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Thursday, June 23, 2011

Trend for 23rd of June 2011

Market trends reverse today

Hi, everyone. Let us look what daily trends developed throughout the day today. Today, or we can be more exact (yesterday in the evening) most currency pairs reversed and continued their tendency today. I believe you do not have any questions as to why this happened (Federal Open Market Committee Rate Decision and Ben Bernanke speech). The reaction of the markets wasn’t immediate as it often happens nowadays, but during European session today pretty big moves started. Some of them might be already over as I see that some securities have reached their support levels. And who are the biggest winner today? US dollar and Japanese Yen! So, let us look at some pairs to see what possibilities we had today.  

The biggest movers are eur/usd and eur/jpy in today’s trend


Eur/usd and eur/jpy were hit most. Since British pound had been beaten earlier in the day, it wasn’t that weak against Yen and US dollar, but still continued collapsing before it found some stronger support. I have my rules for trading economic news releases. When I see that the market does not react to an announcement in a period of 1 hour I usually reduce my position (amount of stop orders) or remove my orders entirely. However, I also do know that often reaction to news comes after some time, therefore I check various support and resistance levels to see if I can place some orders for breakout trades. 

Example with eur/usd pair


I think we had an ideal set up for eur/usd in terms of risk (yesterday). At about 20:00 GMT (yesterday) eur/usd formed a low at 1.4340 level. It then went up a little reaching short term resistance at 1.4357. So, a sell stop could be placed below the level with a tiny stop a few pips above the short term resistance. You could then move your stop placing it above 4 hour chart. This would have kicked you out of the market today with about 145 pips of profit. The same strategy could be applied for eur/jpy. 

Technical breakout in usd/cad in the direction of a short term trend


A little bit different strategy could be applied to usd/cad pair. It has been trading technically for a few months.  You may study it on 8 hour chart to see beautiful technical waves and a slightly bullish tone on the pair. This leads us to an idea that we have to buy when the pair dips (after some reversal pattern is formed and a breakout upwards occurs. Below are the charts showing the places for buying the pair. 123 patterns and breakout trades of 1-2 days’ highs work best in these kind of markets.
Hope the post was useful. Thanks for reading. 

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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.