Forex Analysis – 18th July 2012

  • Come On Ben, Spit It Out…
  • Fed Up With The Fed…
  • Potentials shorts on the AUD/USD and plenty more…
  • USA news announcement created lot of ripples…


More Dollar – negative easing in the pipeline?

Bernanke’s address remains in focus after only vague
easing signals yesterday and the Yuan climbed to a two
week high following his testimony. The Australian
Dollar is supported by RBA’s signal to retain the
status quo on rates.

Adrian Jones

Adrian Jones

Federal Reserve Chairman, Ben Bernanke, said yesterday, that the central bank is ready to support the U.S. economy if needed. He wasn’t specific about just how that would be done though.

Specifics might well come to the fore later in the session from today, when he addresses the House Financial Services Committee.

Bernanke was cautious, having said that the Fed stands ready to add more stimulus as it was needed, however he stopped short of spelling out any near term action.

He said that the U.S. recovery is being subdued by Europe’s debt crisis and also uncertainty surrounding U.S. fiscal policy.

It’s become clear to me and many analysts, that more easing is in the pipeline at some point, and that’s very Dollar-negative.

Some economic strategists have suggested that the Fed may take a lead from the European Central Bank (ECB), which has lowered the interest paid to banks on their excess reserves deposited with the central bank. This could play out in addition to a third round of large scale bond purchases or quantitative easing (QE3) as it’s known.

The Euro had made limited gains against the Dollar yesterday after it seesawed overnight, however it then rose to session highs and continued to push higher during Asian trade to $1.2292. This is well below Tuesday’s one week high of $1.2317 but also a good distance off its two year low of $1.2162 hit a week ago.

As regards the Aussie, it appears that the Reserve Bank of Australia’s (RBA) release a day ago of minutes from its July meeting, has provided a good reason to hold on to the Australian Dollar.

The RBA had refrained from cutting interest rates at its July meeting after data pointed to more momentum for the domestic economy than many had first thought.

The Aussie was last at $1.0296 and rose to a record high against the Euro of A$1.1884 overnight, dipping slightly thereafter to A$1.1930 as the Euro picked up as against the U.S. Dollar.

The Euro edged up to 97.21 Yen while the Dollar bought 79.06 Yen. It appears that investors have shrugged off minutes released today of the Bank of Japan’s (BOJ) policy meeting which was held on 14th and 15th June. At the meeting some members had said that Japanese sentiment could suffer should Europe’s debt problems led to a rise in the Yen.

The Chinese Yuan rose to a two-week high after Bernanke’s Address, which has supporting the outlook for Asian economic growth.

The People’s Bank of China have raised the currency’s reference rate 0.04% to 6.3140 per Dollar, the strongest level since the 4th of July.

While the potential of more U.S. monetary easing is supporting the Yuan to an extent, investors appear cautious, likely as there aren’t any clear signals that China is returning to its recent strong growth track.

All the best!

Adrian Jones

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Euro Wipe Out, Bernanke Giving Nothing Away… Yet

The Euro wiped out gains achieved yesterday after the Federal Reserve testimonies sent the currency soaring against the US Dollar.

A gloomy assessment of the U.S. economy from Federal Reserve Chairman Ben Bernanke, now leaves the door open for more monetary easing although his testimony was vague at best. Investors are now looking to the second round of testimony due later today.

As a result, we can expect moves in the Euro and other major currencies to be subdued ahead of today’s testimony.


News Watch For EURJPY


There are no High Impact news releases scheduled for the EURJPY this week, but watch out for news and reaction from the Federal Reserve chairman’s second testimony later in the day.


EURJPY Analysis


The EURJPY reacted wildly to the Fed’s announcements yesterday and while some gains were posted, they have all but been erased. Let’s take a look at how we will approach this pair today, take a look at the chart

Click on Image to Enlargen

As you can see, price did eventually break through and close below the 97.000 level. The swing was so violent that it just tagged the 96.400 support level and bounced back over the 97.000 level.

Like I mentioned in my column yesterday, a breakout does not mean we have a valid trade signal. We need to confirm the entry by checking that our indicators are in agreement.

As it turned out, there was zero confirmation from my indicators so there was no action to be taken and this helped me to avoid getting into a bad trade.

It was as if someone hit the reset button because price suddenly returned to its original position within a few bars. This presents us with another opportunity to take advantage of a bearish break downwards.

At the moment, price has just broken below the 97.000 level once more, so we’re looking at a potential Sell trade entry if we manage to get a close below this level and we get additional confirmation from our set of indicators.

My indicators are currently lining up but I need to be patient and wait for the entry signal. It’s all too easy to get carried away by big price movements and think that we’re missing a good trade but I simply refuse to enter on sentiment as it usually ends in disaster.

Patience is always well rewarded so hold on until there is indisputable proof that a valid Sell trade is on the cards.

Potential targets for Sell trades can be found at the 96.400 level.

It may be a while before the entry signal appears so I’ll be keeping a close eye on how this trade setup progresses and give you an update in my next column.

Until then, take care and all the best!

Senior Trader for MTChamps

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Joshua Schultz

Joshua Schultz

After yesterday’s expected move down to the 1.5443
area to support, price stalled and is now sitting
just above 1.5575 on the daily. We still have strong
buy signals here on this time frame.

Click on Image to Enlargen

So far today we’ve made a second attempt to get down past these areas but have been unable to sustain. Let’s look at the 4h chart and see if there are any reasons to either continue down or if we’re in for a move upwards towards 1.5722.

Click on Image to Enlargen

Right now, we’re in sell here on the 4h chart and we may see a further move down to the 1.5443 area again. We’re not confirmed on the higher time frame for a short which I would like to see so the downside may be limited today. We have had some strong movements this week already so we could also see some sideways action on the Cable.

In the news today we have 2 high impact news releases for the Usd.

1.8:30am – Building Permits

2.10:00am – Fed Chairman Bernanke Testifies – Again.

Good luck and safe trading!

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Toshko Raychev

Toshko Raychev

AUD/USD 18/07/2012

Yesterday the pair made a strong upwards move of around 80 pips, along the way breaking resistance at 1.02692 and later in the evening it unsuccessfully tested major resistance at 1.03183.

For a few hours today, this same major resistance level was tested but again without success and the price has currently formed a Bullish Doji candlestick between the Daily Middle and Upper Bollinger Bands (Pic1,point A).

The Daily MACD is in divergence with the price, forming a lower high and is presently above the Zero level, having just crossed its Signal line and moving upward (Pic1,point B).

Stochastic is still in the overbought area above the 80 level and has already started to flatten out (Pic1,point C).

Click on Image to Enlargen

Now let’s see what the H4 chart shows.

Price here has oscillated around the H4 Upper Bollinger Band and major resistance at 1.03183 for the past few bars, forming Doji candles. (Pic2,point A).

The H4 MACD is above the Zero level and was moving sideways for a while and almost on its Signal line (Pic2,point B).

Stochastic is also moving sideways and from overbought territory it already crossed down the 80 level and its Signal line to the downside (Pic2,point C).

Click on Image to Enlargen

From both the Daily and H4 chart readings we can see: a Doji on the Daily chart at 1.03183 and a series of Dojies on the H4 chart, again at the same resistance level around the H4 Upper Bollinger Band, Daily MACD is in divergence with the price and the H4 MACD moving sideways and almost on its Signal line, Daily Stochastic is in the overbought area and the H4 Stochastic is crossing the 80 level and its Signal line to the downside, we can assume that today there is very big chance for some downside movement to the 1.02692 and 1.02438 support levels.

My analysis for today is to look for potential short entries, with possible take profit targets at around the 1.02692 and 1.02438 levels. Also be prepared to take some longs if major resistance at 1.03183 is clearly broken upwards, as in this case we will see another 50+ pip move to the upside. As usual confirm all entries with the signals given by your indicators.

Also don’t forget that today we have two High Impact News releases which could affect the AUD/USD pair: Building Permits and testimony by Fed Chairman Bernanke. It’s a good idea to avoid trading around these times as the market may react with unexpected spikes.

Happy Trading

Toshko Raychev

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Piet Swart

This morning I am looking at the AUD/NZD 1 hour chart again. I am still busy licking my wounds after the abuse that I received from this pair yesterday. The USA news announcement of yesterday created some havoc in the market. If I look at this pair today, it seems like price have found resistance at 1.29800. Price could now move in a Bearish direction to the target line area at 1.29445. If you could find the right entry, you could make a nice 20 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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