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Friday, June 17, 2011

Trend for 17th of June 2011

This Friday wasn’t as volatile as Fridays usually are. Again, as two weeks ago, Euro and Japanese yen have been the strongest currencies in Forex market. Yen has probably strengthened because oil was pretty weak. As we know there is high correlation between oil price action and Yen price action, oil being the security that sets the tone for currencies such as Yen and Canadian dollar. And again, US dollar and Canadian dollar were the biggest losers yesterday and today. As there were no important news releases, except University of Michigan Confidence from US, a trader could take his technical analysis tools and trade comfortably. Let us look at some winners and losers and how it was possible to trade those today.

Usd/jpy technical collapse

If you followed price action in usd/jpy pair, it wasn’t difficult to see that the pair had better chances to down than up today. After falling for some time usd/jpy was able to establish a short term bottom on the 8th of June. It has been rising in waves since then. However, price action from 15th to 16th of this month showed pretty bearish reversal signs. On these two days the pair experienced two big sells offs. It then formed two support levels on 16th and 17th. However, lower highs clearly showed that bears took control of the situation and would not allow bulls to advance any further. 

At the time of European session the pair collapsed through the support of 80.50 and did not even look back. The most logical way to trade it was to place a sell stop order below the mentioned level with a stop loss order at 80.70 (the most recent high) and go short when the market opened the order. Support for the pair is now at 70.70. Looking at the technical picture of Yen pairs I see bullish signs for Yen. I do not know if that happens, but we could have a strong (maybe short) rally in Yen. I talked about it yesterday, briefly mentioning bearish picture in aud/jpy. 

Eur/cad back to uptrend

Today we had a few possibilities to go long in eur/cad pair. As we knew that the pair reversed sharply yesterday, we might have expected a bullish move to continue today. One way to trade it was to buy at support after 123 reversal pattern was formed at the end of Asian and beginning of European session. You just had to place a buy stop above 1.3940 level with a stop loss order at 1.3911. You would then simply had to wait and move your stop as the market progressed upwards. 

Since we were not sure whether a reversal that took place yesterday will develop into a short term uptrend we could wait for Asian session to be broken to confirm our expectations. In this situation you had to place a buy stop order above Asian session high at 1.3970 and wait for the level to be broken. You would have then gone upwards. As momentum wasn’t very strong and the week was closing it was better to exit somewhere around even number of 1.4000. The profit would be not too big, but tangible. On the whole, if I am not in an investing trade I always close positions for weekends. Why risk? Who knows what might happen during weekend and if I am able to get out of the market with small losses. 

So much about Friday! I am going to write a post on some technical aspect of trading tomorrow. 

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Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.