In all the brouhaha about Greece and the euro it's easy to forget what else is going on in the forex market. Sometimes I feel Greece is taking up too much space in traders' heads at the expense of other markets and currencies. And for a perfect example of what I mean look no further than the continued strength in GBP which has seen some great trends in GBP/NZD & GBP/CAD & I'm still waiting for the GBP/JPY to turn lower, but only once we see a major reversal in risk sentiment.
On both charts the NinjaTrader trend monitor has remained firmly bullish with only a minor transition on the GBP/CAD reflecting the recent pause in the longer term trend. However, moving to the NinjaTrader currency strength indicator to the left of the chart, here we can see that the British Pound, the yellow line, is now moving ever deeper into the oversold region on the daily timeframe, so this trend...
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...
The EUR/USD continues to look bearish as it sits on support between 1.0885 & 1.0890 & just below the VPOC the yellow line on the volume point of control indicator. This level has now been breached on good volume and should take the pair to 1.0863. In addition the trend monitor has also transitioned from blue to red and with the US unemployment data coming up shortly, this could provide further downwards momentum if the numbers are on target or better than expected. The forecast this time around is 271k against a previous of 274k and whilst this is an important number it is the backwash from Janet Yellen's US dollar positive comments which continue to drive the US dollar higher, coupled as always with ongoing concerns over the Greek debt issues, which have yet to be resolved - if ever!
The currency strength indicator is confirming the negative sentiment for the single currency with the orange line, the euro, reaching an...
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 (...
In many ways an extraordinary day - particularly for the AUD/USD which has posted a huge candle on the daily chart. In fact the three main USD pairs David & I follow, namely the EUR/USD/ GBP/USD & AUD/USD have all ended in positive territory - with the Aussie the clear leader!!
All three have, of course, benefited from relentless USD selling, and for a view of whether this is set to continue we will have to wait for tomorrow's advance GDP release and also the FOMC. The USD is certainly over extended on the medium term time frames (30 and 60 min) as can be seen on the currency strength indicator alongside the chart above. However, as we've seen with the Aussie today, a currency can stay over extended for very long periods of time. In the higher time frames there is still some room for the USD to fall even further. Indeed the monthly chart for the USD index is...
In the run up to any UK news the British pound is often one of the best currencies to consider early in the London trading session, either to position ahead of the news, or to wait until the data has been released. However, this morning the most compelling currency has been the Japanese Yen which is very over stretched across a number of time frames on our currency strength indicator. The result has been a number of potential trades to sell the YEN.
This is the principle way we approach the forex market - focus on a single currency & consider its price behaviour against its counter parties to see which is offering the best opportunity to trade safely and profitably. A sell on the YEN usually denotes positive market sentiment and this morning we have seen some mildly bullish moves in Globex on the NQ & ES indices, confirming this risk on sentiment. The USD/JPY is also ticking higher, giving us additional confidence.
Of...
It's been another great day's trading on the EUR/AUD, which has continued the bearish tone from yesterday, following the RBA statement and a decision to keep interest rates on hold for the time being. The 60 minute chart has delivered a consistent trend today with the pair moving through the platform of support in the 1.4125 region and as defined with the accumulation and distribution indicator. The trend monitor at the bottom of the chart continues to confirm the bearish tone, supported by the trend dots indicator. Early this afternoon the wide spread down candle saw the pair close at 1.4016 on very high volume, and confirming the current bearish tone for the pair.
To the left of the chart, the Quantum currency strength indicator confirms the technical picture, with the euro (the orange line) now deep in oversold territory, and with the Aussie dollar (the blue line) continuing to rise deep into the overbought region. A great trade on this...
The main focus overnight was in Australia with the RBA deciding to hold the current cash rate at 2.25%, with no cut. This decision was against the backdrop of declining commodity prices and a slowdown in China with many expecting the rate to be cut to 2.00%. As a result the Aussie dollar strengthened on the news against many of the major currencies, with another nice move on the EUR/AUD on the 15 minute chart.
The Quantum accumulation and distribution indicator initially defined the support and resistance region with the 1.4360 being the key level of support and a region that had been tested on several occasions prior to the news. The bearish sentiment was confirmed with the trend monitor to the bottom of the chart which continues to remain bearish in this timeframe with the move lower accompanied by high volume and confirming the short term bearish trend. To the left of the chart and the Ninjatrader currency strength indicator,...
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