Euro the leader for a few weeks
Today was another day that saw various currency pairs to continue their swings. As I wrote in my post ‘Follow the leader’ you have to identify the strongest currency (or any other security if you trade other financial markets) and trade in the direction of a trend by going long in that specific currency. If you look at the charts you will clearly see that Euro has been the strongest currency for a few weeks (Japanese yen being the second).
Canadian and US dollars the biggest losers
Another thing which you have to identify is the weakest currency (or any other security if you trade other financial markets) and put the strongest currency against the weakest currency. In this way you will be able to make maximum profits. If you look through the charts you will see that Canadian dollar and US dollar were the weakest currencies. So, all these two weeks you could go long in Euro and Japanese yen and go short in Canadian and US dollars.
Eur/usd and eur/cad were the best pairs to go long
Eur/cad was making minor retracements so it would have been impossible to wait for dips and then go long in the pair. You had to take longs each time the pair took out previous highs. It means you had to take breakout trades. This is not a favorite strategy of mine if there are no news around. Therefore I would have preferred to trade eur/usd instead of eur/cad, or use eur/usd as a primary pair for going long and eur/cad as a secondary.
Possibility in eur/usd today
I have already given you examples yesterday with eur/usd how it retraced to support levels which used to be resistance once, but after being taken out they became support. This is classical technical analysis! So, if we continue talking about price action in eur/usd today you will see how good the pair was for taking long during early European session. It was falling through American session yesterday and consolidating during Asian session.
At the end of Asian session a beautiful 123 reversal pattern was formed and the pair broke upwards to continue its short term swing. When the news from Europe came it had almost reached its daily high and started going sideways. What you could do is simply place a buy stop order above point two and go up with the market when it cleared the point.
Reversal in Japanese yen is in the cards
Thinking about the second strongest pair (Japanese yen) I kind of tend to think that it can reverse pretty soon. Oil is bottoming bit by bit. Canadian dollar has reached a pretty important resistance and most Japanese pairs seem to be forming reversal patterns. Eur/jpy is actually breaking up of the reversal pattern and it can be again the leader in the move. Gbp/jpy is also finding support. Even usd/jpy seems to have formed some sort of double bottom on 1 hour chart.
This data can move markets tomorrow
We have very important data coming from Japan tomorrow (Nominal Gross Domestic Product) and also some extremely important data from Great Britain and Europe (Rate decision). This can set all financial markets on fire. I think that this could also cause oil and other commodities to go up and yen to go down. Let wait to see what tomorrow brings.
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Disclaimer
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.