After a week of boring range trading, the pair rose earlier to 1.2855 where it met the Weekly R1. This was the highest price since August 19. Despite the pull back after we hit the Weekly R1, the Euro is still trading more than a 120 pips above today’s opening price, the biggest daily gain in almost a month. Looking ahead, I would expect to see the current rally extend as high as 1.2900’s. Also watch for 1.2780 as an important level of support; it is both the old trend high for the recent rebound as well as the 38.2% retracement of today’s 1.2663/1.2855 range.
Here’s my 4 hr chart. Good luck trading!
Well it looks like my bias for more of a down move on the EUR/USD below the 1.2600 level has not come into being just yet. The pair is still continuing to consolidate and shake out the longer-term short trades (mine included) as it inches is way above the 1.2700 level. Lots of resistance to be had up above, but since we are at the end of the week, I’m taking the next day off while this currency pair makes up its mind with regards to the next trend.
Anytime you are in a ranging market, daily pivot points work quite well at predicting price action. As I mentioned in my post below, I have been looking for opportunities to short this pair all week, so I wanted to share how well the daily R1 worked for me at picking price levels at which to enter the market. On Tuesday the weekly S1 and daily S1 combined to give me a decent buy level, but I also waited for it to also reach the daily R1 at which time I closed that position and entered a new short position. Being adaptable is the new of the game. Here’s a pick. Post questions below!
For more about using Pivot Points, check out this brief lesson: Pivot Points
UPDATE: 8-25-2010
I am still short on the EUR/USD as it still appears to be a bearish trending market as of this writing. Here are two more pics of my graphs. This first pic shows that a bearish engulphing candlestick has formed on the 4 hr chart and our moving averages are still far enough apart to indicate the bearish momentum is still decent.
Also lets see what forms of support might account for this period of consolidation that we are in. The answer is once again a fib level my friends. Here’s my daily chart where you will see that we are right around the 50 fib level from the recent May to August rally.
So I would watch today’s price action real close to see if the current 1.2720/1.2600 range is broken and use that to predict the next direction of this pair. If we can close above 1.2690/1.2700 at the end of the NY session, then I’d say we might see a reversal of the trend, but if not I would say we are headed lower, perhaps the lower 1.2400’s right around the 61.8 fib level on the daily chart.
To learn more about these indicators, follow these links: Fibonacci Made Easy, Moving Averages, The Alligator
I love it when a plan comes together! The trendline that I’ve been posting about and following since the end of June when bullish momentum took charge over the EUR/USD pair, was finally broken today as a result of both profit taking ahead of the U.S. FOMC meeting and and abysmal Q2 Non-Farm Productivity figures (biggest decline since Q3 2008). As a result of that trendline break we saw strong selling pressure that was met with slight support around the 200 MA and weekly S1. The retracement went right up to my red MA (which provides support/resistance in strong trending markets) as well as the 50 fib level. God I love fib levels more and more. Once the retracement was laid to rest we’ve seen price action drop even farther as low as 1.3072 as of this writing. I provided a picture of my chart to show the technicals mentioned above. Hope everyone finds it useful. Feel free to leave me any questions or comments.
Well the numbers are in and as expected the unemployment rate held steady at 9.5%. June private sector jobs were revised much lower, to +31,000 from +83,000 previously! Total non-farm payrolls were revised lower to -221,000 in June, from -125,000 previously. All in all this was not a good sign of the times here in the U.S.
I’ve attached a photo of the trade setup that I took on the EUR/USD. Whenever trading the NFP, I always let the market choose a direction first, then wait for a retracement to begin and use my fib levels to determine my actual entry. In this case the momentum was very strong and so our retracement was very weak, only reaching the 23.6 level before taking back off again. This is the 5 min chart, my preferred chart for volatile news event trades.
Here’s a simple look at my 4 hr chart where I only have my trendline and fib levels showing. The fact that we have the 61.8 fib level syncing up perfectly with a nice round price level like 1.3000 shows that we are at a critical level (I believe) for the euro. For 9 days in a row now, that 1.3000 price and 61.8 fib level has been tested and yet not broken on the daily chart as well. There is LOTS more resistance levels above than support levels below, leading me to guess that the rally we’ve been riding high on is at a plateau and soon we’ll see a reversal in trend. Above the 1.3000, we have two big forms of resistance: one is the weekly R1 at 1.3050 and the daily R1 at 1.3057. There’s also minor resistance at 1.3035. To the downside, a break of 1.2970 would peek my interest that momentum has shifted, but ultimately we should watch that red trendline to confirm a true reversal has happened.
I’ve been trading the range (which I have at 1.2970/1.3030) on the hourly chart for modest 40 pip T/P with a 20 pip S/L and had 3 successful trades this week doing that, and I will continue to do so until the market breaks out of this counter-trend. Trading ranging markets is brutal sometimes since about 80% of all breakouts become fake-outs, and I like to ensure that I never get emotionally attached to the trade so that if the trade goes against me, I still can re-evaluate and jump back on board in order to not miss out on the next trade setup. If anyone has questions or comments feel free to leave them below. Good luck out there!
Well last week I posted the graphic showing how the 50 fib level provided resistance to the strong rally we were seeing all week and reminded everyone of the powerful tool that fibonacci levels are to trading. Well now the next level up, and one of the most crucial levels to know about, 61.8 has provided a stronger source of resistance by capping any rallies above it three days in a row. We have now seen a sell-off that currently finds support at the 50 fib level (support turned resistance). The pair is now consolidating in a tight range between 1.2790 and 1.2830. Whichever of those two levels is broken first, that’s the next entry setup for you to take advantage of.
I failed to realize this yesterday, so here is an actual image to show that the recent stall in this most recent rally occurred right at the 50% fib level on the daily chart from this year’s April to May swing high and low. This is why you need to know how to use fib.’s my friends! Also Adding to the resistance was our Weekly R1 which price action broke but hasn’t closed above on the hourly, and the daily R1 just above there (not seen in this image).
The Euro reached a 2-month high after breaking above 1.2700 and continuing up to 1.2737 reaching the highest price since May 12. As I write this, my smaller time frames (hourly and 15 min) show extreme overbought conditions and it’s a safe bet that we will see the EUR/USD trigger some bearish corrective movement now and into the close of New York’s session. Most analysts that I keep up with say to watch for 1.2660/70 area to be the key: if it’s under, corrective movement could extend close to the 1.2600 area, while if price holds above the level, price action should resume bullish trend.
I traded two classic setups according to my strategy and using the 1 hour chart. First, during the initial morning hours of the European session when the EUR/USD was falling, price action reached the daily S1 and came within 5 pips of the Weekly S1 as well, triggering a high probability buy that I managed to leave open during the subsequent rally that took of when New York opened its session. We then just had what’s known as a tweezer candlestick formation occur on the hourly timeframe for the 11:00am and 12:00 pm candlesticks. Whenever you have price action at extreme levels and two consecutive candlesticks close moving in opposite directions (bullish candle followed by a bearish one) and both of them have tails or wicks of equal length, that’s usually a great entry for a corrective move in the opposite direction of the initial surge. Hope that makes sense, if not feel free to comment. Sorry, but I’m not leaving a graphic up for this one, but it’s better to discover these things on your own charts since most every trader I know has a customized chart anyway.
So looking ahead, again watch the 1.2660/70b area as I just mentioned for an indication of which direction we are going to go in for the rest of the week. Of course news will effect this recent momentum as well and coming up tomorrow are several key economic releases out of both the U.S and Europe to pay attention to. 1.2880 would be the next big resistance area to watch for as that was last year’s lowest level of support in mid-April, so it should now become crucial resistance for this pair to overcome now that the other levels are out of the way. Also the 100 day MA is approaching above the 1.2937 level. Good luck trading!
Just wanted to look at this Sterling Yen chart which really is an amazing pair, and although I am not in any way attached to currencies as in a favourite little friend, this one comes out pretty rock ‘n’ roll in my top movers list. These shocking pink head and shoulders patterns, which we can find on all time frames, contain some serious moves with plenty of momentum and can help in the identification of areas where the big money may be sitting with orders. These areas are where we hopefully can hitch a ride to some important moves whilst keeping our risk in the market at an acceptable level depending on our MM plan.
The simple upward trend line, with corresponding horizontal resistance could have provided a way into the market where our technical analysis had created a high probability entry order with low risk and a potential 60pip first target. Remember there are no guarantees, and our analysis is only zooming us in closer and closer to the trade that is most likely to go in our favor based on historical evidence. The market never makes a false move, I talk about false breakouts a lot of the time, but of course their not false, they just don’t fit into my little trading picture, but they are very real and true.
In this GY chart example our trend line has been tested several times and held. What this starts to create in our trading mind is an idea of what the big money is looking at, are they looking at this same trend line? if they are then the probability of trading with them just increased. The next time the price arrives at the line we can place our trade and have a plan already built-in so as to keep our subjectivity out of the button pushing. We will have certain expectations for the trade and the means to get out quickly if things go against us.
On the Sterling Dollar chart we can recognise how for the last week the price has prefered to stay in this 130pip range with some little excursions higher and lower that have met swift opposition. This is important intelligence to be able to understand the overall feeling traders have of the pair. We can apply S&R lines from higher time frames and look for smaller time frame entry points, only of course for trades that carry a high probability of success. This is the way I trade profitably, I do have losses but they are kept to a minimum because I won’t just take any trade, and this inevitably means that my trades can be infrequent, that’s not a worry for me. I know and believe that good set-ups exist a lot of the time and it’s only a matter of choosing the highest probability ones to end up being a winner in forex. This is what I would like novice traders to know and believe as well.
See more posts like this at http://forexdawn2010.blogspot.com
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