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Wednesday, July 13, 2011

Market trend analysis for 13th of July 2011

Bernanke’s speech creates big market moves


Hi, everyone. Let me do market trend analysis for today’s price action in forex market and make some predictions for the future. The big event for today was Bernanke’s speech that triggered huge moves in financial markets and caused US dollar to collapse across the board. I do not know what he said and I am not intending to read much, as I am mostly a technical trader. I follow price action of securities and base my assumptions of where the price is going by purely watching what happens at various technical levels (support and resistance). However, I know that news events cause a lot of daily trends that we could all monetize. So, let’s see how one could have traded eur/usd pair today. Gbp/usd was the best to trade the event, but you can do analysis of it on your own. 

Two possibilities to trade news event in eur/usd


There were a few possibilities (or better technical levels) to place your orders for buying eur/usd; one riskier, the other one safer. If you wanted to take a riskier trade you would have placed a buy stop order above 1.4082 level, which was a 1 hour high of a previous candle before a news breakout occurred. As there usually is a lot of price action before news is released, your order could be triggered before news is released, therefore a much safer way to trade any news event is to place your buy and sell stops a little bit further from the price.

Today, the second possibility was to place a buy stop above 1.4110 level. It was a 4 hour high of the previous candle when the breakout occurred. It is a much safer way to trade news events when you place order above or below 4 hour candles. So, whichever way you may have chosen, your order would have opened and your trade would have been profitable. The exit level was at an even number of 1.4200. I like exiting ten pips before even number. So, in this case this would have been 1.4190. Nice profit! 

Support for the pair is now at 1.4190 (most recent resistance becoming support). We have to see what happens at that level to determine how to trade the pair. If the pair does not plunge through the support but forms a reversal pattern (after consolidation and a small retracement) we have to look for opportunities to buy. If it goes down decisively, we have to wait for opportunities to sell rallies.
Hope the market trend analysis was useful.
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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.