Trend for 17th of May 2011

Today I wanted to show you a nice technical pattern in gbp/jpy that caused a breakout upwards in the pair.  If you analyze the conditions under which the breakout occurred you will see that it was based on technical conditions rather than fundamental news. The news from Great Britain (Consumer Price Index) that could cause a move was scheduled to be released at 9:30 GMT. If you looked at the charts you would see that the move beyond the range gbp/jpy was in occurred 3 hours before the above mentioned announcement. This leads me to a conclusion that the trend upwards was purely technical.

However you could easily foresee the move in advance. How? Firstly, you could see it coming by looking at price action. On the 13^th of May the pair made a short term low and jumped off it. It then formed a few consecutive higher lows. It means that the price isn’t willing to go lower. Actually there were three more lows made after the 13^th of March (130.26 low). You also can see two points of resistance made at 131.50 level formed on 13^th and 16^th of May. 

If you consulted RSI it was oversold on both 4 and 8 hour charts and a clear divergence can be seen on both time frames. As the pair is in a range, oversold and overbought levels as well as traditional divergences work very well. In this case they told us about upcoming reversal from downwards to upwards. Preliminary support is at 131.50-70 level with a possibility of dipping to 131.00 level. I am slightly bullish now as I am bullish about commodities: silver, oil. It is a general rule that when commodities (especially oil) go up, yen goes down and Australian, Canadian and New Zealand dollars go up. 

Where was the point for exiting this long trade? The first point could have been at 132.00 (first even number). The next point of resistance was at a previous resistance (look at the chart), which also coincided with another even number of 133.00. If the pair continues going up you might expect it to reach another even number of 134.00. We have tomorrow data from England coming (Bank of England Meeting Minutes) and this could trigger some nice day trends in various currencies. So, let us patiently wait for tomorrow’s European session and be ready to go both directions, wherever the market takes us.

Read my previous post:

Moving average

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.

Trend for 13th of April 2011

In terms of trend trading today was a pretty boring day again. Gbp/jpy failed to make significant advancements and stayed within a very narrow range. It was pretty difficult to trade it today, unless you do some scalping. Eur/usd pair reversed from an uptrend and is approaching to a short term support at 1.4400 level. This could be an opportunity to go up, but I am always waiting for confirmations, whether it is support or resistance. What I want to see is some sort of a double bottom on 15 minute chart with 123 technical pattern. Then I would place a buy stop order above the pattern.

There was some pretty important forex news from a few regions, basically Britain Jobless Claims, US Advanced Retail Sales and Canada Monetary Policy Report. All of the data could create significant daily trends in currency markets. However, they did not create any moves today and you would not have made good cash if you traded the events. I also do not see any important news releases on Thursday (tomorrow), so if you are a news trader, you will have to wait till Friday and see what data from US will bring.

However, there was a pretty good move in eur/cad pair. It was purely a technical breakout. It formed a double top (the first top was made on the 8^th of April, the second on the 12^th of April). One may assume that in these kind of situations you should take a reverse trade. It is possible, but in my opinion a support level at 1.3779 had to be taken for the bearish momentum to set in. It did not happen and the pair came back to double top today and took it away at the end of European session. So, you simply had to place half a position of buy stop order and wait for the level to be broken. Then you would have taken the position when the news from Canada was released, or better before the release. 

Read my previous posts:

Gbp/jpy short term reversal

Possible reversal in gbp/jpy

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.