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HotForex Daily Technical Analysis
« poslato: 22.09.2014, 11:02:44 »
U.S. Dollar hovering near its highs – Gold nearing 1-year lows

In a quite Monday kick off for the FOREX markets the U.S. Dollar remains near its highs against a basket of major currencies. The dollar is still supported by expectations that U.S. Federal Reserve will raise its base interest rates sooner than later and that as soon as it does it will do so with increased pace.

EUR/USD touched a new 14-month low on Friday night, trading as low as 1.2823 before recouping this morning to trade at 1.2865. The pair still looks bearish with support levels remaining intact at 1.2837 and 1.2755 thereafter.

GBP/USD surprised all traders expecting to move to the North on the back of the confirmed “no” vote on Friday. The pair instead closed Friday near it’s Thursday’s opening after recording a spike, as it traded up to 1.6533 just after the official referendum result was announced. Concerns on further political instability within the U.K. ahead of next May’s general election weighted on traders’ decision to sell the pound against major counter currencies.

AUD/USD continued its recent downtrend on Friday and this morning too. The pair is now trading just above 0.89 which has been the first intermediate major support level (May’s2014 low) ahead of yearly lows down to 0.8659. The pair however technically looks way oversold on the daily chart and it might need a consolidation period before a break lower is accomplished.

Gold sellers have also dominated the precious metal market with spot Gold trading this morning as low as 1208 $/ounce, and nearing 5-year lows at 1182$/ounce recorded earlier this year and in mid 2013s. Gold which is a non-bearing interest asset has been heavily wounded by increased expectations for a FED interest rate hike, having lost since 10th of June -10.50% against the U.S. Dollar.



Having cleared an eventful week that included the FOMC decision, ECB stimulus and Scottish referendum the markets are set to focus on important fundamental data to be released this week. Today economic calendar is free of high importance data, but important data such as German and U.S. PMIs will be coming into the picture from tomorrow onwards.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

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« Odgovor #1 poslato: 30.09.2014, 10:55:24 »
Euro on the focus today as Eurozone Inflation and German Unemployment figures are due

After a quite kick start in the week for the FOREX markets, all the focus has been concentrated in the Euro and the related data to be released later today.

EUR/USD attempted a bounce from its recent lows yesterday, trading as high as 1.2717 but it slowly retreated back below 1.27. The Euro is still weighted by increased uncertainty surrounding a proposed referendum in Catalonia, and the weak data stemming from the Eurozone. Yesterday German inflation was steady at 0.8%, with the focus now turned to Eurozone data. If the data to be released later this morning, appear weaker than expected for the Euro, we would expect a break below the 2-years low support level at 1.2659, and to open the way towards the next technical support level May’s 2012 low at 1.2286.

https://blog.hotforex.com/wp-content/uploads/2014/09/blog30.png

German unemployment data for September will be released at 07:55 GMT, and Eurozone inflation September data at 09:00 GMT. Later this afternoon Canadian GDP figures will be announced for the month of July at 12:30 GMT, and U.S. consumer confidence for September at 14:00 GMT.

All the data of course might give a small impact on the markets if the traders fear of aggressive positioning ahead of the U.S. Non Farm Payrolls that will be released on Friday.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

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« Odgovor #2 poslato: 30.09.2014, 10:56:02 »
Euro on the focus today as Eurozone Inflation and German Unemployment figures are due

After a quite kick start in the week for the FOREX markets, all the focus has been concentrated in the Euro and the related data to be released later today.

EUR/USD attempted a bounce from its recent lows yesterday, trading as high as 1.2717 but it slowly retreated back below 1.27. The Euro is still weighted by increased uncertainty surrounding a proposed referendum in Catalonia, and the weak data stemming from the Eurozone. Yesterday German inflation was steady at 0.8%, with the focus now turned to Eurozone data. If the data to be released later this morning, appear weaker than expected for the Euro, we would expect a break below the 2-years low support level at 1.2659, and to open the way towards the next technical support level May’s 2012 low at 1.2286.



German unemployment data for September will be released at 07:55 GMT, and Eurozone inflation September data at 09:00 GMT. Later this afternoon Canadian GDP figures will be announced for the month of July at 12:30 GMT, and U.S. consumer confidence for September at 14:00 GMT.

All the data of course might give a small impact on the markets if the traders fear of aggressive positioning ahead of the U.S. Non Farm Payrolls that will be released on Friday.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

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« Odgovor #3 poslato: 01.10.2014, 14:28:14 »
EURUSD trading near the 1.2600 level in the European session. US ADP Non-Farm Employment Change on focus.

EURUSD dropped yesterday and closed at 1.2630. The CPI Flash Estimate in the Eurozone dropped to a level of 0.3 percent on an annual basis in September. The Unemployment Rate in the currency union remained stable at 11.5 percent. Data from the United States showed that the CB Consumer Confidence dropped to a reading of 86.0 in September. The Chicago PMI also failed to meet the market expectations coming at a reading of 60.5 in September.

Data released today indicated that the Final Manufacturing PMI in the Eurozone dropped to a level of 50.3 in September.

Investors are now looking forward for the ADP Non-Farm Employment Change and the ISM Manufacturing PMI releases due from the United States.

Support for the EURUSD is seen at 1.2586 and resistance is seen at 1.2716.



Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

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« Odgovor #4 poslato: 22.10.2014, 14:17:23 »
Need for safe haven increases demand for gold

Since the International Monetary Fund (IMF) lowered its estimation for global growth for 2015, the equity markets have seen a sizeable correction. Last week, before the correction in stock indices was reversed, over $3.2 trillion was momentarily wiped out from the value of the global stock market. In addition to this, various worries ranging from the spread of the Ebola virus to the Federal Reserve (Fed) tightening its monetary policy, added to the general feel of the investment world as we’ve known it over the last four to five years, coming, if not to and end, at least close to it. This translated into strength in Gold which is often viewed as a safe haven when global threats arise or when the Fed expands its balance sheet. It is clear from the charts that when things got jittery, money flowed out of the other markets, but not from gold. Instead, gold gained after it touched a long term support level. According to the Financial Times, flows into gold investment funds hit an eight week high in the week to October 15th. At the same time the comments from the St. Louis Fed president Mr. Bullard have left the door open for further expansion of the Fed’s balance sheet. Based on all of the above, it is safe to assume that gold prices will be either sustained above the latest weekly low (support level at 1183) or trend higher over the coming months.

For recent and upcoming economic reports see: HotForex Economic Calendar



Gold, weekly

Over the last two and a half weeks gold has been moving higher from an important support level (blue horizontal line). While the most important weekly resistance levels (red horizontal lines) are far away from the current market price, we should pay attention to the Fibonacci cluster levels on the above chart (black horizontal lines). Based on several major highs in the recent sideways move in 2013 and 2014, as well as the latest market low, it is possible to draw several Fibonacci retracement levels. Because there is no single right way of choosing the low/high points for the analysis, different people draw the Fibonacci levels from different price points. Fibonacci cluster analysis provides us the areas important to the majority of analysts by eliminating all the other levels and focusing on those that cluster together. This analysis provides us with the following areas of importance in Gold. Support (area below current price) 1215 – 1220 and Resistance (area above price): 1260 – 1268. The third area of importance for Fibonacci analysts is where the price currently fluctuates. This area coincided with the weekly low from June this year. Price action below this weekly low is likely to be range bound and the range best visible (and tradeable) in the smaller time frames (4h and 1h). I base this view on what happened the last time gold was moving up from the same support level and prices reached the previous weekly pivot low (in January this year). Then, Gold moved sideways for three weeks before breaking above the resistance area created by the mentioned weekly pivot low.



Gold, 4h

In the above chart we have the same levels in a 4h chart. Price has been moving fairly steadily without strong extensions outside the Bollinger Bands, but some weariness in momentum is visible as the latest directional move hasn’t been strong enough to take gold to the upper end of the channel. This indicates that even though buyers have been able to work their way through the Fibonacci cluster at the weekly low, they are confronted with further supply at these levels.

If price breaks lower from here, potential supporting areas are the 4h Bollinger Bands that coincide with the daily low from Friday 17th and the penetrated resistance (see above chart) which has already proven itself as an area where buyers are willing to step in. It is worth noting that this level (a supporting Fibonacci cluster at 1215 to 1220) is roughly the area of former resistance from September this year and should the price move back there this would be a potential support and worth keeping an eye on.



Gold, 1h

Price is currently hovering at the lower 1h Bollinger bands while it moves sideways just above one of the Fibonacci cluster levels drawn earlier, but seems to be slipping lower. If gold can’t close above the descending red trend line but keeps on drifting lower, I would look at the 4h (240 min.) Bollinger Bands as potential support or first target for short trades. If momentum analysis (e.g. in 15 and 5 min. charts) confirms that this area of potential support is likely to hold, then long entries could be considered at or around the level.

Conclusion: Keeping in mind that we are at price levels where psychology has changed substantially in June (the market turned from bearish to bullish right at current levels). This might mean that immediate upside is limited and that the market needs to dip lower to gather strength for another attempt to break through the above resistance. This is not very clearly visible in price action yet, but as I pointed out earlier the latest move higher in the 4h chart isn’t as strong as those before it. Therefore, it makes sense to prepare for the possibility of gold breaking lower and be ready to take long trades at potential support levels. However, if current minor support at Bollinger Bands and close to the level of rising trend line holds, it would be advisable for traders to act accordingly and follow the direction of the rising trendline in their trading.

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« Odgovor #5 poslato: 23.10.2014, 13:38:04 »
BoE concerned about Euro area slow down impacting UK

The Bank of England’s MPC meeting yesterday (Oct. 22nd) voted 7:2 against rate hikes. This was expected by the analysts and the same members, Weale and McCafferty, voted for a 0.25% hike as the last time. The rate stayed the same at 0.5%. Members voting against the rate hike were concerned about weak wage growth and couldn’t justify a rate hike in the current low inflationary environment. The UK Consumer Price Index (CPI) has been trending lower since October 2011 and is currently at 1.2, well below the BoE’s Q3 inflation expectations of 1.8%. This allows the Central Bank to have an ultra loose monetary policy without worrying excessively about price stability. Members of the committee were also concerned about a rate hike exposing UK to economical shocks and the slow down in the euro area being contagious. In light of recent weak data (low CPI and jobless claims for September falling less than expected), it may well be that those voting against rate hikes in the November meeting will have even stronger majority.

Today and tomorrow the focus will be on Friday’s Preliminary Gross Domestic Product (GDP) figure for the UK. This is the first release of the 3 versions of UK GDP. They are released a month apart – Preliminary, Second Estimate, and Final. The Preliminary release is the earliest and tends therefore to have the biggest impact on Pound Sterling.

The UK economy grew by 0.9% in the second quarter. Slightly beating expectations (0.8%) and was in line with Q1′s GDP reading of 0.8%. At that time, the IMF also upgraded its annual GDP forecasts for the U.K., which was then one of the better performers among the major economies. A weaker growth rate pace is projected for Q3, as manufacturing and services activity has slowed during the period. The analysts’ expectation for the Q3 GDP reading is 0.7%. A strong deviation (in either direction) from this figure is likely to translate into a stronger than average move in Pound Sterling pairs.

For recent and upcoming economic reports see: HotForex Economic Calendar



GBPUSD, weekly: has been trending lower, now hovering at 50% Fibonacci retracement level (measured from July 2013 low to July 2014 high). Has bounced from proximity of weekly support at 1.5855. Weekly support: 1.5855 – 1.5875 and weekly resistance 1.6252 coincides with 38.2% Fibonacci level. Stochastic oscillator is oversold but showing some bullish divergence (Stochastics has moved higher while price has moved lower). This suggests to me that the downside is limited as the market is turning and probabilities are on the long side once the intra-day charts signal the timing for longs is correct. Weekly and daily pictures give us the frame work and an understanding of what kind of process the price is going through. Intra-day charts provide us with timing tools.



GBPUSD, daily: This weeks high (1.6185) coincided with a Fibonacci cluster 1.6170 – 1.6197. These clustering levels are measured from the highs in the down move to the latest low. The fact that several Fibonacci levels and a weekly high coincide at same levels emphasizes the importance of, not only Fibonacci cluster analysis but also the level as a resistance. Another cluster above this one is at 1.6250 – 1.6274, a level where the Bollinger Bands are at the moment as well. Supporting Fibonacci cluster (blue lines) is roughly at the same level with the always so important 50% retracement (measured from July 2013 low to July 2014 high). In addition, the pair has just broken out of bullish wedge formation three days ago and has now retraced to the trendline that used to limit its move higher. This too is a sign to look for long opportunities in shorter time frame charts.



GBPUSD, 1h: The most interesting area to consider long trades is the potential support area (1.5940 – 1.5965) provided by the daily Bollinger Bands and the October 16th low. At the time of writing, price is still creating lower lows and highs and seems to be edging lower. This might well be due to the uncertainty caused by the coming GDP update on Friday. If there will be no major negative surprise (the UK GDP figure is close to expectations) the above mentioned support levels could provide day trading opportunities with the 21st October low being the first target. Above that potential target levels would be 1.6180 and 1.6220.

Conclusion: Based on the above analysis GBPUSD is currently at levels that favour long trades. We have a market that is close to a support after long move lower, and it is showing signs of momentum change: bullish wedge and breakout with a divergence in Stochastics. The downside seems to be limited as downside momentum is waning and probabilities are therefore on the long side. We should keep in mind though that intra-day signals should be closely monitored in order to increase chances to get the timing for longs right. In addition, it is unlikely that this market will make major moves before the preliminary GDP publication tomorrow. If there is no intra day momentum reversal signal and the price keeps on moving lower, this setup is negated and traders should act accordingly.

HotForex Blog: https://blog.hotforex.com/boe-concerned-about-euro-area-slow-down-impacting-uk/

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« Odgovor #6 poslato: 23.10.2014, 18:02:52 »

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« Odgovor #7 poslato: 24.10.2014, 15:16:49 »
Why to trade with multiple time frame charts? | Part 1

As the traders who read my articles are aware by now I do not favour an idea of basing one’s analysis and trades on price action in a single time frame chart. New traders are often fascinated by the constant action visible in the 1 minute or 5 minute time frames. This is the same crowd that loves trading platforms with flashing lights, blinking windows and buzzing buzzers. The more eye candy and action, the better. I’ve been there and done that, so I can’t blame them. But, believe me, after watching price action for over 16 years, I’ve got no need for such hyper activity any longer. I am only interested in knowledge and information that has quality, validity, and hopefully, also some predictive value.



The main problem with the lowest time frame charts is the thing called noise. Noise can be defined as unwanted signals that obscure the real signals and therefore harm the quality of your analysis. In other words, 1 minute charts for instance, have so many spikes, ranges, mini trends, hammers, shooting stars, breakouts and false breakouts that these “setups” are only going to wear you out – and drain your trading account. You are free to try out, but unless you are extraordinarily lucky it’s likely that you will, sooner or later, become physically, mentally and financially exhausted. If you recognise some (or all) of these symptoms, take a step back and start again with (multiple) higher time frame charts and do some analysis that adds value to your trading career.

Another major problem with single time frame analysis is the fact that you are constantly out of touch with what is really happening in the market that you are trying to trade. How can that be true? Let’s give it some thought. First, what logical reason would there be to assume that the price action in, for example, a 5 minute chart would give us any relevant clues on what the big market operators, such as banks or hedge funds are focusing on. Their operations generally last longer than the time period a newbie trader typically focusses on (when watching his small time frame charts). These market participants are those that have the power to really move the markets and I have not yet heard of any central bank action or other major currency operation that would be completed intra day.

For instance, when a big company buys another from abroad for billions of dollars, this deal needs a currency transaction in order to be completed. The buyer needs to exchange the local currency to the currency of the target country. The FX market is the biggest market in the world, but selling or buying billions does mean that the position has be accumulated over a few days. Obviously the traders try to complete the buy operation in such a way that they don’t push the prices higher. If we do our analysis properly, we can find the levels that are meaningful for the big operators as well. These levels are likely to be important daily and weekly highs and lows, not minor one or five minute levels.

In addition, if one limits his or her view into a single time frame chart, the understanding of the current process and context at which this price action is taking place is kind of difficult (if not impossible) to grasp. With a process I mean for instance a situation where price is bouncing off from a higher time frame support level or it has reached a major resistance level and the momentum is waning. Should a trader focus only on a 5 minute chart or 1h chart for that matter, he or she would be likely to keep on shorting the bounces next to a major support. In other words, shorting even though price has reached a level that is likely to attract institutional buying. These shorts have much fewer probabilities on their side than those opened close to a major resistance level after there is confirmation that prices are indeed likely to turn lower. The old adage goes: buy low and sell high, but we need the bigger time frame to understand what the low and high actually mean.

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« Odgovor #8 poslato: 24.10.2014, 15:17:37 »
Why to trade with multiple time frame charts? | Part 1

As the traders who read my articles are aware by now I do not favour an idea of basing one’s analysis and trades on price action in a single time frame chart. New traders are often fascinated by the constant action visible in the 1 minute or 5 minute time frames. This is the same crowd that loves trading platforms with flashing lights, blinking windows and buzzing buzzers. The more eye candy and action, the better. I’ve been there and done that, so I can’t blame them. But, believe me, after watching price action for over 16 years, I’ve got no need for such hyper activity any longer. I am only interested in knowledge and information that has quality, validity, and hopefully, also some predictive value.



The main problem with the lowest time frame charts is the thing called noise. Noise can be defined as unwanted signals that obscure the real signals and therefore harm the quality of your analysis. In other words, 1 minute charts for instance, have so many spikes, ranges, mini trends, hammers, shooting stars, breakouts and false breakouts that these “setups” are only going to wear you out – and drain your trading account. You are free to try out, but unless you are extraordinarily lucky it’s likely that you will, sooner or later, become physically, mentally and financially exhausted. If you recognise some (or all) of these symptoms, take a step back and start again with (multiple) higher time frame charts and do some analysis that adds value to your trading career.

Another major problem with single time frame analysis is the fact that you are constantly out of touch with what is really happening in the market that you are trying to trade. How can that be true? Let’s give it some thought. First, what logical reason would there be to assume that the price action in, for example, a 5 minute chart would give us any relevant clues on what the big market operators, such as banks or hedge funds are focusing on. Their operations generally last longer than the time period a newbie trader typically focusses on (when watching his small time frame charts). These market participants are those that have the power to really move the markets and I have not yet heard of any central bank action or other major currency operation that would be completed intra day.

For instance, when a big company buys another from abroad for billions of dollars, this deal needs a currency transaction in order to be completed. The buyer needs to exchange the local currency to the currency of the target country. The FX market is the biggest market in the world, but selling or buying billions does mean that the position has be accumulated over a few days. Obviously the traders try to complete the buy operation in such a way that they don’t push the prices higher. If we do our analysis properly, we can find the levels that are meaningful for the big operators as well. These levels are likely to be important daily and weekly highs and lows, not minor one or five minute levels.

In addition, if one limits his or her view into a single time frame chart, the understanding of the current process and context at which this price action is taking place is kind of difficult (if not impossible) to grasp. With a process I mean for instance a situation where price is bouncing off from a higher time frame support level or it has reached a major resistance level and the momentum is waning. Should a trader focus only on a 5 minute chart or 1h chart for that matter, he or she would be likely to keep on shorting the bounces next to a major support. In other words, shorting even though price has reached a level that is likely to attract institutional buying. These shorts have much fewer probabilities on their side than those opened close to a major resistance level after there is confirmation that prices are indeed likely to turn lower. The old adage goes: buy low and sell high, but we need the bigger time frame to understand what the low and high actually mean.

HotForex Blog https://blog.hotforex.com/why-to-trade-with-multiple-time-frame-charts-part-1/

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« Odgovor #9 poslato: 29.10.2014, 11:59:31 »
How to trade with multiple time frame charts | Part 2 - HotForex Blog https://blog.hotforex.com/how-to-trade-with-multiple-time-frame-charts/

In this article you will learn:
A simple setup for entering trades that have a high probability of success.
Those reading my analysis should, by now, have a good understanding of what to include in their analysis. We need to, among other things, pay attention to weekly, daily and intra day support and resistance areas as well as price formations and Fibonacci levels clustering together. For a more detailed explanation, please refer to my earlier analysis on the USA 500 index, Gold and GBPUSD. The purpose of this educational article is to give HotForex clients a very practical example on how to benefit from the analysis that I produce. On Wednesday 22nd I wrote a report on Gold (you can find it here https://blog.hotforex.com/need-for-safe-haven-increases-demand-for-gold/).



Chart #1: Gold, 4h
As we now see, the analysis was correct and gold has, since then, been hovering between the two levels that I suggested as potential supports. The higher one was penetrated and has been acting as a resistance as price has been consolidating just below it. I still think it is likely that we will see gold touching the lower level.
Last week’s gold analysis suggested that because the price was right at a weekly resistance and the price action in 4h chart was losing momentum, gold could break the rising trend line and move lower. This information can be used in several different ways. First of all, those holding long positions and hoping they would have even greater gains from a further up move were given a heads up and an opportunity to exit longs while in profit. Secondly, traders that considered longs against the rising trend-line might have waited for price to break lower, settle or reverse at the lower levels and then look for buy signals from a better cost base.
The third option (shorting while price breaks lower) is the one we are going to explore here. So, how do we identify shorting opportunities in similar situations? First of all, we know from the weekly and four hour analysis that momentum was fading and gold was staying below the (red) down trend-line I drew (see Chart #1). This trend-line itself provided a guideline on where to take short trades at.
However, there is yet another way of identifying profitable opportunities when similar breakdown is just about to happen or is under way. For this we need three things: 1) 50 period moving average below 100 period moving average 2) a retracement to Bollinger Bands and 3) a sign of momentum fading, (= a narrow range candle or a shooting star).



Chart #2: Gold, 15 min.
Here’s the setup (Chart #2) in a 15 minute chart. At the time of the publication of my analysis, gold was breaking lower. My comment then was: “…(the price of gold) moves sideways just above one of the Fibonacci cluster levels drawn earlier, but seems to be slipping lower. If gold can’t close above the descending red trend-line but keeps on drifting lower, I would look at the 4h (240 min.) Bollinger Bands as potential support or first target for short trades.” Once the bullish traders decided to drive gold up to a level that coincided with 15 min. Bollinger Bands, the setup was almost ready: fast moving average (50 ma) was below the slower (100 ma) and price had reached the Bollinger Bands (see the point two in Chart #2).



Chart #3: Gold, 5 min.
The only thing that was missing when the price arrived at the bands was the momentum confirmation. This confirmation however came relatively soon. As the price of gold reached the bands, momentum of this upsurge started to falter. It was visible both in 15 and 5 min. charts. The price in the 15 min. chart created a shooting star candle (a candle with a narrow body and a spike higher) and the momentum indicator in 5 min. chart had bearish divergence or a lower high, while the price on closing basis made a higher high (see Charts #2 and #3). Once at the bands, price started to stall and also the five minute chart produced a shooting star candle. With a stop above the recent highs this trade had the probabilities on its side. The next opportunities to short gold using the same setup occurred again later on that same day, as price turned lower from the 15 min. Bollinger Bands. Should a trader use leverage wisely, these kind of setups can give handsome profits. And the good thing is that they occur relatively often.



Chart #4: Gold, 15 min.
Later, as the price of gold kept on trending lower this setup occurred three times. The price hits the Bollinger Bands, the move stalls and turns.



Chart #5: Gold, 5 min.
Here is the first one of the setups (numbered in the Chart #4) in five minute resolution. As the move against the trend starts to weaken, the first signs of it can be seen in the Momentum and Stochastic indicators. The other two occasions have similar characteristics, which you are welcome to study. Studying the historical price action is an excellent way of learning to understand how the price in different time frames develops.

Conclusion:
In similar cases to the above gold setting you can follow this simple procedure. Once you have read my analysis (and provided that your own analysis agrees with it), start to look for shorting opportunities. Create a 15 minute chart with the 50 and 100 period (simple) moving averages together with the Bollinger Bands. You can use either the standard 20 period and 2 standard deviation setting or both the 2 and 1.5 stdv. bands like I do. Then wait until the 50 ma is below the 100 and look for the price to move up to the bands. See then if the above mentioned signs of fading momentum occur to confirm the setup. Don’t forget to place a protective stop above on of recent highs and remember to use a reasonable leverage. Obviously no setup is 100% guaranteed, i.e. they don’t always work out but get stopped. However as long as they are based on solid analysis and proper risk management (no over leveraged positions and correctly placed stops) is used, the long term odds are stacked in the favour of the trader. Note: a similar setup can be used to find long opportunities. This will be covered in one of the future educational articles.

Janne Muta
Chief Market Analyst
HotForex

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« Odgovor #10 poslato: 30.10.2014, 13:35:17 »
Is Fed Being Bullish About US Economy Enough? - Read more at HotForex Blog https://blog.hotforex.com/is-fed-being-bullish-about-us-economy-enough/

The Federal Reserve statement cited “solid job gains and lower unemployment rate” and suggested that there is a positive trend in labour resource utilisation: “a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing”. The Fed continues to lean on its verbal arsenal rather than real action, such as QE. The first case of such verbal action was two weeks ago when Mr Bullard appeared on Bloomberg and suggested that there should be more QE. This appearance coincided with the US stock market being at major technical support; the stock market rallied from the level after his comments.

Now the Fed seemingly hopes to support the equity market by being bullish about growth in the USA. Even though the statement included a promise to keep the borrowing costs low for a “considerable time”, a wording that they have used frequently in the recent past, it is likely that interest rates will rise eventually and the Fed needs all the verbal bullishness it can muster. This in fact is the only option the Fed has if it wants to keep steering off from Quantitative Easing.

In Japan the Bank of Japan governor Kuroda is scheduled to appear before the parliament today and tomorrow will be the Bank of Japan press conference. Markets are not expecting new QE announcements from Japan tomorrow as only three of 32 economists surveyed by Bloomberg News this month predicted that policy makers would expand asset purchases at a meeting on Friday. According to Bloomberg the central bank buys about $64 billion of bonds each month.

For recent and upcoming economic reports see: HotForex Economic Calendar



USDJPY, Weekly

USDJPY has moved higher from a support level and approaches the latest highs and weekly Bollinger Bands, a potential resistance area. USDJPY has been this high the last time in 2008. The weekly candle (hammer) suggests the trend higher will eventually continue and that the current resistance is eventually cleared. This is supported by the current view that the Fed is not likely to start another QE program while the Bank of Japan will continue being aggressive in their efforts to increase inflation via Quantitative Easing. Should there be changes to this underlying setup, the markets would surely re-price the USDJPY. In the near term we are likely witness some range bound price action as the USD bulls are trying to push the pair higher.



USDJPY, 4h

The pair has been rising higher in a well defined trend channel. After yesterday’s FOMC statement it shot up like a rocket and reached the level of daily Bollinger Bands. They coincide with the proximity of the upper end of the channel. At the same time the Stochastic Oscillator is deep in the overbought area. All this is reflected in the 4h candle forming a bearish shooting star (a sign of momentum reversal). Therefore I am expecting USDJPY to move lower from the current levels to the support below. The nearest 4h support level is also the daily high from 27th Oct at 108.40.



USDJPY, 1h

The 60 minute chart reveals a support level approximately at 108.90-108.95 which coincides with a 50 period SMA in the 15 minute chart. This area could theoretically act as a support, but the immediate upside seems to be limited. It isn’t typical for prices to keep on going higher if they’ve been moving in an uptrend and then get shot up to a resistance after a news event. In my experience buying after such a move is too risky and does not usually produce trades with good profit potential.

Conclusion: The pair is at a resistance area, but keeping the likely future central bank actions in mind it makes sense to expect USD to gain further against the JPY. However, the resistance has to be cleared first and this probably means that the price has to consolidate a bit and retrace to support areas before the 4h trend higher can continue. Look for buy opportunities if the support 108.40 is touched. A return move there and we should be looking for signs of momentum reversal to go long. Sell high and buy low as the saying goes. Look to sell against a resistance and buy against a support.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
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« Odgovor #11 poslato: 31.10.2014, 13:37:25 »
The dollar strength pushes gold lower - HotForex Blog https://blog.hotforex.com/the-dollar-strength-pushes-gold-lower/

The US Federal Reserve ended the asset purchases as expected just two days ago and now Bank of Japan, against all expectations, has increased its stimulus program.  This has caused Gold (priced in USD) to fall further. According to Bloomberg, the Bank of Japan is now targeting an 80 trillion yen ($726 billion) expansion in the monetary base. This move together with expected stimulus from the ECB supports the US dollar. Investors have been buying gold over recent years mainly as a hedge against the unprecedented expansion of the Fed’s balance sheet. Now that the Fed has wound down their Quantitative Easing program and is not signaling that it would be ready to initiate a new one, investors seem to be turning away from gold to other, better yielding assets classes.



Gold, Weekly

The Fed’s hawkishness is causing dollar strength against the major currencies and gold is not an exception in this regard. Many people think of gold as a currency and because it is priced in USD, the dollar strength means weakness for gold. Gold is at the time of writing breaking the weekly level that supported the price since June 2013. Last week the price formed a weekly shooting star right below a resistance level and has moved substantially lower turning the technical picture bearish for gold. I was expecting the price to form a trading range below that weekly resistance and then move higher from there. This scenario was based on the collection of fear factors in the world (which would translate into support gold on safe haven basis) and the fact that the last time gold moved up from the same support it was at first range bound for a while under a similar weekly resistance level before eventually moving higher. However, as this scenario didn’t play out, we need to find the current resistance and support levels for gold. The weekly low (1156) from July from 2010 is a very potential candidate for a support. As for a resistance, it is likely that the former support at 1183 will now act as resistance.



Gold and DXY, Daily

Over the course of this year gold has reacted higher each time the US Dollar index (DXY) has reacted lower from a resistance, and vice versa. The Dollar index is a measure of the dollar value of USD against a basket of major currencies. The weights of these currencies in the index are as follows: EUR 57.6%, JPY 13.6%, GBP 11.9%, CAD 9.1%, SEK 4.2% and CHF 3.6%. DXY is now approaching a reaction high while Gold is well below the coinciding reaction low. Therefore it is possible that the timing of gold reaching the support DXY trading at the reaction high could coincide. Should this happen simultaneously there would be an increased likelihood that we could see a reaction higher from the 1156 support. But what might be the trend in the price of gold after that reaction? Now that the Bank of Japan is even more aggressive with their QE than anticipated and the ECB is expected go along the same route it seems likely that the DXY will keep on moving higher. This would mean further weakness for gold.



Gold, 4h

Apart from the penetrated weekly support (at 1183, now resistance) the next resistance levels are at 1195 and 1208. Should the price rally to these levels I would be looking to short the signs of momentum reversals (in lower timeframe charts) with a tight stop and reasonable leverage. The latest low and the weekly support at 1156 could work as targets for these trades. However, please remember that these are just guidelines for you on how to do your own analysis. You should never trade blindly on someone else’s ideas but rather see if the price action at suggested levels supports the idea given to you.

Conclusion

The weekly shooting star candle from last week and the breaking of major support suggests further weakness and rallies to resistances should provide shorting opportunities. The current central bank policies support the USD and therefore increase the likelihood of DXY moving into new highs and gold moving lower. A very sharp reversal with a weekly close above the 1183 level would mean a revaluation of the current analysis would be necessary.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
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« Odgovor #12 poslato: 04.11.2014, 14:38:55 »
US Dollar Index in four year highs

The markets’ focus this week will be on US Non-Farm Employment change which will be reported on Friday. Expectation is that the US economy has added 229 000 new jobs while the previous month’s figure was 248 000 which beat analysts expectations. Traders will get a preview on employment data tomorrow as private Automatic Data Processing Inc. publishes their estimation of the Non-Farm figures. The ADP figure doesn’t always track well with the official number, but it is still an event that markets pay attention to. It is expected that ADP will report 214 000 new jobs outside the farming industry and should there be a significant deviation from the expected number of jobs, there would be stronger market reaction in the dollar pairs.



DXY Weekly:

The US Dollar Index (DXY) is trending higher as slowdown in global economic activity once again means that the US economy is the cleanest dirty shirt in the laundry basket. There is an element of flight to quality combined with the fact that the Federal Reserve is expected to raise rates sooner than other central banks in major economies. The Index has reached a four year high which has brought it to a weekly pivot from June 2010 (red lines). This has caused the sideways move we have seen lately. Support can be found at the latest weekly high (blue line) and the weekly target is the high of the weekly pivot (from June 2010). This coincides with the 4.250 Fibonacci extension target calculated from the price action from May to June this year.



DXY 240 min:

The current sideways move in the 4h chart is due to a Fibonacci extension cluster (navy lines in the chart) and the historical weekly pivot low creating a resistance. Index is getting close to the upper end of the trend channel and the Money Flow Index (MFI) is overbought, but that is typical in an uptrend. I look for a continuation of the trend, but would not rule out a short lived correction to the nearest 4h support. Should the index have a correction I would look to trade against the area of the recent gap and the previous high. I believe this area will attract dollar buyers if it is reached. The Fibonacci extension level could well be the first target as it coincides with trend channel top. The numbers 1 to 3 in the chart help the readers to see which points I have used in drawing the Fibonacci extension target.



DXY 60 min:

The intraday price action is at the time of writing taking place at an intraday support zone created by a previous low and the pivot high before that (blue lines). My experience is that support levels are not exact levels but rather areas or zones. That is why I don’t focus on one single point value as a support but rather draw couple of levels and have zone between them. The Index is at lower Bollinger Bands that coincide with this support. While MFI is oversold in this timeframe, this support level could provide an opportunity for dollar longs. If the level breaks look for trades at the support at 240 min. gap.



DXY and USDJPY, 240 min.

Conclusion

The US Dollar Index is at a historical resistance (weekly pivot from 2010) that coincides with a Fibonacci extension cluster calculated from pivots in a 4 hour chart. I expect the trend to continue with the first target in the region of 1.618 Fibonacci extension and the channel top. If the current support in 1h chart does not hold then I would look for long USD trades (i.e. short EUR, AUD or JPY for instance) close at the area of 4h gap and previous weekly high. However, we have to remember that all currency pairs are individual markets with their own characteristics. Therefore, pay attention to potential support and resistance areas in currency pairs you intend to trade. In other words, traders should do their own analysis as well reading mine. By doing analysis on DXY my intention is to provide traders with a framework by which the moves in USD pairs can be better understood. As can be seen from the chart above the price action in DXY future helps in understanding what is likely to happen for instance in USDJPY. In order to increase the probabilities of winning, it is advisable to trade the USD against weak currencies such as AUD, JPY and EUR and not the likes of GBP. As we have already seen GBPUSD has relative strength while the USD has been moving higher.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
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« Odgovor #13 poslato: 06.11.2014, 12:02:32 »
Euro off its lows against the U.S. Dollar ahead of critical ECB meeting https://blog.hotforex.com/euro-off-its-lows-against-the-u-s-dollar-ahead-of-critical-ecb-meeting/

The Euro managed to trade off its yesterday’s lows during Asian trading session managing a consolidation just above 1.25 against the U.S. Dollar. Investors will be closely looking today’s ECB meeting despite the fact that no fresh stimulus is expected to be announced. The recent rumors that some members of ECB were unhappy with Draghi’s aggressive stimulus push have given an extra interest in today’s policy rate meeting.

On the other hand, Bank of England’s policy rate meeting is expected to be a non-event for the markets as no change in policy is expected. The Pound has been struggling against the U.S. Dollar after the Scottish referendum and has recently being hovering around 1.60. Yesterday GBP/USD attempted a break below the recent tight trading range having touched 1.5875 but it quickly bought up to trade 15 pips short of 1.6 just before European market opening.

USD/JPY continued its uptrend recording a fresh 6-year high earlier this morning at 115.50 before retreating fiercely to trade in the area of 114.30. The price movement has been closely correlated with a Japanese stocks selloff, but it better explained as a profit taking, position closing ahead of the policy rate meetings later today and the market moving U.S. NFPs tomorrow afternoon.

XAU/USD traded to new 4- year lows yesterday managing a break from the recent lows to trade as low 1137.60 $/ounce. The precious metal is now consolidating near that area with the bearish sentiment still in place.

BOE policy rate meeting takes place at 12:00 GMT and will be followed 45 minutes later by ECB announcement. Mario Draghi’s press conference which will be expected with great interest will be held at 13:30 GMT.

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« Odgovor #14 poslato: 07.11.2014, 16:14:53 »
Coffee time?

The price of coffee has risen since the November 2013 lows by almost 80% while the latest high from October 2014 is slightly more than 112 % higher from the same low. This momentous move was caused by two things coinciding relatively close to each other. Firstly, after a long period of decline the price of coffee reached an important historical support level (December 2008 low) which led to the price of coffee breaking out of the descending trend channel. Secondly, the market was flooded with new demand as news about worsening drought conditions in Brazil hit the news wires. The country is the biggest coffee producer and exporter in the world. Just lately, we have seen the price of coffee declining due the reversion of the same theme. According to Bloomberg, hedge funds decreased their positions in coffee futures as rains brought relief to the droughts in Brazil. So, is it all about the weather? Would we need to know the future rain patterns in Brazil in order to benefit from this market? It certainly seems like a sensible proposition. However, there is another option. We can define the technically important levels, wait for the market to approach those levels and trade this market based purely on price action.



Coffree, Weekly

The price of coffee has been swinging wildly between the July 2014 low and the October 2014 high. We now have a higher high but it was created with a lower volume than the previous high from April this year. This can be seen both in the volume and Money Flow Index (MFI) and has resulted in a lower high in MFI, meaning we had a bearish divergence associated with the latest move into the resistance. It is interesting that this move into resistance happened on the same day that Bloomberg had a news piece with a headline: “Coffee futures jump to 32 month high, on Brazil crop woes”. Yes, the news was true but the price didn’t move higher but rather stalled at resistance. Nine days later the futures opened with a sizeable gap and headed south. This was a clear example of how traders should pay attention to technical levels and use the technical toolkit available to them. Now the price of coffee is at a weekly pivot from September this year and has been edging slowly lower. As the price is close to an area that attracted buyers the last time, I would be monitoring the price action in lower time frames in order to find signs of momentum reversal. Support at September low and nearest resistance at a gap coinciding with weekly Bollinger Bands and a former resistance from July and Septembe240-min.png[/img]

Coffee, 240 min.

The fact that price has reached a potential support area can be seen in how the price reacts. While the price is still moving lower in a descending trend channel it is forming a wedge like formation as the navy colored trend at the lower end of the channel is approaching the top of the channel. This suggests that the balance in supply and demand is slowly turning to favor the long side. There is a 4h support area right below the current price action and we have had one quick move inside this level. The move was rejected, but the price (a hammer candle was created) has again edged closer to the level. This suggests to me that we might not see an explosive move higher from here, but rather a gradual change in the direction of the price. The nearest 4h resistance level is at the high of the wide range up bar that followed the hammer candle and coincides with the Bollinger Bands. The next resistances are likewise at the highs of the pivot bars. This could act as targets for short-term scalping trades.



Coffee, 60 min.

The picture we get from the 1h chart is not that different to the 4h chart. A confirmation of the first signs of momentum reversal would be a move outside the wedge and the descending trend channel accompanied with a higher low or steady up move outside the channel.

Conclusion:

The fundamental picture has, at least momentarily, changed with the recent rain in Brazil. Therefore it can be questioned whether the price of coffee will be able to create yet another higher high. At the same time though, we are at a technical level. This level has attracted buyers in the past and if the signs of momentum reversal continue, then we have a case for a long trade. Look for breakout above the channel as a confirmation of this view.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex