This morning's highlight comes from Chancellor George Osborne here in the UK with his Autumn Forecast Statement, so expect lots of smoke & mirrors, volatility and opportunity to shake traders out of the market.For the British pound complex on the faster time frames, it's been a case of some good moves lower against USD, JPY & euro. The hourly currency strength indicator is also highlighting the GBP as heavily oversold, but as we have said many times in our forex webinars - currencies, markets and instrument can stay stubbornly over extended much longer than we think. And as we also say in the webinars your time horizon will always be a factor in any trading decision, and also help to quantify the level of risk associated with that trade.
Discover more about the currency strength indicator here....
With year end on the horizon, now perhaps is a good time to see what the Swiss franc has been up in an effort to determine what the currency is likely to be doing in the run up to the 15th January 2015 anniversary when the SNB (Swiss National Bank) removed the floor of support for the currency, unleashing a wave of volatility on the markets not seen since the dark days of the financial crisis back in 2008.
From a technical standpoint the Swiss Franc is now heavily oversold on the hourly and daily currency strength indicator, against most of its counterparts, with the exception of the where the picture is very different, with the pair firmly range bound albeit well below the 1.20 price point, which triggered the January volatility.
With regard to the other CHF pairs, and in particular the USD/CHF the current move higher that started in mid October is now reaching an exhaustion point, as the pair...
Of the three commodity dollars, namely the Aussie, Kiwi and Loonie it is perhaps the Aussie which finally appears to be showing signs of a potential reversal from its oversold state on the slower time frames of our currency strength indicatort (the blue line). And of the Aussie pairs it is perhaps the AUD/USD and AUD/CAD which appear the most interesting.
Starting with the AUD/USD it was the failure in May to break through the resistance at 0.8160 which was the start of the its downards descent which saw the pair finally find some support at 0.6906 on the Friday before the Labor Day Holiday in the US. And whilst this level was tested once again last Monday, since then the AUD/USD has managed to claw its way back to 0.7138 at time of writing.
Such positive sentiment and similar price action can also be found on the daily chart of the AUD/CAD where the test of support at 0.9149 on the...
Have been reading that carnage is expected and word is EUR/USD has already dropped to 1.1029 - although my MT4 hasn't started as yet, so we will have to wait & see. Meantime here are some levels for some of the euro pairs :
EUR/USD - was already bearish & shorts at CFTC increased last week. Putting the 1.1029 aside for the time being - 1.1052 is the first level of support & if breached 1.0819 comes into play where a high volume node on the VPOC awaits.
EUR/JPY - Has been in congestion for a number of days having failed to breach the 140.78 price point & now looking to turn bearish. The immediate level below is at 137.57 with any move through here then likely to test the 136.69 region. The VPOC continues to remain in the 134.94 region for the time being and should this be taken out then a longer term bearish trend will ensue.
EUR/AUD - The interest rate...
We have four central banks on today's trading horizon, BOJ, RBA, BOE & later this evening we have interest rate decision, policy statement and a press conference from the RBNZ. I really must come up with a collective noun for the CB's! In between we have the Manufacturing Number for the UK where forecast is for 0.1% against a previous of 0.4%. This release can be very difficult to judge as there has been no clear trend since 2009 when the number was consistently awful. On the GBP matrix we have seen some strong buying of GBP against USD, which is not surprising given the alleged Obama comments at the G7.
However, GBP buying actually started last week after NFP. It was the deep lower wick to Friday's candle which signaled a potential reversal for cable. This was given further impetus on Monday, & the buying was cemented as yesterday's candle ended the session with an even deeper lower wick. The current daily chart...
The overnight fall in the Nikkei 225 of 1.76% has resulted in an impressive two bar reversal (aka a shooting star) on the daily chart for the USD/JPY - so no surprise to see the pair move lower in this morning's trading session.
What is perhaps more significant is this move in the JPY is not consistent across the JPY pairs we follow on our matrix, and in particular the EUR/JPY and GBP/JPY. The latter is a pair I am looking to short on a longer term basis, but patience is required not least because I want to see the JPY begin to move away from the bottom (oversold) on the currency strength indicator. This also highlights a key aspect of forex trading, namely individual currencies can stay overbought or oversold for much longer than we expect. Much, of course, will depend on risk sentiment, and in particular whether the current downwards trend in equities continues, and if so then we...
If you come along to our forex webinars you will always hear David & I explain the importance of the fundamental news & how easy it is to be ambushed by 'events'. But I must admit so far it's been absolutely relentless & it's only Wednesday!
Coming up we have Aussie retail sales & Trade Balance - both very important numbers, and so far it's been a buy of the Aussie except against the euro - a trade we've been following. Of the two releases - the Trade Balance number has been negative since July last year, and whilst February's number was encouraging, coming in at -0.44b against a forecast of -0.85b, the subsequent releases have been dire.
Tonight's headline number is -2.17b against a forecast of -1.32b, in fact a further deterioration, and with AUD/USD having moved strongly higher yesterday as a result of USD weakness. it's no surprise to see a doji on today's daily chart, which by coincidence is...
The EUR/NZD has delivered some excellent trading opportunities across all the timeframes this morning to the short side, following the recent heavily bearish sentiment towards the New Zealand dollar which has seen it weaken against all the major currencies. Indeed longer term the NZD is now looking increasingly oversold, so we may see this trend reflected on the slower timeframe charts in due course.
This morning's move was signalled initially with a move below the volume point of control (VPOC) on the 30 minute chart ( the yellow line), a move that was duly supported with rising volume and confirming the bearish sentiment. In addition, the transition in the trend monitor indicator from blue to red also confirmed this reversal, coupled with a pivot high indicator prior to the move through the VPOC. Since then, momentum to the downside has increased with volumes also rising sharply and confirming the wide spread down candle as we approach a potential area of support...
UK retail sales have given GBP a real boost higher & it's occupying six top spots on the currency matrix. Number was a great improvement & market has temporarily forgotten the negative CPI number.
What's interesting is at 8.00 am at the London open, there was a huge buy of cable off an important order board level at 1.5520 with retail sales then just adding the momentum.
Cable is also benefiting from USD pull back from its recent bullish move higher. The 4hr currency strength indicator is particularly revealing as the USD has been overbought for some time, but is now moving lower. The move higher in the London session has now moved to test the VPOC level in the daily chart, and we are now waiting to see if this afternoon's US data can help to push the GBP/USD through this key level. This is denoted on the chart with the yellow line.
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Here in UK election day is almost here & we can expect reactions as soon as the exit polls start posting as well as the actual results. Heaven only knows what is going to happen. So far GBP has been fairly well behaved - moving more as a result of USD & EUR.
Meanwhile in Asia - AUD has employment data to contend with. On 4hr CSI we have seen the AUD pull back & is also showing the NZD as hugely oversold, but as mentioned many times before a currency can stay stubbornly over stretched for a considerable time. And in the case of the Kiwi where it is still falling on the weekly and daily charts it is likely to stay down on the 4 hr chart. Of course AUD/USD is the one to watch, but expect to see moves in the AUD/NZD cross with some interesting volume/price action now developing in the slower timeframes, and with the NZD (...
