Market Analysis

Since peaking out in mid-March just shy of 1.13, USD/CAD has been making fairly rapid progress to the downside. With the market having now broken 1.07 to the downside, however, it is probably a good point to look for the volatility to ease off and some support to develop. A starting point for thinking that way is the seasonal pattern for the pair. It has generally been a negative one for the last several weeks, but over about the next month or so that shifts to a more positive bias. This certainly isn’t to say 2014 couldn’t see the market go against the historical averages, but it gives us a reason for caution when considering playing the short side from here.

Perhaps more significant, though, is the weekly chart pattern. As can be seen below, the market has now retraced to just above the peak from July 2013. That peak was in a rejection zone from the spike high of October 2011 and even when it was broken in December it took a few weeks before the market could muster enough strength to pull clear. That suggests strong resistance, which now likely means good support.

USD/CAD chart

Of course one thing that could be seen as working in favor of a continuation in USD/CAD lower is the fact that the Bollinger Bands have only relatively recently begun expanding. Normally this would indicate a likely early-stage trend situation. In this instance, however, the Bollingers could continue expanding for a little while still without the market moving much as they catch up to the volatility seen of late.

What looks to be a good play from here is to watch for the market to move back up toward the area above 1.08 where it found support in May that was finally broken a couple weeks ago. That support should now be resistance if the market is to remain strongly bearish. Thus, a failed rally back in that direction would make for a good entry to play an eventual continuation to new lows for the move. And if the market can get clear above that resistance, then it’s probably not as weak as we might think.

2 Comments

Trade Leader Or Kahana presents analysis of the AUD/JPY.

AUDJPY created numerous of bullish patterns on several time frames, from the hourly chart to the daily chart. The uptrend can develop into a monthly trend, depending on the monthly close.

AUD/JPY chart

AUDJPY created a bullish pattern in the Woodie's CCI hourly chart. The 50 CCI (in black) made a nice bearish movement by building two hills in the -200 CCI area and another hill in the -60CCI and crossed the zero line upwards.

In order to avoid the bearish correction, don't enter a long position in AUDJPY right away; wait for an hourly ZLR to perfect your entry. I've written earlier about recognizing Zero Line Rejects.

In the daily chart there is a potential for a ZLR in Woodie's CCI. If the 6TCCI (in blue) will reach the zero line a daily ZLR will be closed. It does not depend on the closing price level; it can be during this day or the next days. In the daily chart, the price also didn't reach to the upper band after it closed above the 20MA. Therefore, I expect the AUDJPY to target 96.440.

As mentioned in the first paragraph, this establishing uptrend can develop further even to the monthly chart.

On the back of insurgent activity in Iraq, crude oil prices have popped up above recent highs. This isn’t something yet which breaks the long-running trading range I noted previously, but it is a development we need to keep an eye on moving forward. We can see why by first taking a look at the weekly chart below.

Crude Oil weekly chart

Notice how narrow the Bollinger Bands have become thanks to the relatively narrow range either side of about 102 seen over the months before the recent rally. As indicated by the lower plot on the graph, the Band Width reached its narrowest point in years, which by itself tells us to be on the lookout for a volatility expansion – most likely as part of a new trend. The oil rally above 105 is seeing the Bands start to widen out, which suggests that a volatility/range expansion has begun. The range being resolved positively is supported by the clear pattern of rising lows we can see going back to 2012.

That said, there’s definitely some resistance overtop at this stage. The market hasn’t been able to sustain moves above 108 at all since it peaked near 115 in 2011. And even if the market is able to overcome that resistance, the precipitous way oil sold off after making its 2008 high indicates the potential for resistance remaining a factor above 115.

Still, in the monthly time frame the Bollingers have turned higher and are very narrow. That paints a pretty positive picture for prices. A monthly close above 110 or so would probably get the Bands starting to widen out – a positive trend indication. If the Bands weren’t so narrow I’d suggest that we could actually see the kind of low volatility grind higher bullish trend that develops sometimes. With recent volatility so low, however, the odds would tend to favour at least some kind of short-term rapid range expansion before a trend settles in.

Asian bourses were mixed with the Hang Seng Index retreating from the five month high registered on Tuesday while the Nikkei and Shanghai Composite gained 0.5% and 0.1% respectively.  Chinese stocks, especially utilities advanced on speculation that the government could announce measures to tackle water pollution.

Read the original article at Forex Crunch • Trade Forex Responsibly

On Seeking Alpha, Dean Popplewell writes, "With little new data to chew on the forex investor continues to wander in 'no man's land' of tight contained range trading." Markets have been hoping for a breakout, but it has yet to materialize. After the European Central Bank got aggressive against potential deflation, there was hope of action in the EUR, but the Bears remain caged for now.

Read the original article at Seeking Alpha

2 Comments

Trade Leader Or Kahana presents technical analysis of the GBP/USD.

GBPUSD created numerous technical bullish patterns in three different time frames: hourly chart, H4 chart and daily chart. At the time of writing there is a long entry at 1.6787. If GBPUSD will be around this price, you can still enter the trade but if not one should wait for an hourly or H4 ZLR.

Aside this, the weekly chart is establishing a potential Bearish Wedge. It is only a potential scenario since there was not a third retest of the upper line of the wedge. In order to minimize my risk and help me avoid the bearish corrections, I would wait for a bullish ZLR in Woodie's CCI hourly chart or H4 chart to join the trend. To learn more about ZLR, you can read my previous post.   Additionally, I liquidate a part of my trade for the short term and a smaller part for the medium term.

GBP/USD chart, click to enlarge

GBPUSD hourly chart painted a bullish pattern which is called "Rising Three Methods". This pattern is created when a large bullish candlestick is followed by three or more bearish candlesticks that do not cover the large candlestick. The technical correction is weak and we should expect the trend of the large candlestick to continue.

The H4 chart built two bullish patterns both in the graph and in Woodie's CCI.

In the graph, the price started to rise from the lower Bollinger Band and usually in those cases it should reach to the upper band. Also, the woodie's CCI didn't reach the 200CCI yet, observing on Woodie's CCI, the bullish trend is not yet to end.

Last but not least the daily chart bullish wedge and the "Rising Three Methods" pattern. Both are indicating strength in the pair. In the daily chart the pattern in the Bollinger Band is brighter. The price rose from the lower band and closed above 20MA (the middle band). Mostly in those cases the price would reach the upper band.

My targets according to my analysis:

A: 1.6816

B: 1.6831

C: 1.6886

 

1 Comment

Gold got rather uppity a short while back. After an uneventful couple of months trading in an increasingly narrow range either side of about 1295, the market broke down sharply and eventually got to near 1240. As you can see in the daily chart below, that move came out of a very narrow Bollinger Band set-up, which is quite often the precursor to high volatility moves.

jf69a

As much as the move in narrow Bands to start expanding can signal the beginnings of a new trend, in a case where the Bands have become exceedingly narrow the dynamic can change a bit. In those cases the market has been so tightly controlled that the eventual break is quite violent, as we’ve seen in gold. And as is the case here, a major initial move quickly peters out as the initial impetus fades.

This is not to say further movement in the direction of the break can’t or won’t come. A continuation of the break can indeed eventually develop to create a more lasting trend. A lot depends on the bigger picture, however.

This would certainly seem to be the case where gold is concerned. A look to the weekly chart provides us some perspective. You’ll quickly observe that here too we have a situation involving narrow Bollinger Bands, which could be setting the stage for a new trend in that time frame.

jf69b

The proximity of the market to the lower Band is enough reason to suspect that we might yet see a period of consolidation and maybe a bounce in gold from the shorter time frame perspective. There is also reason to look for the Bands to narrow a bit further in the weekly time frame as they are not quite as tight as they were before previous major expansions. A bit more time in the current range would facilitate that.

That said, we could see a Band expansion from here. It would certainly happen if the market were to break through the 1240 support zone and head for 1200. The market repeatedly rejected attempts to break below that latter level in the last year or so, however, so it likely won’t be one easily taken out. That’s another reason to be cautious about playing gold from the short side at this juncture. The risk/reward profile is a bit better for long plays, even if the bigger perspective view probably favors the bears a bit more.

Investing.com - The dollar was broadly higher against the other major currencies on Wednesday, as investors eyed the release of a string of U.S. economic reports later in the day, while caution ahead of the European Central Bank's policy meeting supported safe-haven demand. Dollar rises broadly vs. counterparts, eyes on data

Read the original article at Investing.com