This morning the Eurozone released their Markit Composite and Services PMI’s which both came out positive. Comparing the latest release to the previous month’s data, we can see that there was a moderate growth in activity with Germany proving to be the best performing country during August.
Looking at this pair on the daily time frame above, we can see that there was a reversal off of the 78.6 printing a morning star pattern which went on to create a higher high and also took price just shy of the first take profit area. Following the new high created, there’s been a pullback into the perfect area for long positions. As we can see, the take profit areas line up nicely with the key level of 128.000.
On the 4-hour time frame, we can see how the highlighted region has acted as a strong support for price where we’ve just seen price wick into followed by the current candle engulfing the previous candle which looks like a reversal on the off of the 78.6 as well.
On the hourly chart, I would either wait for price to pull back to the highlighted region for the best possible entry but if price goes on to break the structure on this time frame and create a new high, it would create the opportunity to scale in an entry which is shown above with the fib and the arrows drawn. I would expect price to find some resistance around the psychological round number of 126.000 and if we have a pull back into the 125.600 region, we’d see price create an inverse head and shoulder as well as a potential reversal off of the 61.8.
Remember to always follow your trading plan and always use the correct risk management when entering trades. Subscribe below to receive these blogs sent directly to your e-mail.
Following up on the analysis of the dollar versus the Swiss Franc, there was a wick rejection of the 78.6 indicated in yesterday’s blog post but towards the end of the US session, the dollar gained strength ultimately pushing this pair above the trend line drawn.
Revisiting the daily time frame above, we can see that at the close of market last night a morning star pattern was printed indicating upside movement, but structure has not yet been broken to the upside on this time frame. The current candle rejected the high of 0.9370, and if we have a daily closure back below the trend line, I expect further downside on this pair.
On the 4 hour chart above, we can see that yesterday’s sell set-up was invalidated once the trend line was broken to the upside however if you draw the fib from the second touch of the trend line, which is also where the most recent bearish drive started, down to the low we had a rejection off of the 78.6 and price is looking to be break back below the trend line but I would wait for the candle closure below the trend line to confirm further downside movement.
On the hourly chart, it is evident why a break below the trend line is crucial for the downtrend to continue because now price looks to be retesting the trend line for a bullish move. Looking at the candle stick patterns we had an evening star pattern off the 78.6 shown by the highlighted region with price currently rejecting the trend line with a doji forming. If price breaks and closes above the highlighted region, it will invalidate this analysis.
From a fundamental perspective, there are a few data releases for the dollar later this afternoon. The most important being the ADP Nonfarm Employment Change which measures the change in the number of employed people in the US excluding the agricultural sector. The reason so much importance is put on this data release is because it is a key economic indicator for what to expect for the governments NFP report which is released every first Friday of the month. There will also be Factory Orders, Crude Oil Inventories as well as Cushing Storage and Inventories reports released later today which will be important to consider as well. When looking for shorts on this pair, one would hope for negative data releases to push the dollar and this pair to the downside.
Remember when trading a dollar pair that it is important to analyse the DXY along with the pair you are looking at for further confluence. Always stick to your personal trading plan and use the correct risk management when executing trades. Subscribe to receive blog posts sent directly to your e-mail.
With the dollar on the back foot after the Fed’s new inflation policy as well as money being pumped into safe havens let us look at the safe haven pair USDCHF below.
Starting on the daily time frame above we can see that the overall structure of this pair is bearish. We can see that it has been successfully making lower highs and lower lows except for the most recent price action where price looks to be printing a double bottom with 0.9350 proving to offer support. Looking at the trend line drawn, we could see a potential push up to 0.90970 for the fourth touch of the trend line which lines up perfectly with the 78.6.
Dropping down to the 4 hour chart, we can see that there was a candle closure below 0.9350 shown by the upward pointing arrow but the next two candles has brought price straight back above that region which will be an important area to break for the downtrend to continue. Looking at the fib drawn on this time frame, we can see that the 61.8 lines up with previous support which could provide resistance, but for a better risk to reward ratio waiting for a drive further into the 78.6 would be best.
On the hourly chart we can see that when price pulled below the level of support we formed a higher low shown by the upward pointing arrow. We can see that a descending trend line which there has already been 3 touches off of has been broken to the upside suggesting that we could see price push higher before continuing the trend to the downside.
Remember to practice safe money management and always stick to your trading plan. Hit the subscribe button to receive blog posts sent directly to your e-mail.
The announcement of the Fed wanting to maintain average inflation of 2% over time caused major volatility In various markets and ultimately sent saw the Canadian dollar gain on the U.S. dollar.
On the 4 hour chart above we can see price fell short of the third touch of the trend line but structure was broken to the downside where a lower low was formed. Paying attention to the candle stick closures, there was a hammer printed with a sharp rejection of the 1.30450 region which will now be an important level to break if this pair continues to the downside shown by the upward pointing arrow.
Dropping down to the 1 hour chart, we can see by looking at the upper highlighted region how after those few volatile candles, support turned into resistance and price reversed from the 1.31350 area shown by the downward pointing arrow. Plotting the fib tool we can see that there has already been a rejection off of the 61.8% level but a more attractive risk to reward would be to wait for the 3rd touch of the trend line which lines up nicely with the previous support as well as the 78.6% fib level.
The Fed is aiming to keep inflation rates as low as possible for as long as possible until the labour market begins to make a recovery. Once a recovery in the labour market takes place, it is expected that the inflation rate will be raised in order to keep averaged it at 2% over time. It will be important to follow inflation indicators such as the CPI, PPI as well as the Unemployment Claims which may provide insight into what could possibly happen to the inflation rate in the future.
Remember to always wait for candlestick confirmation before executing any trades and always stick to your personal trading plan.
Oil prices have started to push higher as Hurricane Laura begins to move from the Gulf of Mexico towards the heart of the U.S. oil industry. Since Tuesday, 1.56 million barrels per day of crude output has been shutdown as well as 15% of the U.S. processing capacity has also been shut down. Let us look below at a pair that correlates well with the U.S. oil market and what the under supply of oil this week has done to the pair this week.
Above we have the 4-hour chart, looking at the highlighted box we can see this pair found support at the low formed during the U.S. session on the 19 August as well as Monday’s London low. We can also see that a lower high was formed on the major key level of 1.32000 shown by the ellipse and then went on to create a lower low. Looking at the overall structure of this pair we can see that the lower supply of oil this week pushed the oil market up slightly which favors USDCAD downside.
Dropping down to the 1-hour time frame, we can see more clearly that 1.31350 has been holding as support. Drawing a trend line from the high on the 25 August with the second touch of the trend line on the 26 August and also drawing a fib tool, the 61.8% level as well as the third touch of the trend line could be a potential zone where USDCAD could continue the momentum to the downside. If price breaks through the trend line we’d look at the 78.6 for reversals on this pair. If we do break through the 78.6 as well, I would plot a fib from the high on the 25 August to the highlighted region for the higher time frame fib where you will see that the 61.8% fib level lines up with the key level 1.32000.
At the moment, it will be crucial to see what kind of damage Hurricane Laura causes as it progresses through the U.S. It has already hit Louisiana causing flash floods and it is expected to hit Texas as well but refiners are expecting to be back online by the weekend. However, if the Laura can maintain speeds as it makes it’s way towards Texas, we could see the reopening of rigs and refineries get pushed back into next week which would further slow the production of oil and will push USDCAD down further.
Remember to always stick to your trading plan and use the correct risk management when entering set-ups. Subscribe to receive emails sent directly to your email.
With the first data release for the dollar coming out negative this afternoon as well as the Consumer Confidence coming out negative, let us look at updated analysis on USD/JPY.
On the 4-hour time frame we can see that price rejected off of the potential right shoulder area meaning the head and shoulder pattern is still valid. Looking at the fib tool plotted, we can see that price has pushed just above the 61.8 and for further downside movement, the current candle would need close and engulf the previous candle. We could see a push further into the 78.6 region if price closes above the right shoulder area.
Dropping down to the hourly time frame, we can see that the upside momentum has slowed, and we are currently testing the upper end of the right shoulder region.
Be on the look out for monetary policy announcements on Thursday when Fed Chair Powell addresses the nation. Any reintroduction of further monetary policy will be a positive for the US economy. GDP (QoQ) as well as Initial Jobless Claims will also be released on Thursday. In terms of yen news for the rest of the week, Tokyo Core CPI will be released on Friday.
Remember to always stick to your risk management and wait for candle stick confirmation.
With the dollar index reaching record lows yesterday, let’s look at a potential move to the downside on USD/JPY.
On the 4 hour chart above, we can see that price made a lower low by looking at the upward pointing arrow. We also have a potential head and shoulder pattern which lines up nicely with the 50% and 60% fib which can be seen more clearly when looking at the two highlighted boxes drawn on the two sets of double bodies in the left shoulder region. Looking at the fib tool drawn more closely, we can see that there has been a rejection off of the first zone as well as a reversal off of the 50% fib. If price breaks through the 50% fib, the next point of call for the downtrend to continue would be the 61.8% fib which lines up perfectly with the upper zone of the left shoulder.
On the 1 hour chart above, we can see that there has been a close below the key level of 106.000. Plotting a fib we can see there has been two wicks into the 61.8% level and both candles closed below the key level. Looking at the highlighted box, we can see price has been consolidating on the key level and we just had the breakout as well as a retest of the box. Price has been making spinning tops at current price indicating indecision in the market, if there is a breakout above the drawn box, wait for candlestick confirmation at the zones spoken about above on the 4 hour chart.
Later today, the US will be releasing their Initial Jobless Claims which has made slight improvements in recent weeks. The Philadelphia Fed Manufacturing Index will also be released which will be important to watch out for as a positive data release could provide some relief for the dollar which could push this pair slightly higher into the above mentioned zones.
Remember to always be patient and wait for candlestick confirmation. Only take trades which line up with your personal trading plan. Subscribe to receive updates sent directly to your email.
Today, we’ll be looking at the Euro versus the New Zealand dollar for a potential move to the upside into and possibly through the monthly key of 1.82000.
Plotting the fib on the 4 hour time frame we can see that there was a wick into the 78.6 and a reversal off of the 61.8 followed by a very discreet higher high.
Dropping down to the 1 hour time frame, it’s clear that a higher high was formed. Now, plotting the fib to look for the potential higher low we can see that the 61.8 lines up nicely with the ascending trend line. To add another confluence, take a look at the highlighted region where we could have a potential inverse head and shoulder form if the lower high is created in the 61.8 region.
With today marking the seventh and last scheduled round of Brexit negotiations, it’s accepted by both parties that a deal will not be reached as soon as today with issues such as fishing rights still left to be agreed upon. The UK has ruled out extending the deadline until December 2020 with the hopes of an agreement being reached in September when talks are set to resume. Be on the look out for any significant updates regarding these negotiations later today.
Remember to wait for candlestick confirmation and always practice the correct management when executing trades.
Knowing what to expect in terms of news events for the week is crucial when trading as it gives you more insight into the market direction with the specific pairs you are trading.
US and China postponed trade talks that were planned for the weekend past. They were supposed to review the progress made on their phase one trade agreement, but the meeting date has been pushed back indefinitely. In terms of dollar news for the week, the Month over Month Building Permits will be released tomorrow. This is a key indicator of the demand in the housing market. On Wednesday, the Crude Oil Inventories will be important to consider when looking at any pairs that correlate with oil. The outcome of Wednesday’s FOMC Meeting Minutes will be worth noting as this is where stimulus and monetary policy decisions are made. On Thursday, the Philadelphia Fed Manufacturing Index and Initial Jobless Claims will be important to consider as well. Lastly, be watchful of the PMI data as well as the Existing Home Sales which will be released on Friday.
The Japanese yen saw its sharpest recorded contraction in GDP this morning with a 7.8% contraction Quarter over Quarter as well as a 27.8% contraction Year over Year. Their export data will be released on Wednesday and the only other news coming out for the yen this week will be their National CPI as well as the Services PMI coming out on Friday.
South Africa will be posting their CPI data on Wednesday. With alcohol and tobacco sales resuming as of tomorrow, we can expect the rand to gain strength over the next few weeks. It’s estimated that the country has lost around R6 billion in taxes due to the banning of cigarettes.
The Eurozone will be releasing their CPI data on Wednesday and their PMI data on Friday. They will also be publishing an update on their monetary policy on Thursday.
The UK’s CPI data is being released on Wednesday and their Retail Sales data which is coming out Friday.
Gold is currently trading at $1952/oz, Silver at $26/oz and USOIL around $42 per barrel.
Remember to always stick to your trading plan in order to ensure defensive money management. Hit the subscribe button to receive updates sent directly to your e-mail.
USDJPY has recently closed above a major key level for the first time since the end of July. Below, I’ll do a top down analysis on this pair starting at the daily time frame.
Looking at the chart above, we can see that we’ve recently closed above the major key level of 106.500. Looking at the highlighted box as well as the upward and downward pointing arrows we can see how this level has been providing support as well as resistance.
On the 4 hour chart, we have a descending trend line plotted that was just broken above for the first time since the end of June. A 4 hour candle closure above the trend line indicates potential for further upside movement.
Looking at the 1 hour time frame, we’ve had a few rejections of the trend line already and price is currently retesting. Plotting a Fib on the 1 hour time frame, we can see that the 61.8 is offering some resistance. Look out for candle stick confirmation above this trend line to validate this trade set-up. If price breaks below the above trend line, the 78.6 as well as the major key level of 106.500 would then be the next levels of support.
Remember to always stick to your trading plan and always use the correct risk management. Hit the subscribe button to receive updates sent directly to your email.