Forex Trading

Trade Leader Or Kahana analyzes recent developments in the GBP/AUD

Last night (on 22-04-14) GBPAUD created a bullish pattern in the weekly CCI, a weekly Zero line reject (ZLR). I am not using the standard CCI but rather the Woodie's CCI. The blue CCI (turbo-6) reached to the zero line while the black CCI (50) was and still is in the 40 region, both in a V shape.

GBP/AUD weekly chart - click to enlarge

You can see all the recent ZLRs have led to strong gains in this pair, between hundreds to thousands of pips.

A weekly ZLR does not mean one can execute a long trade in GBPAUD immediately!

In the daily CCI there is still a potential for a bearish ZLR. Before entering the bullish uptrend, make sure this potential ZLR is invalidated!

I would analyze the hourly chart and search for a ZLR after the opening of the first green bar or the following green bars in order to perfect my entry.

GBP/AUD hourly chart - click to enlarge

There are a couple of things you must note before taking the trade. The first thing is the negative swap. Longing GBP/AUD incurs a relatively high negative interest so it may be wise to target 30-40 pips (depending on the hourly range) as intraday take profits and to continue buying on dips if intraday technical patterns are confirmed, 1hr, 4hr and/or Daily chart should be used. The second is not less important than the first. When looking at the monthly chart you will see that this pair already gained approximately 5,000 pips from the bottom. Bear this in mind! I won't expect hundreds to thousands of pips as seen in the latest ZLRs. Taking this ZLR I would expect a smaller movement of about tens to hundred pips.

FXStreet (Edinburgh) - Pernille Nielsen, Analyst at Danske Bank, observes the different outlooks for
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“EUR/NOK saw a bit of support the last couple of trading days as the market liquidity has been very thin. We do not believe the moves reflects that EUR/NOK will start a new trend higher this week, especially as oil is trading at a seven-week high”.

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In an email exchange recently a friend of my working in the markets bemoaned the dull state of the forex market these days. I recall well how much grumbling there was in the middle 2000s about how little action there was in exchange rates at that time. I asked my friend if this was anything like that. His response was that the markets are the worst he’s ever known. No doubt there’s a fair bit of hyperbole in that statement, but this is a fellow who was a bank dealer in London back in the 1980s, so he’s seen a thing or two.

Overstated or not, the market has definitely gotten less volatile recently. As the weekly chart below shows, the USD Index has been in a quite narrow range for the last few months. That’s seen the Bollinger Bands get to their narrowest since 2006.

Weekly USD Index chart - click to enlarge

The range-bound dollar is linked to range-bound interest rates. As the 10-year Treasury Note yield chart below shows, the volatility there has dried up considerably of late as well. Exchange rates are closely tied to interest rates, and especially interest rate differentials. When those rates aren’t moving, it tends to keep the forex market quiet.

Weekly 10 year treasury chart - click to enlarge

Interestingly, though, the USD Index chart belies what’s been happening in the dollar exchange rates to a certain degree. If we look to the likes of EUR/USD and GBP/USD we can see weakening trends at work. These are being countered by an opposing trend in USD/CAD and USD/JPY (though in the latter case ranging is more the theme). That makes this a market where you want to be looking at specific pairs, not the major USD pattern as depicted by the index.

That said, however, the narrowness of the Bollinger Bands and interest rates suggests something big is building. One need only look at what has happened in the markets after the Bands got as narrow as they have become recently to see the potential for market mayhem this set-up represents. I’m definitely not calling for another Financial Crisis type experience for the markets. I think, however, that it won’t be too much longer before my friend is no longer complaining about dull markets.

The emerging market carry trade is back on, helping to chase higher the very assets that were sold off last year amid concerns U.S. interest rates were set to rise.

“The U.S. yields haven’t actually risen,” said Nizam Idris, head of fixed income and foreign-exchange strategy at Macquarie. “That environment encourages funds to look for yields,” which can typically be found in the very current account deficit countries that were sold off last year, he added.

Read the original article at Forex News

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Read the original article at Forex Crunch • Trade Forex Responsibly

Via the FT, "At a gathering of global central bank officials and industry representatives in Sydney on Friday, attendees will discuss alternatives to the system of fixing benchmark exchange rates in a one-minute window when high volumes of trades are pushed through, according to a person familiar with the agenda." Trying to get ahead of ongoing fixing investigations, FX honchos are looking to get their own houses in order and keep ahead of the regulators.

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