EURUSD Bounces After Breakdown

I was taking a look at this chart this morning. The EURUSD was falling and a break of its trend looked like it could lead to another fall for it to test the 1.2750 level.

As can be seen we had that break below the trend.  But what we never had is a consolidation period where the currency pair trades below the trend, tries to trade above and then fails.  Without the consolidation phase, such a move is simply momentum dump but doesn't qualify as a breakout play.  

Worth watching though to see where it closes for the day.

Still Short Gold – Wathcing Head & Shoulder Pattern

It’s been way too long since I posted a trade update.  With the storm and election I wasn’t really seeing too many ideas worth trading playing out.  In the meantime, I was continuing to stay short Gold which I sold at 1740 last month as it was about to break below its 50 day moving average (Selling Gold As It Hugs 50 Day Moving Average).  After bobbling for a bit, Gold broker down and hit a low of around 1675 before the US elections.  With the lack of clarity from the US eclections, it made sense to cover around that time.  But, I gave it a few more days, only to see a surprise squeeze occur and gold jumped back above 1725.  Since then its stayed below its 50 day moving average (important), found support at 1700, and formed a Head and Shoulders pattern (see chart for all of this). 

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Where Is the AUDUSD Headed This Week?

The AUDUSD briefly cracked the 1.0400 barrier again last week, matching its 1.0410 highs of October.  However like much of the rest of the market, the pair dropped to close at 1.0335 after the US’s Non Farm Payrolls beat expectations and triggered dollar strength.  This was followed by a late selloff on Friday in US equities which caused an overall risk decline.  Coming up this week the AUDUSD will be in focus as a bunch of economic announces are coming out.  The fun starts on Monday morning with Retail Sales and Trade Balance figures, followed by the RBA’s Interest Rate Meeting on Tuesday, and then on Thursday we get Australian Employment Change numbers.
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BoJ Stimulates More Than Expected, USDJPY Falls Anyway

If you ever needed a reason why not to trade on news, the chart below provides a pretty good example of why its completely hit or miss.  Coming into the Bank of Japan’s Monetary Policy Meeting, the USDJPY had been trading steadily higher as forex traders were expecting the BoJ to provide 10 trillion yen of stimulus.  At the end, they came through for traders and even upped the ante to 11 trillion.  But, as you can see from this chart, other than that tiny uptick as the news was announced, the USDJPY tanked on the news.

 

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Buying AUDUSD On Possible Further Breakout

Yesterday I mentioned how I wasn’t excited about the AUDUSD’s move above 1.0300 and wanted to short it if it fell back below its previous resistance level of 1.0285.  That didn’t happen as it had a day long breakout and has moved to just below 1.0400. 

The strength brought out lots of talk in twitterville about shorting it as it looked overbought and RSI’s were hitting 80 etc.  However, as often happens, just because something has moved higher doesn’t mean it can’t keep moving.

Taking a look at the AUDUSD since yesterday afternoon it has been creating a support base just above 1.0360 and unlike other currencies that rallied yesterday, never really had much of profit taking hit the pair.  As such, with a rotation occurring back into the Aussie, and demand stepping up to support it at 1.0360, I am taking a long this morning at 1.0394, right around its highs and just below 1.0400 resistance. 

While the 1.0400 figure is an important barrier, based on the amount of skeptical traders shorting it as it went ‘overbought’ we could see another upside breakout if it trades above 1.0400 and triggers stop losses.

Target on long of 1.0475 on the trade with stops below support at 1.0355. 

Trading Idea of the Day – Short AUDUSD on Weakness

Initially published this idea on tradingview.com.  As you can see from the chart below, the AUDUSD has had resistance for the past two weeks at 1.0285 or so.  While it never really sold off hard, it hasn’t seen much demand during periods of overall risk buying.  This was especially seen yesterday as  it barely reacted when the EURUSD was moving higher on the EU/Spain funding related news.  This same trading characteristic was the reason I was long the EURAUD for nearly two months. 

In any event, the AUDUSD finally did succumb to the overall buying in the market to take out its resistance level and trade above 1.0300.  However, I wouldn’t be surprised if this move had more to do with sellers backing off than real buyers stepping up.  As such, I would go short the AUDUSD if it trades back below the 1.0285 level as it would be expected to trigger selling as the short term buyers exits and the longer term sellers return.

 

Short Aussie On Fall Below Resistance by ronfinberg on TradingView.com

Selling Gold As It Hugs 50 Day Moving Average

Shorting something as it bounces around its 50 Day MA isn’t usually one of my favorite ideas.  Preferably you want to see a trading instrument close below the MA first to confirm weakness.  In Gold today I am making an exception.  As this chart shows, Gold is right at its 50 Day MA (green line).  But although it found support there yesterday, its been fading today as US CPI figures showed once again that inflation isn’t an issue.  Also, even though we’ve had a morning risk rally being fueled by the events in the EU, the commodity currencies haven’t followed along with the likes of the EURUSD and GBPUSD.  As such, it looks like interest is flowing away from Gold and it could be a downside breakout candidate if it closes below its 50 Day MA or trades below yesterday’s low (1728.50).

Gold at 50 Day MA

As I believe either of those scenarios will trigger some stronger selling pressure, I would rather sell first and take the preemptive attack.  Selling Gold at 1740.14. 

Fed's Dudley Speaks - USDJPY Keeps Creeping Higher

 

With that backdrop, the one forex pair that looks interesting is the USDJPY.  While it’s hard to become a full fledged USDJPY bull knowing that it has made repeated moves back below 78.00, its current trading is hard to ignore.  The USDJPY hit an October high this morning of 78.92 as it has been reacting to positive US news.  As mentioned in this website quite a few times, much of the ebb and flow of the USDJPY is based on the forecasts of Japanese exporters on the rest of the world.

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House Clearing Day: Exiting EURCHF, EURAUD & EURGBP

Haven’t posted in a long while.  Basically I have been staying on the sidelines with my Euro longs; EURAUD, EURCHF and EURGBP as for the most part they have been doing well.  I have decided today to close them all and go flat.  The forex markets currently look very sideways with no real catalysts lately.  The only story was the better than expected non farm payrolls figures earlier this month which the Fed has been trying to ignore anyway.  Also, the story in Europe has gone to its next phase of stalling along. As such, taking the opportunity to close all positions.
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Forex Trading Analysis: GBPUSD Looking Strong while EURCHF Firms

Market Needs to Wake Up!Not a whole lot going on today as the markets continue to look for direction after last week's risk rally. Overall. not much has changed since last week's FOMC Meeting. In fact, it can be said that risk sentiment has actually risen with the Bank of Japan joining the party and increasing its own monetary stimulus plans. As such, with riskier currencies in the forex markets seeing weakness this week, we appear to be in a period of profit taking after the previous run-up.

Looking forward, forex traders may want to keep their eyes on EU sovereign debt yields, specifically those of Italy and Spain for an indication of whether the "good times" are set to continue or whether the longer term risk adversity theme is still in play.

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What’s Up With the EURCHF?

In the crazy world of the EURCHF, the pair continues to hold it gains from yesterday even as the Euro is selling off after comments from the ECB’s Draghi that the central bank had slashed their GDP forecasts. 

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Buying GBPUSD Ahead of MPC Meeting

In the morning comments, I liked the way the GBPUSD was trading.  From being at a place of seeing 1.5900 resistance, it now looks like sellers are backing off and it’s a matter of whether buyers will step up again.  As such, I am buying the GBPUSD ahead of the MPC Meeting at 1.5908.  I see this trade as having a solid risk/reward value. 

Stops are just below the morning low at 1.5880.  On the upside, if buyers emerge, it could easily spike to 1.5975.  There are two worries though on this trade; one-spread volatility widens and it gets stopped out early or bad news leads to massive negative slippage.  For the former, I am trying to avoid an early stop out by placing the stoploss at 1.5880 rather than 1.5888.  For the latter, slippage is a problem, and I am exposing myself to risk by being stopped below the morning support levels.  However, I see the positives outweighing the negatives to take the risk.  (for chart, see earlier post)

Forex Trading Analysis - Do Or Die (Again!) Time for the ECB & Euro

Make A Wish TIme At The ECBIt’s crunch time for the ECB today as they hold their monthly interest rate meeting. Earlier in the week, ECB President Mario Draghi stated that they will do what needs to be done to preserve the Euro, even if this includes unlimited sovereign bond buying. With this backdrop, traders, analysts, media pundits, etc have been building up today’s meeting as a “do or die” session for the survival of the Euro.
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Draghi Tells EU Parliament – “ECB Must Buy Bonds”

Hitting the news wires right now are comments from ECB President Mario Draghi that the central bank will do whatever it takes to ensure the Euro’s survival. Basically he is tipping everyone off for Thursday’s ECB Interest Rate Meeting that they will announce some sort of increase in bond buying.

Other statements from Draghi:
ECB CAN'T ENSURE STABLE PRICES IN FRAGMENTED EURO AREA
INFLATION RISKS STILL BALANCED
WE HAVE TO REBUILD THE EURO AREA
BUYING SHORT-DATED BONDS IS NOT STATE FINANCING

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Closing GBPUSD Long

I mentioned in the weekend trade comments that I would be closing the GBPUSD if it trades to 1.5900 again and fails to break out further.  As the chart shows below, it tried a few times today but continued to hit supply at those levels.  As such, I closed the 1.5811 GBPUSD long trade at 1.5892 for +81 pips.  Overall, the trade was based on a breakout that appears to have stalled.  Risk vs reward just doesn’t seem to justify continuing to be long.

 

SNB's Jordan: EURCHF Price Floor to Continue

In a week which features important news from both the EU and US with Thursday’s ECB Interest Rate Meeting and Friday’s Non Farm Payrolls figures, today, Forex traders are watching the Swiss National Bank.  In a speech just delivered at the NZZ Swiss Capital Market Forum, in Zurich, SNB Chairman Thomas Jordan stated that the central bank will continue to maintain its 1.2000 price floor in the EURCHF.  Justifying the actions, Jordan said "In the current situation, a further appreciation of the Swiss franc would constitute a very substantial threat to the Swiss economy, and would carry with it the risk of deflationary developments.”
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EURAUD, USDJPY & GBPUSD Trade Update

EURAUD On TrackBuy EURAUD @ 1.1842 August, 21: This trade has basically worked out as perfectly as it could.  The trade was based on a rotation out of the Aussie that was occurring. The AUDUSD had been in an uptrend from late May until mid August but appeared to be stalling as the pair wasn’t rallying during periods of risk buying in the overall market.  In contrast, the EURUSD was seeing a rise in demand as Forex traders were bidding up the pair on possible actions from the ECB.  Buying the EURAUD took advantage of the apparent rotation out of the AUD and the EUR’s return to favor.  The trade is up by over 300 pips since it was opened.  Currently, momentum is with the trade and as long as the AUDUSD stays below 1.0400 and the EURUSD trades higher on overall good news, the EURAUD buy primed to keep moving higher. Current:1.2167
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Buying USDJPY Ahead of Bernanke Speech

Might be a little risky, but buying the USDJPY at 78.49 ahead of today's Bernanke Speech in Jackson Hole. This trade adds to my long position I took at 78.73 after August's.  After the NFP, the pair traded around 76.50 and 76.80 for a while before finally moving to a high of 79.65.  It has since fallen after the FOMC Minutes were released last week.  Nonetheless, the pair is showing solid support at 78.40.  As such, with my belief that Ben Bernanke won't say much of anything new today, it could set up a dollar rally; specifically against safe haven names like the Japanese yen and Gold. 

Target on the trade is above 79.00.  The first buy from early last month was a longer term play while with this trade I am out to just rise any short term dollar momentum.  

Forex Trading Analysis - Ben Bernanke Set To Speak, Watch Gold

Coming Up This Week

  • Canadian GDP
  • Fed Chairman Ben Bernanke Speaks

 

Ready or not it Bernanke time. We and the rest of the financial world have spent the week talking up Fed Chairman Ben Bernanke’s upcoming speech at the Jackson Hole Symposium. We are finally here, and as mentioned on Monday, it been a fairly choppy trading week as many Forex traders are on the sidelines or trimming their trading activities in prelude of the speech. Traders are hoping to hear from the Fed Chairman an update of whether the Fed is ready to apply further monetary stimulus at its upcoming FOMC Meeting. In the Fed’s previous meeting, they hinted to that fact, but doubts have risen of whether they actually will make changes. If Bernanke fails to give much clarity about the matter, we could see a fall in equities and the dollar rally.

Charts to Watch

Gold: Since breaking above its 1630 resistance (see chart), prices have gold have performed well. But, after topping out around 1675 it is seeing a little downward pressure. Traders should keep their eyes on the 1650 level. If the level holds, it would signify that demand is real and that the current move higher in Gold hasn’t only been speculative driven. Also, with Bernanke speaking today, Forex traders should watch Gold’s reaction to the Chairman’s comments as it could affect the way the metal trades next week.

AUDUSD: As you can see from the chart below, the AUDUSD has been trending lower since falling below 1.0400. But, the downside has been slow in coming as the pair has seen support; initially at 1.0350 and then at 1.0330. Even after yesterday’s fall below 1.0330 support and trading to a low of 1.0275, the pair has snapped back to around 1.0330. As such, although its long term uptrend has been broken, demand continues to creep up in the pair. Therefore, if Bernanke’s comments do reveal an imminent policy move from the Fed, the AUDUSD could be an outperformer on such news.