Forex Analysis – 16th July 2012

  • Big Ben In The Hot Seat Again…
  • More Than Expected…
  • No clear trend today for AUD/USD and plenty more…
  • If your indicators are flat, read price action?


What will it be Ben?

The Dollar may rise if Bernanke decides not to pursue
QE, and negative yields in the Euro zone bode ill for
the Euro.

Adrian Jones

Adrian Jones

Earlier today the Euro had held steady against the Dollar as investors were focused on whether the U.S. Federal Reserve Chairman, Ben Bernanke, will give any hint of additional monetary stimulus when he gives testimony to Congress on Tuesday and Wednesday.

My thinking is that he will keep the door open to this possibility however, it is unlikely that he will say that the Fed has moved closer to QE since the last FOMC meeting.

In June the Fed had expanded its efforts to keep long term interest rates low, when it announcing that it would purchase an additional $267 billion in long term bonds while also selling short term securities through its “Operation Twist” programme.

The central bank had held off from going the route of quantitative easing (QE), a form of stimulus which would have seen the launch of a third round of outright bond purchases that would expand its balance sheet.

Should the Fed hold off, the Dollar could gain support against both the Euro and the Yen.

As for the Euro, both German and Dutch two year bond yields have turned negative recently. Up to now the strength of Germany’s economy has made its highly liquid bonds a major safe haven from the Euro zone’s debt crisis. A similar scenario has played out as regards Dutch bonds, which have enjoyed similar demand,as investors turned to bonds of Euro zone countries which have been in relatively good fiscal health.

What this means is that, to now, Capital preservation has effectively been ensured by these bond investments but, now that yields have turned more negative, this is becoming a growing concern because investors would suffer losses if they were to hold such bonds until maturity. The upshot of that, could be that we could see a retreat out of Euro zone assets by international investors in particular.

A gauge of investor confidence in Germany, the currency bloc’s biggest economy, is expected to have declined to minus 20 in July from minus 16.9 in June. The ZEW Centre for European Economic Research will release this data for its index of investor and analyst expectations on Tuesday.

German Chancellor, Angela Merkel, said yesterday that a banking union involving a financial overseer for the Euro area will have to include joint oversight on a “new level.” In effect then, it ‘s clear that she hasn’t softened her stance on measures to stem debt contagion.

German lawmakers are scheduled to debate aid to recapitalize Spain’s banks during the week ahead.

The Euro earlier held steady at $1.2242, off its two year low of $1.2162 hit on Friday. The Dollar was slightly down by 0.2% to the Yen at 79.09 Yen.

Tokyo markets are closed for a public holiday today and as a result, moves in major currencies were subdued.

The Aussie had dipped 0.1% to $1.0223 having held on to most of its gains made on Friday after it had strengthened on the release of data that met expectations, when it showed that China had posted second quarter GDP growth of 7.6%.

All the best!

Adrian Jones

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Euro Holds Steady Ahead Of Fed Chairman’s Testimony

The Euro held firm against the US Dollar in early trading on Monday while the market remained largely quiet due to markets in Tokyo being closed for a public holiday.

Meanwhile, the rest of the key market players hold their collective breath ahead of US Federal Reserve Chairman, Ben Bernanke’s, testimony to Congress on Tuesday and Wednesday.


News Watch For EURJPY


There are no High Impact news releases scheduled for today but look out for German Economic data and the Fed chairman’s testimony due out tomorrow.


EURJPY Analysis


The EURJPY pair closed with a late rally on Friday but since the market opened this week, the pair has resumed its downward spiral. Let’s take a look at how we will approach this pair today, take a look at the chart below:

Click on Image to Enlargen

As you can see, price has formed a series of bearish candles and the current tone being set by my indicators tell me that the trend remains predominantly bearish.

At this moment in time, it is way to soon to say where the market will be heading but we can identify key areas where we can look for entry signals.

We can identify Swing Lows & Swing Highs. You will inevitably find that when a candle closes above a Swing High or below Swing Low, we can use this as a pretty good indication of the direction in which the market will go over the next few bars.

This is a potent signal when combined with confirmation from your indicators. On my chart, I have highlighted the most recent Swing High and Swing Low points and drawn a horizontal line across the tops and bottoms.

What we need to do now is simply wait until a candle closes above or below one of these horizontal lines. If a candle closes above the upper horizontal line, we need to check our indicators to see if there is confirmation for a Buy trade before we enter any trades.

On the other hand, if a candle closes below the lower horizontal line, we need to check our indicators to see if there is confirmation for a Sell trade before we can enter any trades.

Our targets can be set at the next closest support or resistance levels or the closest round numbers. In this particular scenario, I am looking at the 97.500 level for Buy trades and the 96.000 level for Sell trades.

That’s all for now though, we’ll take a look at how the scenario plays out in my next column.

Take care and all the best for the week ahead!

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Joshua Schultz

Joshua Schultz

After last weeks move upwards we were expecting price to stall at the 55ema. However, price went even further and hit the 200sma and the weekly pivot…just beyond actually. So what’s going on right now? We’ve made a slightly higher high but the high was made by a bearish pin bar and price fell away not being able to close above it. If we get a close past resistance at 1.5577 I would be thinking about a long position up to the 1.5700 area at R2.

Click on Image to Enlargen

At this point in time my indicators are overbought but as you can see we’re trapped between the 200sma and 55 ema. A close below the 55ema and weekly pivot (green line) might have price move down towards S1 at 1.5451. My indicators are pretty much following price on all time frames but lets take a look at a weekly chart since we’ve just started a new week.

Click on Image to Enlargen

I’m not seeing any divergences here however we’ve broken a longer term trend line at two points here on the weekly chart and we’re presently struggling to make a decision. The 200sma here is trapped between the 55 and 21ema but that’s usually not too much cause for concern. My other system indicators are pretty neutral though the moving averages are all pointing down currently.

The daily chart shows some slightly finer detail as price is in a solid down trend with the 200sma above the 55 and the 55 above the 21 and price currently rejecting off the 21. I have been given an entry condition according to my system for a possible long trade on the daily and that is where my inclination lay for something to the upside on the 4h. We’ve also come down very close to some potential support at 1.5356.

Click on Image to Enlargen

My indicators are moving towards oversold here on the daily so we might see some upside momentum this week.

In the news today we have 2 high impact news releases for the Usd and a couple other medium impact releases for the Usd as well.

1.8:30am – Core Retail Sales – High Impact.

2.8:30am – Retail Sales – High Impact.

3.8:30am – Empire State Manufacturing Index – Medium Impact.

4.10:00am – Business Inventories – Medium Impact.

Good luck and safe trading!

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Toshko Raychev

Toshko Raychev

AUD/USD 16/07/2012

This past week has seen the pair acting quite volatile, falling by 150 pips on Thursday and then moving up by around 100 pips on Friday. The market closed the week at a major pivot level at 1.02229. Yesterday at the market open, the pair was at a resistance level at 1.02438.

Today the AUD/USD has fallen down from the 1.02438 level and is currently oscillating near major support at 1.02229 and just above the Daily Middle Bollinger Band (Pic1,point A).

The Daily MACD is above the zero level and below its Signal line, on the previous’ dump level and moving sideways (Pic1,point B).

Stochastic here is above its Signal line and middle 50 level moving upwards (Pic1,point C).

From the Daily chart readings we can assume that there isn’t a clear trend at the moment and the pair is going mostly sideways. As long as major resistance at 1.02692 and major support at 1.01304 hold and are not clearly broken, the situation can be expected to continue.

Click on Image to Enlargen

The H4 chart shows slightly different readings.

Currently the price is just above the H4 Middle Bollinger Band and at the 1.02229 level (Pic2,point A).

The H4 MACD is in divergence with the price, making a higher high as the price makes a lower high, still above the zero level and Signal line, but has started to move sideways (Pic2,point B).

Stochastic moved from the overbought area downward below the 80 level and is already below its Signal line(Pic2,point C).

All this shows that today we can expect some minor downside retracement to the support levels at 1.01788 and 1.01591, and the H4 indicator’s readings confirms this.

Click on Image to Enlargen

My analysis for today is to look for short opportunities around the 1.02438 and 1.02229 levels, with possible targets at 1.01788 and 1.01591. Also bear in mind that if 1.02438 is broken upwards, we could see a retesting of major resistance at 1.02692 before a fall downwards. So, be prepared for some minor trades today and of course confirm them with the signals of your indicators.

Today we have two High Impact News releases which may affect the AUD/USD – Core Retail Sales m/m and Retail Sales m/m. As you know, when there are such major news releases the can market behave very strangely, so to avoid unexpected losses avoid trading 10-15 minutes before, and at least 30 minutes after, the releases.

Happy Trading

Toshko Raychev

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Piet Swart

This morning I am looking at the EUR/JPY 1 hour chart. This pair has been in a range for a short time and then started to move in the Bearish direction. If I read the market correctly today, it is telling me that we could see a Bullish movement up to the target line area at 96.859. If we find the right entry point we could gain a nice 50 plus pips from the market on this trade. It would be very interesting to see how this one works out. 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
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