The end of the second quarter produced a nice little squeeze higher in EUR/USD as some traders rushed to the exits trying to lock in profits on their short positions. Traders have to take notice of this move as if you are bear, looking for a reentry level. After all, this pair has moved down from 1.45 to 1.18 and that was just in the first 6 months of this year. If you are a bull, and think all this talk of the Euro Zone demise is foolish, then this should be proof positive that just the opposite will occur, right?
Having a look at Currensee’s ‘Community Historical Volatility’ table shows that the average entry level for those short EUR/USD was 1.2645. Thus this squeeze has washed away a good amount of trading profits. Is this the time to place a new short position on? The ‘Community Historical Volatility’ table also shows that key resistance lies right at the big levels ahead, meaning, 1.26 followed by 1.27 and 1.28. Thus if this pair holds below these resistance levels, then look for traders to start placing new short positions back on.
In terms of support, the table shows that 1.25 will be the first level of support before 1.2360 and 1.2350 (at the time of writing). The latter support levels are essentially stacked on top of each other. It could prove to be critical support as if the dam breaks then watch out below! On the flip side, if this area proves to be supportive, then it may become an optimal area to enter a long trade.
If you would rather look outside the Euro Zone until their debt crisis settles down and still play the underlying long-term trend, then have a look at CAD/JPY. If you were to look at the daily chart it would show sideways trade in CAD/JPY for the past 4 or 5 months. Switch over to a shorter term timeframe and voilà, a nice little downward move from 90 to 81 over the last 2 weeks. That is twice the move that GBP/JPY experienced over the same time period and far less choppy.
One strategy that has profited on this move is the “Sekeles – Following a Major Index” strategy. This can be seen on the Strategy section of Currensee. It looks to “identify a major index trend on a long term basis…and enters a weak currency against that leading index.” Thus with our risk-off environment, the Yen is making gains and strong gains against the Canadian Dollar. Individual currency traders are taking notice as 89% of those traders on Currensee are short CAD/JPY from a few big figures higher than the current price level.
Remember, before you put a trade on, have a look at how others are positioned and for that visit Currensee.com.
This report is for your information only and does not constitute investment or business advice or an offer to buy or sell securities.
Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.