Forex Analysis – 12th July 2012

  • How Low Will Our Beloved Euro Go…
  • The Calm Before The Storm…
  • Strong moves on AUD/USD and plenty more…
  • Will this resistance area be to strong?

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BOJ holds rates steady and Yen seen as haven

Today the Bank of Japan (BOJ) made a technical change to its asset buying programme. This saw the Dollar enjoying a short rise against the Yen and it remained close to a two year high to the Euro.

Adrian Jones

Adrian Jones

Despite recent moves to ease monetary policy by central banks in the Euro zone, Britain and China, the BOJ refrained from doing the same as it had been expected to do.

The BOJ held its key policy rate in a range of zero to 0.1% and stopped short of additional easing steps. It did though tweak its asset buying and lending programme.

It decided to maintained the total size at 70 trillion Yen ($879 billion) however, it pledged to purchase more short term securities and at the same time reduce the amount it offers under fixed rate market operations.

The Dollar advanced as high as 79.97 Yen following the announcement, however shortly thereafter erased the move and earlier was trading at 79.49 Yen. Economic slowdown concerns have enhanced demand for the Yen as a haven.

Yesterday’s minutes of last month’s Federal Reserve meeting had revealed that the U.S economy would have to worsen further before the Fed would take any more easing steps.

As a result, the Dollar index soared to a two year high of 83.610 overnight.

The Euro held steady at $1.2242 having fallen overnight to a two year low of $1.2212. The Euro has fallen around 5.5% so far this year.

It seems there will be no quick judgment from a German court on the Euro zone’s bailout fund which is adding to investor uncertainty about Europe’s progress to address its debt crisis.

In Spain, Prime Minister Mariano Rajoy yielded to EU pressure to attempt avoiding a full state bailout and unveiled new measures to slash 65 billion Euro from the public deficit by 2014.

The Australian Dollar took a hit after data showed an unexpected drop in Australian employment in June. This has added to concerns about its economic outlook following reports of a slowdown in China, Australia’s biggest trading partner.

Earlier today the Australian Dollar was down 0.6% at $1.0185, as investors priced in the possibility of further interest rate reductions.

RBA Deputy Governor, Philip Lowe, had said that the recently strong local currency has pushed down prices of imported goods and helped restrain inflation, adding that the high Aussie had played an important role in stabilising the economy and it was hard to argue that the unit was over valued given Australia’s very high terms of trade.

Data due tomorrow from China could show that the world’s second largest economy grew 7.7% in the three months through June.

All the best!

Adrian Jones

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Wesley Govender

Wesley
Govender

EXOTIC TRADING

Euro Sinks To Fresh 2-Year Low, No Easing From BOJ

The troubled Euro relinquished all of the its recent gains against the US Dollar and went on to fall to a fresh 2-year low.

Meanwhile, the Bank of Japan declined making further changes to monetary easing policies as expected but instead went on to make a technical change to their asset buying programme, leaving the Japanese Yen close to a 2-year high against the Euro.

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News Watch For EURJPY

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There are no further High Impact news releases lined up for the EURJPY pair today, but watch out for the Italian 10 year bond auction due tomorrow.

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EURJPY Analysis

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The EURJPY pair bounced off yesterday’s low to present us with an Buy trade signal. Let’s take a look at the chart below to see how this trade played out:


Click on Image to Enlargen

Yesterday we were monitoring the 97.500 level for a breakout which eventually took place late in the day. As you can see, price bounced off the 97.000 level and continued to close above the 97.500 level.

My indicators showed that there was potential for a Buy trade so I went ahead and placed a Buy order at the open of the next candle.

Given the current situation with the Euro I was not convinced that price would go too far, so I decided to keep an eye on this pair to avoid being stuck in a trade if the pair suddenly reversed.

I moved my stop loss to break even as soon as price went 20 pips in my favor, and closed half the trade to ensure that I locked some profit.

As you can see, price reversed soon afterwards and has since dropped close to 100 hundred pips. We were taken out of the remainder of the position at break even so we still managed to exit this trade with a neat profit.

At the moment my indicators have flattened out once more, so while I do not expect too much action until the Italian bond auction due tomorrow, I will be paying attention to see if there are more signals.

I’ll be sure to give you an update in my next column. Until next time, take care and all the best!

Wesley
Senior Trader for MTChamps

Joshua Schultz

Joshua Schultz

The long trade we took at the beginning of the week went straight for the 200sma and 55 ema which provided excellent resistance. We had some very clean hidden bearish divergence that formed in this area and with the news releases yesterday I decided to exit the trade with a profit of 55pips. Not too much happened after yesterday’s 8:30am high impact news release which made me a little nervous. I waited until after the dust had cleared and entered a short trade at 1.5501 with a target of just above S1 which is sitting at 1.5392.


Click on Image to Enlargen

Today we have a bit for the Usd.

1.8:30am – Unemployment Claims – High Impact.

2.8:30am – Import Prices – Medium Impact.

3.2:00pm – Federal Budget Balance – Medium Impact.

4.3:40pm – FOMC Member Williams Speaks – Medium Impact.

Because of the high impact news at 8:30am make sure you’ve got a close eye on your trades. If you can, it may be best to move to break even. If you’re not in any trades, wait until things settle down before looking for trades.

Good luck and safe trading!

Josh
Senior Trader For Profit Day Trading

Toshko Raychev

Toshko Raychev

AUD/USD 12/07/2012

Yesterday the pair moved up by around 100 pips, consequently breaking resistance levels at 1.02229, 1.02438 and 1.02692. It then retraced a little and closed around 1.02438 which was the previous day’s high.

Today, from the open of the market, price dropped strongly and along the way broke downward support levels at 1.02229 and 1.01788. Currently price is oscillating around the Daily Middle Bollinger Band and major support at 1.01591 (Pic1, point A).

Daily MACD is below the Signal line and decreasing its value however is on its previous’ dump level (Pic1, point B).

Stochastic is below its Signal line and moving downwards and almost reached the oversold area at the 20 level (Pic1, point C).


Click on Image to Enlargen

On the H4 chart it can be clearly seen that price is around the Lower Bollinger Band and major support at 1.01591 (Pic2, point A).

MACD is below the Signal line and zero level but in divergence with the price (Pic2, point B).

Stochastic is below its Signal line however already in oversold territory (Pic2, point C).


Click on Image to Enlargen

From the Daily and H4 charts– Price currently is at the Daily Middle Bollinger Band and H4 Lower Bollinger Band, almost at the major support at 1.01591, Daily MACD is at its previous dump level and the H4 MACD in divergence with price, Daily Stochastic is approaching the 20 level and H4 Stochastic already is in the oversold area, We can assume that there is good chance for some upside movement to the H4 Middle Bollinger Band around 1.02021 or even to the 1.02229 level.

My analysis for today is to look for long opportunities around the H4 Lower Bollinger Band and major support at 1.01591, with possible targets at around 1.02021 and 1.02229. If there are any signs for a retracement around these levels, look to short with possible targets again at the H4 Middle Bollinger Band and 1.01788. Don’t forget to confirm your entries with your indicators.

Today most of news affecting the AUD/USD pair has already been released and we have only one High Impact News item remaining at the time I write this- Unemployment Claims, and few other Middle to Lower Impact news events. So stay away from trading around the Unemployment Claims release to prevent unexpected moves and potential loses.

Happy Trading

Toshko Raychev

Piet
Swart

Piet Swart

This morning I am looking at the EUR/JPY 1 hour chart. It seems like price is in a downtrend and has broken the support area at 97.100. My system is indicating that price might test this area again and in doing so it could make a retracement to the Bulls side. If you could find the right entry point you could gain a nice 20 plus pips with this retracement. This target line could become a resistance area for price and it could move down again after testing it. This could be very interesting. In the mean time you should always stay focused, be alert and never drop your guard.


Click on Image to Enlargen

Remember, trade with your head and not your "gutfeel".

Till next time.

Piet Swart
Forex Income Map

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