we have identified the formation of the Crab pattern. The first movement XA can be considered any random bullish move. The second leg AB was a counter-trend, and it reached the 61.8% Fib leg of the XA leg. For the third move, price action goes up, and it retraces 38.2% of the XA leg. The last leg was the CD move, which 161.8% of the AB leg. The fourth leg confirms the pattern formation on the price chart.

We activated our trade at point D with stops below point D and taking profit at point A.

Bearish Crab Pattern

The price chart below represents the formation of a bearish crab pattern on the price chart. The first leg XA was the random move, and second leg AB goes up, and it retraces at 38.2% of the XA leg. The next third leg was the BC move, and it retraces 88.6% of the AB move. The last leg CD was the decision-making move, and it closes at 161.8% of the AB leg.

The trade activation was at point D, and the stop was a bit above the trade, and to book profits, we opted out for the most recent lower low.

Conclusion

The Crab pattern rarely appears on the price chart, but when it does, it provides excellent risk to reward ratio trades. If you are new to harmonic trading, practice trading this pattern on a demo account first and only then trade on the live account. Always remember to trade the Bearish Crab pattern in an uptrend, and Bullish Crab patterns in a downtrend only. Cheers!

Categories
Forex Market Analysis

Daily F.X. Analysis, June 16 – Top Trade Setups In Forex – Eyes on U.S. Retail Sales! 

On the news front, the eyes will remain on the U.K. Jobless Claims and U.S. Retail sales data. Both of the events are expected to perform better than before, but traders are highly doubtful due to lockdown, the numbers can get worse and drive selling trends in the GBP during the European session and USD during the New York session. The yield on U.S. 10 year Treasuries jumped as traders favored risk to the safety of bonds. Furthermore, on Tuesday, Fed Chair Jerome Powell will testify before the virtual hearing of the Senate Banking Committee, and traders will look forward to it for fresh impetus.

On the news front, the eyes will remain on the U.K. Jobless Claims and U.S. Retail sales data. Both of the events are expected to perform better than before, but traders are highly doubtful due to lockdown, the numbers can get worse and drive selling trends in the GBP during the European session and USD during the New York session. The yield on U.S. 10 year Treasuries jumped as traders favored risk to the safety of bonds. Furthermore, on Tuesday, Fed Chair Jerome Powell will testify before the virtual hearing of the Senate Banking Committee, and traders will look forward to it for fresh impetus.

On the news front, the eyes will remain on the U.K. Jobless Claims and U.S. Retail sales data. Both of the events are expected to perform better than before, but traders are highly doubtful due to lockdown, the numbers can get worse and drive selling trends in the GBP during the European session and USD during the New York session. The yield on U.S. 10 year Treasuries jumped as traders favored risk to the safety of bonds. Furthermore, on Tuesday, Fed Chair Jerome Powell will testify before the virtual hearing of the Senate Banking Committee, and traders will look forward to it for fresh impetus.

Economic Events to Watch Today

 

  

EUR/USD – Daily Analysis

The EUR/USD pair closed at 1.13255 after placing a high of 1.13323and a low of 1.12263. Overall the price action of the EUR/USD remained bullish throughout the trading day, although the EUR/USD pushed lower at the end of last week. After the risk sentiment increased on Monday, the pair EUR/USD reversed its movement and started posting gains. 

In earlier sessions’ the U.S. dollar was strong, which kept a lid on EUR/USD pair’s upward movement, but in the late session, the U.S. dollar lost its pace, and the currency pair EUR/USD started to move higher. The U.S. Dollar Index, which gauges the value of the U.S. dollar against the basket of six currencies, spent most of its day in positive territory above 97.00 level but it turned negative in the second half of the day and helped EUR/USD to start posting gains.

On the data front, at 14:00 GMT, the Trade Balance from Eurozone showed a surplus of only 1.2B against the expected 20.3 B in April and weighed on Euro. From the American side, the only data from the U.S. was New York’s Empire State Manufacturing Index, which rose to -0.2 from the expected -30.0 and supported the U.S. dollar.

In the Late session on Monday, Federal Reserve announced that it would begin broad buying of corporate bonds and debts, which boosted the risk appetite in the market and perceived EUR. The air EUR/USD recovered almost all of its previous day’s losses on the back of U.S. dollar weakness after the Fed’s announcement.

According to the Fed, it would start purchasing investment-grade U.S. corporate bonds in a view to secure companies and ensure credit market liquidity due to coronavirus crisis. After this news, risk sentiment was back in the economy, and the EUR/USD pair moved higher. After the Fed announcement, the yield on U.S. 10 year Treasuries jumped as traders favored risk to the safety of bonds. Furthermore, on Tuesday, Fed Chair Jerome Powell will testify before the virtual hearing of the Senate Banking Committee, and traders will look forward to it for fresh impetus.

Daily Support and Resistance

  • R3 1.1293
  • R2 1.1275
  • R1 1.1263

Pivot Point 1.1245

  • S1 1.1233
  • S2 1.1215
  • S3 1.1203

EUR/USD– Trading Tip

The EUR/USD pair is trading at 1.1340, having violated the double top resistance level of 1.1328 level. The continuation of a bullish trend can lead the EUR/USD prices further higher until the next target level of 1.1380 level. The MACD and RSI are suggesting bullish bias in the pair, and this bullish bias can help traders to capture a quick buy trade over 1.1328 level today until the next target level of 1.1380. While support stays at 1.1328 and below this, the next support will stay around 1.1267. 

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.26059 after placing a high of 1.26063 and a low of 1.24539. Overall the movement of GBP/USD pair remained bullish throughout the day. The Pound jumped from session lows against the dollar on Monday as the U.K. & Brussels agreed to boost up post-Brexit talks. PM Boris Johnson gave hope that the end of next month could reach an outline of a deal.

The lack of progress in negotiations following the latest round of talks between the U.K. & European Union, PM Boris Johnson said that he would personally work with the E.U. to find common ground to break the deadlock. Britain left the European Union in January, but it is still under transition period until 2020 when it should strike a deal over its future trade, travel, security, and financial relations with Europe. Many rounds of trade talks between trade representatives from both parties failed to secure a deal, and then PM Boris Johnson decided to do it himself.

On Monday, PM Boris Johnson held talks with Brussels chief Ursula von der Leyen, and Charles Michael as the European Union finally acknowledged the rejection of the U.K. overextension of the transition period. Both parties have agreed that new momentum in the countdown period to secure a deal was required. Brussels formally accepted that the U.K. would not seek an extension to the transition period, and both parties agreed on work to conclude an agreement by the end of the year. It means both parties are hopeful that an agreement could be reached before the year-end.

The PM Boris Johnson added on Monday after his video conference with E.U. members that there was no reason not to agree to the Brexit deal’s outline by the end of July. E.U. has suggested October 31 as the latest date for a deal to reach. In the time from October to the end of the transition period in December, member states will back and ratify the deal.

The optimism about the Brexit deal gave a push to British Pound, and the pair GBP/USD surged and recovered its previous day’s losses on Monday.

On the other hand, after the announcement of the Federal Reserve to start buying corporate bonds in the secondary market to overcome the losses U.S. economy faced in the coronavirus crisis, the U.S. dollar turned weak and added in the currency pair’s gains.

Daily Support and Resistance

  • R3 1.2593
  • R2 1.2568
  • R1 1.2538

Pivot Point 1.2512

  • S1 1.2482
  • S2 1.2456
  • S3 1.2426

GBP/USD– Trading Tip

On Tuesday, the GBP/USD pair is trading with a bullish bias around 1.2650, but the recent candles seem to peak out of the upward regression channel, which may drive selling in the market. The pair is most likely to find resistance around 1.2707 level, and continuation of a selling trend below this level can lead the pair lower towards 1.2595 and 1.2550 Conversely, a bullish breakout of 1.2707 level can extend buying trend until 1.2805 level in upcoming days. 

USD/JPY – Daily Analysis

The USD/JPY was closed at 107.353 after placing a high of 107.552 and a low of 106.583. Overall the movement of USD/JPY remained bullish throughout the day. The USD/JPY gained strength after posting losses for the previous four consecutive days. The stronger U.S. dollar and negative macroeconomic data release from Japan might have added in the strength of this pair USD/JPY.

At 9:30 GMT, the Revised Industrial Production from Japan in April was declined by 9.8% against the forecasted 9.1% and weighed on Japanese Yen and moved the pair USD/JPY in the upward direction on Friday.

The brighter market sentiment due to come back of risk appetite in the market after the possibility of renewed lockdowns increased due to increased fears over the second wave of coronavirus outbreak.

The fears of the renewed spread of virus grew after the U.S. reported more than 2 million coronavirus cases as of June 12, and the infection cases were reported from the most populous states of America. The high level of new infections was reported from California, Texas, and Florida, which raised the possibility of a new wave of COVID-19 and prompted risk aversion.

Risk appetite increased the demand for the U.S. dollar across the board as the bar for renewed restrictions of lockdown raised. Federal Reserve has already announced that the road to economic recovery will be longer than expected, which indicated more need for stimulus packaged from governments.

However, the U.S. Dollar Index was up to 97 levels on Friday, and the strength of the U.S. dollar pushed the USD/JPY pair above 107.5 level.

Another factor aiding in the U.S. dollar’s strength was better than expected macroeconomic data from the USA. At 19:00 GMT, the Prelim Consumer Sentiment from the University of Michigan (UoM) surged to 78.9 in June from the expected 75.0 and supported the U.S. dollar. The Import Prices in May also increased by 1.0% from 0.6% of forecast and supported the U.S. dollar. The Prelim UoM Inflation expectation in June was reported as 3.0%.

Daily Support and Resistance    

  • R3 107.93
  • R2 107.75
  • R1 107.54

Pivot Point 107.36

  • S1 107.15
  • S2 106.97
  • S3 106.75

USD/JPY – Trading Tips

The USD/JPY pair is trading sideways as it failed to break above an immediate resistance level of 107.500. This level is working as resistance for USD/JPY, and the 50 periods EMA is also prolonging strong resistance at 107.650 zones while immediate support lingers nearby 106.600. The bearish trend in the USD/JPY pair can trigger a sell-off unto the next support level of the 106.017 level today. Let’s wait for the USD/JPY to test the 107.650 level before entering a sell in the USD/JPY today. 

Good luck! 

Categories
Forex Fibonacci

It is Not Always the Level, It is about the Zone

In today’s lesson, we are going to demonstrate an example of a chart where the price makes a strong move from the 61.8% Fibonacci level. However, in this example, things are slightly different. We know the world is not perfect; neither is the Forex market. Today’s lesson is going to show that. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart where the price makes a strong move from the 61.8% Fibonacci level. However, in this example, things are slightly different. We know the world is not perfect; neither is the Forex market. Today’s lesson is going to show that. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart where the price makes a strong move from the 61.8% Fibonacci level. However, in this example, things are slightly different. We know the world is not perfect; neither is the Forex market. Today’s lesson is going to show that. Let us get started.

The chart shows that the price makes a strong bearish move. After that, the price may have found its support. The last candle comes out as a bearish candle with a long lower shadow. The price may make a bullish correction and, then, a bearish breakout at the lowest low of the wave to offer a short entry.

The price makes its bullish correction. Upon producing a doji candle followed by a bearish Marubozu candle, it heads towards the South. The last candle closes within the level of support, where the price gets a rejection earlier. The sellers are going to eagerly wait for a bearish breakout.

The price makes a breakout at the lowest low of the wave, consolidates, and produces a bearish reversal candle. The sellers may trigger a short entry right after the last candle closes by setting Stop Loss above consolidation resistance. We talk about Take-profit in a minute. Let us find out how the entry goes.

The price heads towards the South with extreme pressure. It seems like the Bear is in a real hurry to hit the target. It produces only one bullish candle before the last one. The last candle comes out as a bullish inside bar. Typically, it suggests that the chart is still bearish biased. We find that out whether it really is or is it time for the sellers to come out with their profit. Let us draw Fibonacci levels.

Here it is. Despite producing an inside bar, the price heads towards the North for a bullish correction. It may change the trend as well. The reason for this is the price hits 161.8%. Typically, the price makes a reversal once it hits 161.8% of an existing trend when the trend starts from 61.8%. The question is whether the price really trends from 61.8% or not? If you closely look at the chart, the price does not hit 61.8%, but it trends from well below. Nevertheless, it trends from the zone of 61.8% to 78.6%. As long as the price trends from that zone, the Fibonacci traders consider that it trends from 61.8%. This is what makes the price behave as if it trends right from the  Fibonacci level of 61.8%. When it trends from there, we know where to set our Take Profit. Yes, it is to be set at 161.8%.

Categories
Forex Price Action

The Trend in a Bigger Frame is Traders’ True Friend

There is a saying in financial trading “Trend is traders’ friend.” Without any doubt, this is true. In a chart combination trading, a bigger timeframe’s trend plays an important role and helps traders a lot to go with an entry in its counterpart. Let us have a look through an example of how it works.

There is a saying in financial trading “Trend is traders’ friend.” Without any doubt, this is true. In a chart combination trading, a bigger timeframe’s trend plays an important role and helps traders a lot to go with an entry in its counterpart. Let us have a look through an example of how it works.

There is a saying in financial trading “Trend is traders’ friend.” Without any doubt, this is true. In a chart combination trading, a bigger timeframe’s trend plays an important role and helps traders a lot to go with an entry in its counterpart. Let us have a look through an example of how it works.

This is a daily chart. The chart shows that the price heads towards the North at a moderate pace. The last candle comes out as a bullish candle closing well above consolidation resistance. It means the daily traders may start eyeing to go long in the pair.  The daily-H4 combination traders may flip over to the H4 chart for the price to consolidate and produce a long signal.

This is the flipped H4 chart. The chart shows that the last candle comes out as a bullish candle with an upper shadow. The buyers are to wait for the price to consolidate now.

The price consolidates and produces a bullish candle breaching consolidation resistance. Here is a thing. The consolidation range is shallow. The consolidation range plays a significant role in determining the next move’s length. The length of consolidation here does not suggest that the next move will be a big one. The daily-H4 combination traders may trigger a long entry by setting stop loss below consolidation support and by setting take profit with 1R. Let us proceed to the next chart.

The price hits the target of 1R by the next candle. Concentrate on the last candle. The candle comes out as a bullish Marubozu candle. It suggests that the price may head towards the North further. Let us find out how far it goes.

The price heads towards the North with three more candles. This means it travels almost three times more length than the combination traders have anticipated. Can you guess what may be the reason for this?

The daily chart is in a strong bullish trend. The last daily candle breaches through consolidation resistance and makes a strong statement about its bullishness. That may have attracted the daily buyers to go long in the pair as well. This brings extra liquidity and helps the price head towards the North with extreme pressure. This happens most of the time in combination trading. If the bigger chart makes a breakout and has a solid trend, the price seems to head towards the trend’s direction at a good pace in the minor chart. The combination traders may keep this in their mind and make full use of this.

Categories
Forex Price Action

When the Same Chart Offers a Better Trade Setup

In today’s lesson, we are going to demonstrate an example of an H4 chart offering two entries. The first one does not create enough bullish momentum right after the breakout, but the second one does. Let us now get started.

In today’s lesson, we are going to demonstrate an example of an H4 chart offering two entries. The first one does not create enough bullish momentum right after the breakout, but the second one does. Let us now get started.

In today’s lesson, we are going to demonstrate an example of an H4 chart offering two entries. The first one does not create enough bullish momentum right after the breakout, but the second one does. Let us now get started.

The chart shows that after being bearish for a long while, the chart produces two bullish candles consecutively. The H4 traders may keep their eyes on the daily chart to get a daily bullish reversal. Then, consolidation followed by an H4 bullish reversal candle would be the signal to go long in the pair.

The price starts having a bearish correction. The buyers are to wait for a bullish reversal candle first to go look for a long opportunity. The price is at a significant level, where it reacted earlier several times. The reversal candle might be around the corner.

Yes, the chart produces a bullish Inside bar. It is not a strong bullish reversal candle, but it is a sign that the price may get bullish soon, considering other factors. Let us proceed to the next chart.

The next candle comes out as a bullish candle with a long bullish body having a tiny upper shadow. The buyers may trigger a long entry right after the candle closes by setting stop loss below consolidation support and by setting take profit with 1R.

The next candle comes out as a bearish inside bar. The buyers usually would love to see the price head towards the trend’s direction after triggering entry. It does not happen here. However, it does not look too bad.

What a surprise! The chart offers one more entry. Look at the last candle, which comes out as a bullish engulfing candle closing well above consolidation resistance. Some buyers may trigger another entry. Yes, it is a debatable issue whether traders should take multiple entries in the same pair. At least, if traders miss the first chance, they may consider taking entry here. Let us find out what the price does next.

The price heads towards the North with good bullish momentum. It hits the buyers’ target with ease. On the second occasion, the bullish engulfing candle forming right at consolidation support makes the pair very bullish. On the first occasion, the price does not get that bullish after the signal candle. On any day, the second signal is better than the first one. Some traders do not like taking multiple entries, which is fair enough. If a trader does not mind taking multiple entries, he may as well consider taking entry if it is a better trade setup than the last one with relatively a smaller lot than his usual trading lot.

 

Categories
Forex Price-Action Strategies

Do not Forget to Check the Daily Chart

In today’s lesson, we demonstrate an example of an H4 chart and try to evaluate its price movement after breakouts. The chart shows that the price makes three breakouts altogether. The first two breakouts do not create that much momentum towards the breakout, but the last one does. We try to find out the reason behind it.

In today’s lesson, we demonstrate an example of an H4 chart and try to evaluate its price movement after breakouts. The chart shows that the price makes three breakouts altogether. The first two breakouts do not create that much momentum towards the breakout, but the last one does. We try to find out the reason behind it.

In today’s lesson, we demonstrate an example of an H4 chart and try to evaluate its price movement after breakouts. The chart shows that the price makes three breakouts altogether. The first two breakouts do not create that much momentum towards the breakout, but the last one does. We try to find out the reason behind it.

This is an H4 chart. The chart shows that the price makes a bullish move and consolidates. It seems that the price has found its support since it has already produced a bullish engulfing candle. The buyers may go long in the pair above consolidation resistance.

The chart shows that consolidation resistance is a strong level of resistance where the price gets rejection several times. Since it is an H4 chart, three times rejections, on the same level, means that it is a daily level of resistance. Thus, an H4 breakout may not create that much momentum all the time.

The chart shows that the price after making a breakout consolidates for a long time again. It is because of the daily resistance factor. The daily candle confirms the breakout. Thus, the price in the H4 chart consolidates. Look at the last candle. This comes out as a bullish candle breaching consolidation resistance. Let us find out what happens next.

The last H4 bearish inside bar is the last candle of the day. It means the daily candle comes out as a bullish candle after the daily breakout, breakout confirmation, and daily reversal candle.

The price consolidates with one more candle to start the next trading day. A bullish reversal candle may push the price towards the North with good bullish momentum. Since the chart now belongs to the H4 traders as well.

Here it is. The chart produces a bullish engulfing candle closing well above consolidation resistance. The length of consolidation is shallow. However, the bullish reversal candle looks to be a perfect signal candle.

There she goes. The price heads towards the North with extreme bullish momentum. The last candle suggests that the price may continue its bullish journey. Let’s look at the last move. The price does not consolidate with enough depth, but it makes a strong bullish move. On the other hand, on the first two occasions, it consolidates well, but its breakout does not create good momentum. It is because, on the first two occasions, there is a daily resistance factor. The level of daily resistance makes the H4 traders wait for more. Once the price makes a breakout on the daily chart, it heads towards the breakout direction with good momentum. The H4 traders are to check the daily chart before taking entry. This is one more reason to check that one thoroughly.

Categories
Forex Price Action

Some to Take and Some to Skip

In today’s lesson, we are going to demonstrate an example of an H4 chart, which seems to be offering several entries. However, a trader has to be very calculative before taking an entry. Some entries are there to be taken, and some are there not to be taken. We would try to find out why we shall skip taking some entries. Let us get started.

In today’s lesson, we are going to demonstrate an example of an H4 chart, which seems to be offering several entries. However, a trader has to be very calculative before taking an entry. Some entries are there to be taken, and some are there not to be taken. We would try to find out why we shall skip taking some entries. Let us get started.

In today’s lesson, we are going to demonstrate an example of an H4 chart, which seems to be offering several entries. However, a trader has to be very calculative before taking an entry. Some entries are there to be taken, and some are there not to be taken. We would try to find out why we shall skip taking some entries. Let us get started.

This is an H4 chart. The chart shows that the price makes a strong bullish move and consolidates for a long time. The last candle comes out as a bullish candle breaching consolidation resistance. It usually a scenario of taking a long entry. Before taking an entry, we must calculate whether the price consolidates for more than a day or not. Over here, the price consolidates more than a day. It means the level of resistance becomes daily resistance. The breakout is not for the H4-daily combination traders to trigger a long entry.

The chart shows that the price heads towards the North. The buyers may wait for the price to consolidate and get a bullish reversal candle to go long in the pair. They must keep their eyes on the pair.

The chart produces a bearish inside bar. It may consolidate more and make a deeper consolidation. This is what the buyers are to hope for. Let us find out what the price does here.

The chart shows that the price consolidates for five candles altogether. The last bullish candle is the last H4 candle of that day. It means if the chart produces the next candle as a bullish engulfing candle, the buyers will have an opportunity to go long in the pair. Otherwise, they are to wait longer.

The last candle comes out as a bullish engulfing candle breaching consolidation resistance. The buyers may trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R.

The price consolidates again and produces a bullish engulfing candle. It seems the bull is going to dominate in the pair for a long time since it finds another level of support. When price trends like that, traders add more positions, and the price keeps trending relatively for a longer time.

Here it is. The price hits the target of 1R. They buyers grab some green pips. Yes, they wait for the price to hit the target. Some traders may take a partial profit out of it and let the rest of the trade run to grab more pips.

In this lesson, we have demonstrated that traders may take the second entry and skip the first one because of the daily resistance factor. Traders must calculate these things before taking entry.

Categories
Forex Elliott Wave

Advanced Applications in Wave Analysis – Part 4 of 4

Introduction

Introduction

Introduction

In the previous educational article, we presented the contracting triangles and the restricting group. In this last part of our four-part series, we’ll show the non-restrictive contracting triangles and the expanding triangles with its variations. 

Non-Restrictive Triangles

This sub-group of triangles is characterized by locates in any other part of the wave cycle, not exclusively in waves 4 or B. The knowledge of this type of triangles could be useful to the wave analyst in the study of complex corrective patterns. This type of triangles tends to be produced at the end of complex corrections. Frequently, non-restrictive triangles tend to be more simple to identify than restrictive triangles.

  • Wave A. This segment tends to be the most volatile in terms of price at the time of the triangle. According to the alternation principle, if wave A is violent and takes a small portion of its completion, wave B will be slower and complex than wave A.
  • Wave E. In this scenario, the last segment of a non-restrictive contracting triangle, tends to develop a non-restrictive triangle. In other words, wave E could make a triangle inside a triangle of the upper degree. From the different types of non-restrictive triangles, the horizontal triangle tends to be the most common in the real market. The following list exposes the parts where the non-restrictive triangle.
    • Wave E in a horizontal triangle.
    • Last movement of a complex correction as a double or triple corrective pattern.
    • The fifth wave of an impulsive terminal structure.
    • The wave X of a complex correction.

Expanding Triangles

The expanding triangle tends to cheat the wave analyst more than the contracting triangle. This situation occurs because when the price moves in a volatile session, it tends to create a false breakout and quickly resuming its original trend.

The main characteristics of an expanding triangle are:

  • Wave A or wave B will be the shortest wave of the triangle.
  • Wave E tends to develop an explosive movement, higher in terms of price and time than the other waves.
  • In the same way that in contracting triangles, a contracting triangle can produce in wave E, in an expanding triangle, it can construct an expanding triangle.
  • The next movement of the triangle, which could correspond to wave C or 5, should not retrace the advance of wave E entirely.
  • The expanding triangle usually does not follow any Fibonacci relationship.
  • Expanding triangles normally occurs after a powerful movement such as an extended wave or an extended wave C. 

Restrictive Expanding Triangles

The restrictive expanding triangle tends to be placed in waves 4 and B. If the expanding triangle locates in wave B, the triangle belongs to a flat pattern. The rules applied to this group of expanding triangles are as follows:

  1. Waves A and E will be related through a 161.8%, being the wave E the largest segment.
  2. Wave A or B must be the shortest segment of the triangle.
  3. Only wave B or D can fail to try to surpass the previous wave.

Horizontal Expanding Triangle. The characteristics of this pattern are as follows:

  1. Wave A is the shortest segment of the triangle.
  2. Each leg after wave A will be larger than the previous segment.
  3. Wave E should be the most volatile, complex, and longer terms of time than the other waves.
  4. Wave E tends to be 161.8% of wave A.

Irregular Expanding Triangle. This variation of the expanding triangle is the most common to find in the real market. The main characteristic of this variation is that every time that wave B try to surpass to wave A fails in its advance. Wave E and A are show a 161.8% relationship, being wave E the longest segment.

Continuous Expanding Triangle. This type of restrictive expanding triangle is the second most common pattern to find in the real market. The continuous triangle characterizes by failing when this tries to surpass the end of wave C. If wave D fails, the pattern could show a slight bullish or bearish bias. Finally, waves A and E will be related in a 261.8%, being wave E the longest segment.

Non-Restrictive Expanding Triangles

The non-restrictive expanding triangle pattern follows the same conditions as restrictive expanding triangles. Its main characteristics are as follows:

  • Usually, they don’t have any Fibonacci relationship in their internal segments. The only relationship could be found on waves A and E, where wave E length could be 261.8% of wave A length.
  • The apex of the expanding triangle occurs before the triangle. If the apex occurs between 20% and the start of the expanding triangle, the formation should be non-restrictive.

Conclusions

In this educational article, corresponding to the last part of our four-part series covering the triangle pattern, we presented in the first section, the Non-Restrictive Contracting triangle. This group of contracting triangles tends to appear at the end of complex corrections, or the end of an impulsive terminal structure.

The second section corresponds to the expanding triangles, which are characterized by tricking the different market participants, who tend to think that the market has reversed and, after its last volatile movement corresponding to wave E, they discovered that the market in fact is resuming its previous trend.

Suggested Readings

  • Neely, G.; Mastering Elliott Wave: Presenting the Neely Method; Windsor Books; 2nd Edition (1990).

 

Categories
Forex Course

121. Trading The Bullish & Bearish AB=CD Harmonic Pattern

Introduction

Introduction

Introduction

The ABCD is one of the most straightforward patterns in the Harmonic lot. There are two types of ABCD patterns – Bullish AB=CD & Bearish AB=CD. For both the bearish and bullish versions, the AB and CD lines are the legs, whereas the BC line is considered the Retracement or correction. To confirm the formation of this pattern, we use Fibonacci levels that we have discussed in the previous course lessons.

By using the Fibonacci tool on leg AB, see if the BC retracement is reaching the 0.618 level. Next, the line CD should be the extension of 1.272 Fibonacci extensions of BC. This rule applies to both bearish and bullish AB=CD patterns. We go long or short when the price action reaches the point D of the corresponding pattern formed.

How To Trade The ABCD Harmonic Pattern

Bullish ABCD Pattern

The chart that you see below represents the formation of a bullish AB=CD pattern. The CD leg of the pattern is equal to the size of the AB leg. The BC move, which is a pullback, is 61.8% retracement of the AB move. Likewise, the CD move is the 127% retracement, which confirms the formation of a bullish AB=CD pattern on the EUR/USD Forex pair.

We have entered the market at point D, and the stop-loss is placed just below the D point. As you can see, we went for smaller stops, and there is a reason behind it. If the price action goes below point D, the pattern automatically gets invalid.

There are two take-profit areas in the pair. The first one is at point C, and the second is at point A. It all depends on at what point you desire to close your position. It is always advisable to close your positions at higher targets because the end goal for us is to milk the market as much as we can.

Bearish ABCD Pattern

The below NZD/CAD Forex pair represents the formation of a bearish AB=CD pattern. The AB leg of the pattern is equal to the CD leg. Furthermore, the BC is respecting the 61.8% retracement of the AB move, and the CD move was close to 127% extension of the BC move. We have gone short at point D as the price breakout happened.

In this example, we went for deeper targets. If the momentum of the prevailing trend is strong enough, going for a new lower low will be a good idea. The key to winning in trading is to follow the rules and think according to the market situation. These Harmonic patterns require a lot of patience and effort to trade. So it is strongly recommended to master this pattern in a demo account than to trade it in a live market.

Conclusion

The AB=CD is a reversal pattern that indicates the market trend reversal. The AB=CD pattern consists of three legs, and they form the zig-zag shape. This pattern is also known as a lightning bolt, as it looks like one. The AB=CD pattern can be used in any financial market and also in any trading timeframe. Follow the rules, no matter what, to make consistent profits from this pattern. Always execute your trade at point D and ride for the brand new higher high/lower low. Cheers.

[wp_quiz id=”76393″]
Categories
Forex Price Action

Significance of Having the Belief in Your Analysis

In today’s lesson, we are going to demonstrate an example of H1-15 combination trading. The price trends from the level of 61.8%. Usually, when the price trends from the level of 61.8%, it does not take that long to make a breakout. However, in this example, we will demonstrate that it may sometimes take longer than our expectations. Let us get started.

In today’s lesson, we are going to demonstrate an example of H1-15 combination trading. The price trends from the level of 61.8%. Usually, when the price trends from the level of 61.8%, it does not take that long to make a breakout. However, in this example, we will demonstrate that it may sometimes take longer than our expectations. Let us get started.

In today’s lesson, we are going to demonstrate an example of H1-15 combination trading. The price trends from the level of 61.8%. Usually, when the price trends from the level of 61.8%, it does not take that long to make a breakout. However, in this example, we will demonstrate that it may sometimes take longer than our expectations. Let us get started.

The chart shows that the price makes a strong bullish move towards the North. The last candle comes out a bearish inside bar. It indicates that the price may make a bearish correction. The buyers are to wait for the price to produce a bullish reversal candle followed by a bullish 15M breakout at the highest high of the wave to go long in the pair. This is the plan of the game. Let us find out how it goes.

The next candle comes out as a bearish candle as well. The last bearish candle has a long lower shadow. It indicates that the chart may produce a bullish reversal candle anytime soon. The buyers are to wait here with patience.

As expected, the chart produces a bullish reversal candle. The candle comes out as a bullish engulfing candle. The H1-15M combination traders are to flip over to the 15M chart and wait for a bullish 15 candle breaching the wave’s highest high to trigger a long entry.

You may have noticed that the price has been within the level of resistance for several candles. It means the buyers are to keep their eyes on this pair for a long time. Look at the last candle. After so many hours of waiting, the 15M chart produces a bullish candle that closes above the level of resistance. The buyers may trigger a long entry right after the last candle closes. Let us flip over to the H1 chart with Fibo levels on and find out what happens here.

The Fibo level shows that the price trends from the level of 61.8%. This is one of the levels, which usually produces good momentum. In this example, it produces a good bullish momentum after the breakout, but it takes a long time to make the breakout. The H1-15 combination traders’ patience is tested here. The buyers who wait and keep the belief that it may end up producing the signal make money out of this setup in the end. It is not easy, but this is what trading is all about. Having a belief in analysis helps a trader be a better trader.

Categories
Forex Market Analysis

Daily F.X. Analysis, June 4 – Top Trade Setups In Forex – Eyes on ECB Policy Meeting! 

On the news front, it’s likely to be a busy day with most of the focus staying on the European Central Bank’s monetary policy meeting. ECB’s Main Refinancing Rate holds at 0%, and So far, the ECB isn’t expected to change it. However, we need to closely monitor the Press conference as the hawkish or dovish remarks from President Christine Lagarde can drive price action in the EUR/USD pair today. Besides, the dollar may stay supported ahead of the NFP figures coming out on Friday.

On the news front, it’s likely to be a busy day with most of the focus staying on the European Central Bank’s monetary policy meeting. ECB’s Main Refinancing Rate holds at 0%, and So far, the ECB isn’t expected to change it. However, we need to closely monitor the Press conference as the hawkish or dovish remarks from President Christine Lagarde can drive price action in the EUR/USD pair today. Besides, the dollar may stay supported ahead of the NFP figures coming out on Friday.

On the news front, it’s likely to be a busy day with most of the focus staying on the European Central Bank’s monetary policy meeting. ECB’s Main Refinancing Rate holds at 0%, and So far, the ECB isn’t expected to change it. However, we need to closely monitor the Press conference as the hawkish or dovish remarks from President Christine Lagarde can drive price action in the EUR/USD pair today. Besides, the dollar may stay supported ahead of the NFP figures coming out on Friday.

Economic Events to Watch Today

 

 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.12334 after placing a high of 1.12577 and a low of 1.11665. Overall the movement of the EUR/USD pair remained bullish throughout the day. The EUR/USD pair extended its previous bullish rally for 8thconsecutive day on Wednesday and surged to its highest level since March 12 at 1.12500 level. The risk-on market sentiment continued to weigh the U.S. dollar and pushed the EUR/USD pair on an upward trend.

The U.S. Dollar Index was calm during the European trading hours at 97.50, but after the release of economic data, Index lost its traction and was dragged down. At 12:15 GMT, the Spanish Services PMI for May surged to 27.9 against the expected 24.7. At 12:45 GMT, the Italian Services PMI also exceeded the expectations of 26.2 and came in as 28.9. At 12:50 GMT, the French Services PMI for May increased to 31.1 against the expected 29.4. At 12:55 GMT, the German Final Services PMI also surged to 32.6 from 31.4 of expectations. At 13:00 GMT, the Final Services PMI for the whole Eurozone exceeded the expectations of 28.7 and came in as 30.5 to make Euro stronger against the U.S. dollar.

At 12:55 GMT, the German Unemployment Change showed that 238K people lost their jobs in April against the expectation of 188K. At 13:00 GMT, the Italian Monthly Unemployment Rate decreased to 6.3% from the expected 9.2% and supported Euro. At 14:00 GMT, the PPI for the month of April from the whole bloc was declined by 2.0% against the forecasted decline by 1.8% and weighed on Euro. However, the whole bloc’s unemployment rate was recorded as 7.3% against the expected 8.2% in April and supported Euro.

Better than expected Services PMI and Unemployment data from the whole bloc and its countries gave a push to Euro prices against the U.S. dollar and moved EUR/USD pair in an upward trend on Wednesday.

Daily Support and Resistance

  • R3 1.1362
  • R2 1.131
  • R1 1.1272

Pivot Point 1.1219

  • S1 1.1181
  • S2 1.1128
  • S3 1.109

EUR/USD– Trading Tip

The single currency Euro also took a bearish turn against the U.S. dollar to complete 61.8% Fibonacci retracement at 1.1215 level today. This level is extending solid support to the EUR/USD, and violation of this level can extend the EUR/USD pair until 1.1190 level. While above 1.1212 level, the EUR/USD can bounce off until 1.2305 level. Let’s wait for the ECB rate decision to determine further trends in the EUR/USD. 

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.25749 after placing a high of 1.26148 and a low of 1.25448. Overall the movement of GBP/USD pair remained bullish throughout the day. Sterling rose to its five-week highest level on Wednesday, and the pair GBP/USD continued to post gains for the 5th consecutive day on the back of the risk-on market sentiment. U.S. dollar was under heavy pressure amid risk appetite despite U.S. unrest and good economic data. The recent reopening of economies from across the globe boosted investors’ confidence in global economic recovery in the second half of the year, which was also backed by the recent economic data which has already has started to show the signs of betterment.

Markets moved towards riskier assets, including GBP and hence, the pair GBP.USD gained traction in the market. At 13:30 GMT, the Final Services PMI from Great Britain surged to 29.0 from the expected 27.9 and supported Sterling. The ADP Non-Farm Employment Change reported a job loss of 2.76M against the expected job loss of 9.0M. At 19:00 GMT< the ISM Services PMI from the U.S. also increased to 45.4 from 44.2 expected.

However, the gains in GBP/USD pair remained under pressure due to looming Brexit risks after the Bank of England warned the city to prepare for no-deal Brexit. The final round of talks between the E.U. & U.K. has been started, but the chances to secure a deal are highly unlikely.

The governor of Bank of England, Andrew Bailey, told the British biggest lenders to bolster their preparations for a no-deal Brexit. He said that it was Bank of England’s duty to prepare the U.K.’s financial system for all risks that it might face. And to do so, the warning to be ready for the worst-case scenario was issued. This warning by BoE kept a lid on any additional gains in GBP/USD pair on Wednesday.


Daily Support and Resistance

  • R3 1.2684
  • R2 1.265
  • R1 1.2612

Pivot Point 1.2578

  • S1 1.254
  • S2 1.2506
  • S3 1.2468

GBP/USD– Trading Tip

The GBP/USD was trading with a bullish bias to reach at 1.2600 levels, testing the triple top level on the 4-hour timeframe. The bullish channel has driven a bearish correction in the pair, and on the 4-hour chart, the GBP/USD seems to have more potential for selling until the next support area of 1.2475 level. The MACD has also crossed below 0, which demonstrates initiation of a selling bias, and it may lead the Cable lower to 1.2479 level. Consider taking selling trades over below 1.2600 today.

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 108.899 after placing a high of 108.980 and a low of 108.420. Overall the movement of the USD/JPY pair remained bullish throughout the day. The USD/JPY pair extended its previous day’s gains and rose above 108.900 level pacing a high since April 9 on the back of increased risk appetite. The risk-on market sentiment weighed on safe-haven Japanese Yen and pushed the USD/JPY pair above multi week’s highest level.

The U.S. dollar index slipped to its three months low level due to increased global risk sentiment after the hopes for faster recovery increased due to easing of lockdown restrictions. The DXY fell to 97.19 low from 97.63 on the day. Despite the drop of the U.S. Dollar Index, the pair USD/JPY managed to post gains on the back of strong U.S. equity market.

On the other hand, the headlines of China stopped buying U.S. farm goods and were proven false after the reports suggested that Chinese state-owned firms bought U.S. soybean cargo this week. This raised the optimism that US-China worries would become less. It was also supported by the comments from U.S. Senator Grassley, who said that the US-China trade deal was on track.

Meanwhile, at 17:15 GMT, the US ADP Non-Farm Employment Change for May showed a decline in the number of jobless people to 2.76M from the forecasted 9.0M and helped the U.S. dollar to gain traction. At 18:45 GMT, the Final Services PMI from the U.S. came in line with the expectations of 37.5. At 19:00 GMT, the ISM Non-Manufacturing PMI showed a surge to 45.4 from the expected 44.2 for May and supported the U.S. dollar. The Factory orders in April were declined by 13% against the expected decline of 13.7%.

Daily Support and Resistance    

  • R3 109.71
  • R2 109.35
  • R1 109.12

Pivot Point 108.77

  • S1 108.54
  • S2 108.19
  • S3 107.96

USD/JPY – Trading Tips

The USD/JPY bullish bias violated the series of resistance levels to lead the USD/JPY currency pair towards 108.770 level. The closings of bullish engulfing and three white soldiers candlestick patterns are likely to drive further buying until 109.125 level today. On the 4 hour timeframe, the USD/JPY pair has crossed over 50 EMA and has closed a few candles above resistance become support area of 108.350, which is supporting bullish bias among traders. The USD/JPY pair may find support at 108.350 and resistance at 109.125 level while the breakout of this range will determine the next trend in the pair. Today let’s consider buying over 108.35. All the best for today!