Forex Analysis – 20th July 2012

  • Euro On A Record Breaking Downhill Run…
  • Bomb’s Away…
  • Caution with AUD/USD and plenty more…


Can Spain avoid full-blown bailout?

Earlier today the Euro slid as against the Dollar
and was near a record low to the Australian Dollar,
as Spain’s fiscal concerns and recent falls in Euro
zone money-market rates impacted market sentiment.

Adrian Jones

Adrian Jones

Doubts have come even more to the fore today about whether Spain can avoid a full-blown bailout. Yesterday saw weak demand at a bond auction and that in turn has pushed Spain’s 10-year bond yield above 7%.

Many economists are of the opinion that data due out near this month end will show that a gauge of consumer confidence was near a three year low and manufacturing continued to shrink in the 17 nation region.

The Euro has taken a hit this month as investor confidence over the Euro zone’s sovereign debt crisis has declined and after the European Central Bank lowered the deposit rate, which acts as the floor for Euro zone money-market rates, to zero.

A drop in money-market rates has stirred talk of Euro-funded carry trades, which means that investors effectively borrow low yielding currencies to invest in higher yielding currencies and assets.

Add to that the fact that German and Dutch two year bond yields have turned negative recently, it’s clear to me that investors will start to shift out of Euro zone assets as the Euro starts taking on the mantra of being one of the weakest currencies.

The Euro dropped 0.1% to $1.2269, still above a recent two year low of $1.2162 and held steady against the Australian Dollar at A$1.1780, near Thursday’s record low around A$1.1735.

The Euro also declined 0.1% against the Yen to 96.39 Yen, off its lowest level since June 1 of 96.131.

The Dollar edged up 0.1% to the Yen to 78.62 Yen, but still remained near Thursday’s six-week low of 78.42 Yen.

The greenback has weakened against most of its major counterparts over the past few days amid speculation that the Federal Reserve will add to monetary stimulus that debases the currency.

All the best!

Adrian Jones

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Euro Enters Death Spiral, Yen New Safe-Haven

The Euro fell against the US Dollar and a basket of other currency pairs then hovered near record lows after being undermined by growing concerns about Spain’s economic woes.

Recent falls in short term Euro Zone interest rates just added more fuel to the fire.

The Euro held steady against the Japanese Yen in early trading before dropping to a fresh new low as investors now look to the Yen as the new safe-haven.


News Watch For EURJPY


There are no High Impact news releases scheduled for the EURJPY this week so we can expect a relatively quiet ride in to the close of trading this week.


EURJPY Analysis


The EURJPY finally did as expected and broke through the 96.400 level. Let’s take a look at what went down (no pun intended) on the chart below:

Click on Image to Enlargen

As you can see, we were right on the money in our analysis in yesterday’s column. Unfortunately our timing was off as the move took place well outside our trading hours so we missed the signal to enter the market.

Price hovered above the 96.400 level before it went on to break through and close below this support area presenting us with a valid Sell trade entry.

Depending on where you placed your stops you would be wearing a huge grin had you entered this trade because price went on to smash right through our initial target level at 96.000.

Don’t be getting any bright ideas and think that you can hop on board now. This train has left the station and it would not be wise to look for Sell entries at this point.

This is the thing that gets many traders in trouble. If you want to be profitable you need to react at an early stage, like we have shown with our suggested entry for this trade. Looking to enter a Sell trade at this point would be suicide, so if we miss a trade we move on and look for another setup.

Chasing trades can often deal a death-blow to many traders accounts. The simple fact of the matter is that if you try to get in now, you’re getting in at a point where the market movers that drove the price down, are deciding to get out and bank the profits.

What this does is drive price back upwards leaving you in a Sell trade on a pair that is rising. So, while we missed this trade, we can take heart in the fact that our system still has the power to show us where the good signals are to be found. All we got to do now is wait for the next one. :)

Take care and have a great weekend!

Senior Trader for MTChamps

$1000.00 into $18,948

$1000.00 into $19,915

On Autopilot See It Here

Joshua Schultz

Joshua Schultz

Price touched 1.5729 and then fell away as expected however we haven’t moved much to the downside since then. All we’ve done is move sideways in a range on the 4h chart towards yesterdays trend line. If we get a break of that trend line price could easily drop to the 1.5590 area where several of my indicators have pointed to as possible support. If we break resistance today we could see the 1.5775 area as an alternative scenario.

Click on Image to Enlargen

The daily chart also shows some strong resistance in this area so we could see a bit of a bounce in these areas.

Click on Image to Enlargen

In the news today we don’t have anything for the Usd or the Gbp coming up so it’s anybody’s game today.

Good luck and safe trading!

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Toshko Raychev

Toshko Raychev

AUD/USD 20/07/2012

Yesterday The pair continued its strong upward move by around 90 pips and almost hit the next major resistance level at 1.0403. It closed outside the Daily Upper Bollinger Band.

Today on the Daily chart we see a Bearish Harami candlestick pattern formed on the Upper Bollinger Band ( Pic1, point A).

The Daily MACD is still in divergence with the price, making a third lower high in a row while the price made higher highs, is currently above the zero level and its Signal line, but starting to move sideways ( Pic1, point B).

The Stochastic is also in divergence with the price, making three equal highs while the price makes higher highs, and currently is in an extreme overbought area above the 90 level and has moved down onto its Signal line ( Pic1, point C).

Click on Image to Enlargen

From the Daily chart readings we can see: A Bearish Harami pattern on the Upper Bollinger Band, the MACD in strong divergence with the price and starting to move sideways, and the Stochastic in divergence with the price above the 90 level and almost crossing down its Signal line, so we can expect some downside retracement today.

The H4 chart confirms the Daily readings for a possible downside retracement today.

The price formed a Bearish Breakaway candlestick pattern on the Upper Bollinger Band ( Pic2, point A).

The H4 MACD followed the price and clearly broke its Signal line and moved downward ( Pic2, point B).

The Stochastic is in divergence with the price, making an equal high to price’s, and has already crossed its Signal line and broken downwards of the 80 level ( Pic2, point C).

Click on Image to Enlargen

My analysis for today is to look for possible short entries with targets around the 1.03724 and 1.03183 levels, and of course confirm them with signals from your indicators. Also if the major resistance level at 1.04603 is clearly broken upwards today, be prepared for some long opportunities, as the pair could move up by another 50+ pips.

Today there aren’t any High Impact News releases that should directly affect the AUD/USD, but still we have Eurogroup Meetings which affect EUR pairs. So be really cautious while trading today.

Happy Trading

Toshko Raychev

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