Forex Analysis – 19th July 2012

  • US Dollar Circling The Drain…
  • Where To From Here…
  • AUD/USD short today and plenty more…
  • Will the trend pick up momentum?


Debt crisis pushes Euro to record lows

The Euro was steady earlier today although it
remained under pressure after German Chancellor,
Angela Merkel, reignited concerns about the Euro
zone debt crisis. As a result, the safe-haven Yen
reaped the benefit.

Adrian Jones

Adrian Jones

German Chancellor, Angela Merkel, has claimed that European leaders have not yet shaped the European
project in a way that they can be sure that everything will turn out well and that they still “have work to do”.

These remarks have served as a reminder to the markets of the worrying situation in Europe and had helped push the Euro to a session low against the Dollar, a record low against the Aussie and a three and a half year low against sterling.

Today, German lawmakers are due to vote in a special session of the lower house after the Finance Ministry had asked parliament, in a July 16 letter, to support aid of as much as 100 billion Euros ($122.8 billion) for Spain’s banks. The idea is that the funds would come from a temporary backstop, the European Financial Stability Facility, and then from the European Stability Mechanism (ESM) which has yet to be set up.

The Euro is likely though to remain under pressure today until more direction on political willingness is determined.

The Dollar also remained under pressure earlier, as Federal Reserve chairman Ben Bernanke’s recent remarks have kept alive the possibility of more U.S. easing to come.

Bernanke’s congressional testimony yesterday echoed his testimony on Tuesday, when he emphasizing the central bank’s willingness to support the economy as needed without outlining specific steps. He also highlighted job market weakness.

In fact, figures from the U.S. Labour Department due today may show that initial jobless claims increased to 365,000 in the week ended July 14, from 350,000 in the previous period, and the markets will be keenly observing these figures.

The Euro earlier traded above its two-year low of $1.2162 hit last week at $1.2289. The Euro bought 96.54 Yen moving back toward a six-week low of 96.17 Yen touched on Monday.

The Yen had risen against all of its 16 major counterparts on Euro bloc procrastination which supported demand for the Yen as a haven.

The Euro also hit a new all-time low against the Aussie of A$1.1817 and was at 78.45 pence versus sterling, close to 78.27 pence touched overnight and on Tuesday, which was its lowest since November 2008.

The Dollar bought 78.55 Yen near its lowest level since the 5th of June, while the Aussie rose 0.2% to the greenback to $1.0397.

All the best!

Adrian Jones

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Major Pairs Ganging Up On The US Dollar

The Euro posted gains against the US Dollar while the US Dollar fell to a 2-week low against a basket of major currencies.

The US Dollar’s poor form also continued against the Japanese Yen where it went on to fall to a new 6-week low as many investors now favor the Japanese currency due to the possibility of more monetary easing in the United States.


News Watch For EURJPY


There are no High Impact news releases scheduled for the EURJPY this week but watch out for more news and reaction out of the US region which could affect the market as a whole.


EURJPY Analysis


The EURJPY has been all over the place over the last few days and further evidence of wild swings can be seen just recently. However, the bearish sentiment remains so let’s take a look at the chart below:

Click on Image to Enlargen

As you can see, there have been some unpredictable price swings which have wreaked havoc with this pair but there may be potential for a Sell trade soon.

The 96.400 level remains in tact for the time being but with most investors now looking towards the Yen as a safe-haven, we could see price fall further on this pair and present us with a potential entry.

My indicators remain bearish while the entry signals remain elusive, but if price falls once more and we get a close below the 96.400 level, I’ll be looking to enter the market with a Sell order. Of course, there will have to be further confirmation from my indicators before I dive in to any trades so I’ll be looking out for that too.

Good targets for Sell trades can be found at the 96.000 level and the lower bearish channel trendline.

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

Yesterday saw the Fed release the Beige Book Economic Survey as well as Bernanke testify about the state of the economy so all in all the Usd took a pretty bad beating. We couldn’t drop below support but instead bounced right off and is currently making strides towards resistance at 1.5729. If we can break and close above this we’ll be looking for 1.5775 as our next target.

Click on Image to Enlargen

Here’s a closer view on the 4h chart. I do see some bearish divergence here on the 4h chart so 1.5729 could very well give us some trouble and as we have two trading days left this week we could see a retracement after the big moves we’ve seen so watch the trend line here very carefully for a break.

Click on Image to Enlargen

Today we’ve got some things to be careful of as well in terms of high impact news for the Usd.

1.Unemployment Claims – 8:30am.

2.Existing Home Sales – 10:00am.

3.Philly Fed Manufacturing Index – 10:00am.

Good luck and safe trading!

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Toshko Raychev

Toshko Raychev

AUD/USD 19/07/2012

Yesterday afternoon the pair clearly broke upwards of major resistance at 1.03183 and, as was expected, then made a strong 50 pip move upwards to reach the next resistance level at 1.03724. The latter level was exactly at the same level as the Daily Upper Bollinger Band. Then it come down and closed just below the 1.03724 level.

Today the AUD/USD continued its strong upwards move by another 50 pips and along the way broke resistance at the 1.03724 level to the Daily Upper Bollinger Bands ( Pic1, point A).

The Daily MACD is in strong divergence with the price, having made a third lower high point while the price made a third higher high, still above zero level and its Signal line moving up( Pic1, point B).

The Stochastic is in extreme overbought area above 90 level and its Signal line( Pic1, point C).

Click on Image to Enlargen

What we can expect from the Daily chart readings: As the pair is currently on the Upper Bollinger Band and Stochastic is above the 90 level, there is big chance for a downside retracement. On the other hand the 1.03724 level was broken upwards today, there was strong up move by another 50 pips, Bollinger Bands started to expand and MACD is clearly above its Signal line and moving upward, so there is a potential for uptrend continuation to the next major resistance level at 1.04603 before some downside retracement.

On the H4 chart the picture is almost the same as on the Daily.

The Price is oscillating on the H4 Upper Bollinger Band for the last few bars ( Pic2, point A).

The MACD is above the zero level and its Signal line but slowing down ( Pic2, point B).

The Stochastic here is in extreme overbought territory above the 90 level, in divergence with the price, forming the same high point and price a higher high and already on its Signal line ( Pic2, point C).

Click on Image to Enlargen

The H4 chart readings expectations: As the price is on Upper Bollinger Band and a Shooting Star candlestick pattern formed (warning that the top is near), the MACD is slowing down and Stochastic is in divergence with the price, being in extreme overbought territory and already on its Signal line, we can assume that there is great possibility for some downside retracement today.

My analysis for today is to look for possible short entries with targets around the 1.03724 and 1.03183 levels. Confirm all your entries with signals given by your indicators.

Today we have three High Impact News releases – Unemployment Claims, Existing Home Sales and Philly Fed Manufacturing Index. As they affect directly affect the AUD/USD pair, avoid trading during their release to prevent unexpected loses.

Happy Trading

Toshko Raychev

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Piet Swart

This morning I am looking at the USD/CAD 1 hour chart. This pair is in a slow but sure downtrend and seems to be very stable. My system indicates that price could continue in the Bearish direction. With a 25 pip stop/loss you could gain a nice 40 plus pips. It also seems that this trend is picking up some momentum so it would be a good idea to activate a trail stop of 20 pips and if you want you could remove your Take profit. 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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