Forex Analysis – 17th July 2012

  • Is The US Dollar In Big Trouble…
  • So Much To Say…
  • Will Ben affect AUD/USD and plenty more…
  • Where does this long candle come from?


All eyes on the U.S. today

The Dollar finds itself under pressure today ahead of Ben Bernanke’s testimony, while the Euro is off lows as hedge fund buying triggered stop losses.

Adrian Jones

Adrian Jones

Today we saw the Euro rise versus the Dollar as a result of purchases from hedge funds which triggered a flurry of stop-loss buying. This pulled the Dollar down to a seven week low against a basket of currencies. What this in effect did was to exacerbate the Dollar’s losses following poor U.S. retail sales figures.

The greenback was also down to a one month low against the Yen after Tokyo markets reopened following a holiday on Monday. The Yen was held back though on the threat of intervention by the Tokyo authorities and on weakness as against other currencies.

Today all traders are focusing their attention on the world’s largest economy, the U.S, ahead of Federal Reserve Chairman Ben Bernanke’s testimony before Congress today and Wednesday.

In the view of many analysts and myself, besides overtly signalling the possibility of more stimulus, there is not much Bernanke can say or do that he hasn’t already. In fact, the sell off in the U.S. Dollar and U.S. equities show us that investors likely are positioning for slightly more dovish comments from Bernanke.

In June the Fed expanded efforts to keep long term interest rates low, when it announced that it would buy an additional $267 billion in long term bonds while selling short term securities in a measure that’s been dubbed "Operation Twist", while at the same time the central bank held off from launching further quantitative easing.

Earlier today the Dollar stood at 78.90 Yen, and the Euro and Australian Dollar pushed higher versus the Yen, with the Euro gaining 0.3% to 97.04 Yen and the Aussie standing at 81.27 Yen.

The rise against the Japanese currency helped the Euro gain ground to the Dollar and earlier it stood at $1.2314.

It appears that the Euro has now become the funding currency of choice following both German and Dutch two year bond yields having turned negative recently.

Also of interest, is that Germany’s Constitutional Court had said yesterday it would not rule until the 12th of September on whether the Euro zone’s bailout fund, the European Stability Mechanism or ESM, and planned changes to the region’s budget rules are compatible with German law.

In the medium to long term I expect the Euro to remain on a downtrend.

All the best!

Adrian Jones

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Euro Up Against The Dollar Ahead Of Bernanke Testimony

The US Dollar dropped against the Euro and a basket of other major currencies in early trading on Tuesday ahead of much anticipated testimony from the Federal Reserve Chairman.

Most investors are wary of unexpected swings depending on the Fed’s announcement, so we could expect to see the big players refrain from any major moves until the market returns to a ‘normal’ state.

News Watch For EURJPY

The only High Impact news release scheduled for the EURJPY this week has already occurred, but the Federal Reserve chairman’s testimony may still move the market, so watch out for any news and reaction from these hearings over the next few days.

EURJPY Analysis

The EURJPY pair showed some resilience to rise since the open of trading today, but this move might prove to be shortlived. 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, the pair hovered close to a fresh, new low yesterday before reversing and moving upwards. The upward move continued throughout the Asian session and price eventually managed to take out the previous Swing High at the 97.382 level.

This prompted me to check my indicators to see if there was a signal for a Buy trade but there was none to be found, so we’re currently in a holding pattern.

The decision to refrain from entering the trade proved to be a good move because, as you can see, price has since dropped and looks likely to enter a retracement phase.

At the moment, we could see potential for a Sell trade if price continues to fall and close below the 97.000 level. Potential targets for a Sell trade can be found at the 96.400 level.

Once again, we will need to wait until there is a close below the 97.000 support level before we turn to the indicators on our chart for further confirmation.

I’ll be watching this setup as it progresses and give you an update on how it plays out in my next column.

Until then, take care and all the best!

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Joshua Schultz

Joshua Schultz

After a very strong move upwards towards our target of R2 early on this week on the 4h charts, we’re starting to see some reversal signs on the daily chart. Our move started with a strong bounce off of support at 1.5421. My system has given me two entry conditions here on the daily time frame indicating a longer term move upwards. Support on the daily as of now is sitting at 1.5443 and 1.5590 with resistance set at 1.5742 which is not far beyond our target of R2. We also have a downwards channel that we’ve broken out of giving us some very nice confirmation of a bullish move being in the works.

Click on Image to Enlargen

On the 4h chart we’re definitely well past starting to show signs of a bullish move. However it provides a very nice picture of where support may be as I have a clustering of indicators in and around the areas of the 1.5590 and 1.5543 so these will be key areas to watch for the market to pull back to. Often times when the market breaks out from a trend line or a channel we’ll see a retest of the trend line. This upper trend line is also in those two support areas so we can either look to carefully trade the pull back on the lower time frame to this area or we can wait for price to reach this area and get in at a killer price as it bounces off. In either case, we’ve got some great reasons to make some money today!

In the news we have quite a lot to be on the lookout for on the Usd.

1.8:30am – Core CPI – High Impact.
2.8:30am – CPI – Medium Impact.
3.9:00am – TIC Long Term Purchases – Medium Impact.
4.9:15am – Capacity Utilization Rate – Medium Impact.
5.9:15am – Industrial Production – Medium Impact.
6.10:00am – Fed Chairman Bernanke Testifies – High Impact.
7.1:15pm – FOMC Member Pianalto Speaks – Medium Impact.

This is a lot of news folks so be very careful today as your planning your trades.

Good luck and safe trading!

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Toshko Raychev

Toshko Raychev

AUD/USD 17/07/2012

Yesterday the pair moved mostly sideways. At the market open price droped down and almost reached the Daily Middle Bollinger Band. It Then reversed and in the afternoon retested major resistance at 1.02692. It closed the day at its open price in between the 1.02438 and 1.02229 levels, forming a perfect Doji candle and confirming indecision in the market.

Today the AUD/USD is moving strongly upwards. Right from the open it broke upwards of yesterday’s high and resistance at 1.02692 and almost hit the major resistance at 1.03183 (Pic1,point A).

Daily MACD bounced off of the previous’ dump level and moved toward its Signal line, currently above the Zero level (Pic1,point B).

Stochastic here has entered in the overbought territory above the 80 level and currently is above its Signal line too (Pic1,point C).

From the Daily chart readings as the price almost hit major resistance at 1.03183, the MACD is almost at its Signal line and Stochastic is in the overbought area, there is a strong chance for some downside retracement. But if 1.03183 is broken upwards we can see another strong upwards move to the Daily Upper Bollinger Band.

Click on Image to Enlargen

On the H4 it can be clearly seen that we have a Doji candle formed on H4 Upper Bollinger Band (Pic2,point A).

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

Stochastic on H4 chart is in overbought area going down to the 80 level, in divergence with the price making a lower high and price a higher high (Pic2,point C).

From readings on the H4 chart, a Doji formed on the Upper Bollinger Band, Stochastic is above 80 level moving down and in divergence with the price. We can assume that it’s a confirmation for a possible downside retracement today.

Click on Image to Enlargen

My analysis for today is to look for short opportunities around the H4 Upper Bollinger Band with possible targets at 1.02692,1.02438 and maybe 1.02229 levels. At the same time, if major resistance at 1.03183 is broken upwards be prepared to take some long trades, as there would be strong upward momentum with at least 50 pips. Don’t forget to confirm all your trades with signals given by your indicators.

Today we have only one High Impact News release – Fed Chairman Bernanke Testifies. As big players will take a close look at this, it is bound to make some waves in the markets. So, please stay away from trading around 30 minutes before its release and at least for the same period afterward to prevent unexpected loses.

Happy Trading

Toshko Raychev

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Piet Swart

This morning I am looking at the AUD/NZD 1 hour chart. I am not sure what happened in the market with the sudden long candle that we have on most of the pairs, but not to worry we will find out real soon. This pair is in a strong uptrend and now it got the sudden strong push in the Bullish direction which helped it to make the highest high of the past more than a month. Price could come down to the target line area at 1.28700, so if you could find the right entry point, you could gain a nice 35 plus pips. But 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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