Today I want to concentrate
on Forex crosses eur/aud and gbp/aud and share with you my expectations about
upcoming tendency in the pairs and possible targets. I enjoy trading any
security that trends whether it some currency pair, a stock or gold. I like repeating
the phrase of Jesse Livermore that ‘big money is in big moves’. More often than
not you do not even have to be concerned about your entry level as the tendency
pushes the security in the direction of the move quite soon and even if you
entered the market at the wrong time you will be in profit sooner rather than
later. What you need to think more is your position sizing and where to place
your stop. You want to maximize your profits and minimize your risks. This is
how you manage to make money even if you were late to jump on the first wagon
of an upcoming train.
Ok. Let us talk now about
eur/aud and gbp/aud pairs. If you have been reading my posts you probably know my
opinion about trends in various pairs. Do your own analysis and you will see
that when some currency is very strong it usually is strong against all the
other currencies. Your task is to find out the strongest currency and trade it
against the weakest one. As of now, Australian dollar seems to be the strongest.
You may notice that Australian dollar was in a downtrend from the middle of
August (this year) against Euro and Pound. They performed best against the
Aussie. However, you should also remember that those that were the strongest
become the weakest when a trend changes and the weakest also become the
strongest.
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As I look at my charts I see
that the shift has taken place and aussie is doing very well, especially
against European currencies. It is not that powerful against US dollar and Yen
as these have also recently been weaklings, but will gain strength pretty soon.
Now what makes me think that eur/aud and gbp/aud are going to go sharply down?
I have both fundamental and technical reasons for that. Let me start from the
technical ones.
If you look at longer term
charts you will clearly see that both eur/aud and gbp/aud are in long term
downtrends. It means that when you see the pairs rallying up these are
corrections, not a significant change in trend. You can also see that both
pairs end up lower from previous peaks that were reached during previous
rallies against a major aussie up trend. Whenever you see a pair (that has been
in a downtrend) doing a rally and approaching to its’ previous rally peak you
should follow price action. Is the previous peak going to be reached? In most
cases it is not and you can start playing from the short side.
While being in a counter
trend rally a pair usually forms a breakout zone which becomes an entry level
for us to play from the short side when that particular pair gets back to its’
main trend again. At some point, while going against a trend a pair experiences
sharp reversal days 3-7 days and then continues rallying against a major trend.
The area where it stops and continues its rally against the prevailing trend
becomes our entry level (if you are a breakout trader). If you look at eur/aud
pair you will see that our entry zone for going short is around 1.2325 area.
This is the place where the pair continued its’ move against a major trend
after some days of retracing.
You should remember that
this is purely technical stuff and this area should not be applied without
fundamental stuff. Now, if you do remember my previous posts you know that
interest rate decisions are key fundamental events that sets currencies going
and major turnarounds happen when those economic events happen. If you look at
economic calendar you will see that on the 6th of November BOA (bank
of Australia) released its’ interest rate decision. Contrary to expectations of
economists and analysts the Bank did not cut interest rates but left them at
the same level (3.25), which is very positive for Aussie. And for us currency
traders who long Aussie and earn interest on our long positions.
So, if you look at the chart
you will see that at the moment of the release eur/aud was at the very
technical level I have already mentioned in the post. The news was released and
the pair banged through the level. The same thing happened to gbp/aud pair. I
must admit that we have missed some of the move, but you can never catch all of
it and should be glad to jump into a move when it is at the strongest. There
are some events scheduled that could impact prices for the time being, but in
my opinion the direction of the above mentioned pairs is clear – downwards.
Tomorrow is a big day: BOE and ECB interest rates decisions. However, having in
mind poor results from Europe today and average last week we may assume that
ECB will surprise investors. The same will probably be true with BOE. So, my
best speculation regarding the direction of the pairs is down.
I likewise believe that
there will be some days when the pairs will try to resist the main trend and
start rallying. This will present us with more opportunities to add to our
shorts and increase our profits. Unemployment data from Australia later in the
day can also impact prices very much. It can also be another opportunity to
short the above mentioned pairs again. The biggest events are tomorrow. So, be
patient.
As you may understand
tomorrow announcements will have deep impact on other Euro and Pound pairs:
eur/jpy, eur/usd, gbp/jpy, gbp/usd, eur/gbp. I am mostly bearish on Euro and
looking for eur/usd and eur/jpy to depreciate a lot. However, this is not the
topic of the post.
I believe I will finish now
and you will be able to judge for yourselves about my predictions regarding
eur/aud and gbp/aud pairs. I expect
gbp/aud to go to 1.4800 level and eur/aud 1.1700. If you intend to
implement some trades on your own always forget to place a stop loss and let it
not be bigger than 2-5 percent of your equity. And do not forget your profits
run. Trends do start and they make us investors rich!
Good luck in trading.
If you liked the post I
would also be happy if you gave a plus on Google+, tweeted, liked it on
Facebook and other social platforms. Have a nice day.
Vytas.
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http://www.etoro.com/A41516_TClick.aspx
If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!
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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 http://trend0.blogspot.com/ is of educational
nature and cannot be considered as advice, recommendation or signals to trade
in any financial markets.