Forex Analysis – 11th July 2012

  • Why You May Never Buy The Euro Again…
  • When Plans Come Together…
  • Short the AUD and plenty more…

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Crisis hits home in Spain and Italy

A hearing by the German Constitutional Court into the legalities of ESM keeps markets on edge. The Euro hovered near to a two year low to the Dollar while the Federal Reserve is to release minutes.

Adrian Jones

Adrian Jones

Earlier today the market remained unconvinced that the Euro zone can decisively bring down its struggling member states’ borrowing costs.

The Euro zone’s debt crisis has now also engulfed the region’s larger economies of Spain and Italy. Yesterday Italy announced that it may need Euro zone aid to ease its borrowing costs as market jitters persisted.

Spain is set to receive the first batch of aid for its troubled banks by the end of July. Euro finance ministers have given Spanish Prime Minister, Mariano Rajoy’s government an extra year, until 2014, to drive the nation’s budget deficit below the Euro limit of 3% of gross domestic product.

Concerns about a protracted struggle to resolve the debt crisis persisted on plans for a hearing, by the German Constitutional Court, into whether the Euro zone’s bailout fund, known as the European Stability Mechanism (ESM), and planned changes to the region’s budget rules are compatible with German law.

The ESM is seen by many economists as a vital tool to assist in reducing the borrowing costs of indebted nations and for breaking the link between the sovereign debt problem and the banking sector stress in Europe.

Scepticism about the decision- making process in Europe has hurt Euro sentiment, and earlier today the Euro traded at $1.2256, near a two-year low of $1.2225 touched on Monday.

Investors are currently risk averse and are seeking refuge in safer assets such as bonds that are issued by sturdier Euro zone economies, like the Netherlands and France and Japanese government bonds (JGB). The JGB appear more valuable relative to U.S. Treasuries or German Bunds, given Japan’s low inflation rate.

The Yen has remained stronger against the Dollar after a three day gain, on signs that Europe’s debt crisis is hurting growth and on expectations that Japan’s central bank will refrain from adding stimulus to temper the currency’s appreciation.

The Yen touched a one month high against the Euro at 97.10 Yen and the Yen earlier fetched 79.35 per Dollar.

Demand for the U.S. Dollar has remained limited ahead of the Federal Reserve releasing minutes of its June 20th gathering. At that meeting Fed Chairman Ben S. Bernanke had indicated another round of QE remains an option.

The Fed had sought to cap borrowing costs and stimulate the economy when it bought $2.3 trillion of bonds in two rounds of so called quantitative easing, or QE, from
December 2008 to June 2011.

China is due to release its second quarter gross domestic product report on Friday. This is expected to show the slowest growth in at least three years, and follows benign inflation figures and weak imports which have clouded the prospects for Chinese exports.

All the best!

Adrian Jones

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Wesley
Govender

EXOTIC TRADING

Euro Failure To Launch Leaves The Pair Grounded

The Euro remained steady during the Asian session on Wednesday while hovering near 2-year lows against the US Dollar, with analysts sweating over the outcome of a German court hearing on the Euro Zone bailout fund.

This hearing is yet another hurdle obstructing efforts to launch the region out of its crippling debt crisis.

Most analysts believe that while the Euro could see some short-term corrective moves, it is difficult to foresee too many market players taking long positions in the following months.

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News Watch For EURJPY

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There are no High Impact news releases scheduled for the EURJPY pair until Thursday when we can expect at least three announcements that will affect the Yen currency pairs.

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EURJPY Analysis

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While the EURJPY pair remained steady, it has lacked momentum and as a result our indicators have flattened out. Let’s take a look at the following chart:


Click on Image to Enlargen

As you can see, price has been in a downward spiral and after waiting for a close below the most recent swing low, it finally occurred, although outside my trading hours.

So we missed the signal, but this may not have been such a bad move as the downward momentum was quickly sapped out of the move. It appears that even if we did manage to catch this signal and enter the market with a Sell order, we may not have reached our take profit level.

At the moment, price is in retracement mode so while there is movement to the upside, it may prove to be short-lived.

Our best course of action is to be patient and wait until we see a close either above the 97.500 level or below the 97.000 level.

Potential targets for Buy trades include the 98.000 level and 96.500 level for Sell trades. While the indicators on my chart remain flat, they do tend to favor the bearish side but we will need to wait and see what the market has in store for us before we decide to take any new positions.

Patience is the key here so avoid the temptation to jump into any trades before there is enough evidence to suggest that price will continue in our direction and take out our take profit levels.

As traders we get paid to wait. Don’t be too keen to enter the market every time you spot a trade signal. Pick only the best signals and you will notice a postive effect on your bottom line. The best signals are the ones with the most supporting evidence.

I’ll be monitoring the situation and give you an update in my next column. Take care and all the best for the rest of the trading week.

Wesley
Senior Trader for MTChamps

Joshua Schultz

Joshua Schultz

If you’ll recall from Monday, we had some bullish divergence that we were looking at. We got an entry signal late in the day and afterwards went sideways for most of yesterday. Yesterday we were looking at a potential for hidden bearish divergence but that didn’t play out. Instead our long position has carried on and the Usd has lost some steam. Presently we’re up 53 pips on the trade.


Click on Image to Enlargen

Right now we’re waiting on the market to close past the moving averages as well as the weekly pivot for this week and I would like to see price hit last weeks pivot point again for a target. At the present the Usd is very weak as the Gbp is showing some moderate strength.

In the news today we have some things we definitely want to be on the look out for…

1.8:30am – Trade Balance – Usd – High Impact.

2.10:30am – Crude Oil Inventories – Usd – Medium Impact.

3.1:00pm – 10-y Bond Auction – Usd – medium Impact.

4.2:00pm – FOMC Meeting Minutes – High Impact.

With all the news today, especially the high impact news, it may be wise to move stops to break even and look for other pairs that don’t have as much going on.

Good luck and safe trading!

Josh
Senior Trader For Profit Day Trading

Toshko Raychev

Toshko Raychev

AUD/USD 11/07/2012

Yesterday the pair at first started to move down and looked as if would continue its downwards retracement. However it bounced off of the Middle Bollinger Band and made a strong 80 pips upwards move through the 1.02229 resistance level. In the afternoon it fell again and finished the day with a Doji candle.

On the Daily chart today the market opened at Yesterday’s close just above the 1.01788 level and Middle Bollinger Band, moving up strongly and price almost hit the resistance level at 1.02229 (Pic1,point A).

The MACD here is around its above zero line and around its previous dump level (Pic1,point B).

Stochastic is just above its 20 line and almost on the same previous’ dump level (Pic1,point C).

As the price is currently in between yesterday’s range, this shows that today we can expect some good upside moves. But first there could be small pullback to the Daily Middle Bollinger Band and the 1.01788 level as MACD and Stochastic would confirm this. Also be prepared that should yesterday’s high at 1.02438 be broken upwards, then the pair could reach the next resistance level at 1.02692.


Click on Image to Enlargen

On the H4 chart we can see that the Upper Bollinger Band and yesterday’s high are almost at the same level, and that the price is almost touching them (Pic2,point A).

The H4 MACD is above its Signal line and pointing upwards (Pic2,point B).

Stochastic here is above its Signal line, going upwards and around the 80 level (Pic2,point C).

From the H4 readings – price around Upper Bollinger Band and the 1.02438 level, MACD around the zero line, and Stochastic almost on the 80 level, we can assume that there could be a minor downside pullback before uptrend continuation.


Click on Image to Enlargen

My analysis for today is to look for possible short entries around the 1.02438 and 1.02692 levels, with possible targets around 1.02229, the H4 Middle Bollinger Band and even 1.01788. Then look out for long opportunities around these same levels and possible targets at previous shorting levels. Also don’t forget that all your entries must be confirmed by your indicators to be valid.

Today we have Trade Balance and FOMC Meeting Minutes which are High Impact News releases. As they affect all the USD pairs, there could be seen some unexpected moves on the AUD/USD. So don’t trade 10 minutes prior and at least 30 minutes after their release to prevent losses.

Happy Trading

Toshko Raychev

Joshua Schultz

Joshua Schultz

Hi Folks!

I was checking out a couple different sites and found something I wanted to bring to your attention. There’s a method I found called Everyday Pips. Now, on the website we can see a screen shot of a Moving Average, Bollinger Bands, and a MACD and it is just these indicators that are used. Nothing more.

Click Here

The claims on the website say 87% accurate with indicators you already have. What I’ve found in my trading is simple is best and really that’s the way to go. That being said, there’s not much out there as far as user reviews of Everyday Pips. I did find one that gave a bit more info. Basically this method trades once a day on the 15 minute time frame and uses a Bollinger Band and a Simple Moving Average as a filter.

Click Here

There are lots of systems out there. Some have more info on the sales page, some have less. Some look better, some look horrible and give you headaches. As I mentioned, simple is best and a MACD, SMA and Bollinger Bands is pretty simple. However, there is lots of free info on the net about each of the components and rather than dropping the $47 it may be a better investment to learn everything you can about each of those indicators and put together your own system.

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