Looking at the Euro versus the Yen, price has pulled back significantly since printing the post crisis high of 127.07 on September 1st. Below is a top down analysis of this pair starting on the daily chart.
On the chart above, we can see a fib plotted from the start of the most recent bullish drive to the most recent high, price has come 10 pips short of the 61.8. We can also see by looking at the candlesticks that price has begun to slow down around this level and if this significant fib level can hold as support, we can expect a move to the upside but if price breaks below, I would look at the next fib level to offer support. A bullish engulfing candle closure on this time frame, however, would offer further confluence.
On the 4-hour chart above, we can see that at market open we had a push below the parallel channel drawn with the current candle driving price back above the channel.
On the hourly chart, we can see that price is looking to break structure. If the current candle can close above 122.840 that would confirm a break of structure to the upside. Using the fib tool, I would then wait for a retracement into the horizontal ray which illustrates a potential inverse head and shoulder pattern and also lines up with the parallel channel which has been acting as dynamic support since September 21st.
With the Brexit deadline two and half weeks away, chief negotiators on both sides – Lord Frost for the UK and Michael Barnier for the EU – are set to oversee this week’s Brexit discussions before the formal meeting takes place on Friday. Failure to reach a deal by the deadline would result in the UK and EU adopting World Trade Organization (WTO) rules instead of having a free trade agreement which is what the UK are hoping for. Under the WTO rules, tariffs would be applied to most goods which UK businesses send to the EU, making UK goods more expensive and harder to sell in Europe, vice versa.
Remember to always stick to your trading plan and always use the correct risk management. Subscribe to receive updates sent directly to your e-mail.
Today we’ll be going through the lower time frames on the U.S. dollar versus the Canadian dollar. With price continuing to create higher highs and higher lows, let us look at a potential long set-up.
On the 4 hour chart above we can see that the neck line of the inverse head and shoulder as well as the descending trend line was broken with price beginning to break to the upside again now after consolidating around the 1.33000 area.
On the 1 hour chart, we can see that the bullish momentum is continuing with the most recent candle printing a bullish engulfing creating a higher high on this time frame. For the best possible risk to reward, I would wait for price to create a higher low around the 61.8 fib level which will also provide a retest of the neck line area as well as the descending trend line. If price continues to create a new high without any retracement to the desired level, it will invalidate this set-up.
Remember to use correlating pairs to your advantage and to always wait for candlestick confirmation before entering any set-ups. Subscribe to receive updates sent directly to your e-mail.
The Bank of England decided to hold bank rates at 0.10% but also discussed the effectiveness of negative rates which has seen the pound fall significantly in the last two hours.
Looking on the 4-hour chart above, we can see there was a pullback into the 78.6 as well as the key level of 1.30000 where price printed a doji and continued to fall 130 pips lower.
On the 1 hour chart above, we can see that price was trading above the ascending trend line and a reversal can be seen just short of the 78.6 where price continued to fall lower, closing below the trend line and hitting the first take profit area. Looking at the highlighted region, we can see that price is currently trading near a pivotal support/resistance area with the retest of the trend line also a potential area for resistance.
The Bank of England is expecting the third quarter GDP to be 7% lower when compared to the fourth quarter GDP of 2019.
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U.S. oil prices have dropped since the beginning of last week as oil stockpiles in the US rose significantly. The weakening demand can be attributed to the coronavirus pandemic and although U.S. refineries have only gradually returned to operations since storms caused shutdowns around the Gulf of Mexico region, U.S. crude inventories still rose to 2 million barrels and it is expected that oil will see a further slump in price next week.
Looking at US dollar versus the Canadian dollar above on the daily time frame, we can see price bottomed out around 1.30425 and plotting a fib from the opening candle of this week until the high, we’ve had a rejection off of the 61.8 which lines up with previous support and resistance shown by the highlighted region.
Dropping down to the 4-hour chart above, we can see that the highlighted region also illustrates a potential inverse head and shoulder pattern. We could see a push down into the right shoulder region again coinciding with a 3rd touch of the trend line but with the U.S. CPI numbers coming out positive it is unlikely that will be achieved. The right shoulder area would’ve offered the best risk to reward but dropping down to a lower time frames can offer more opportunity.
On the 30-minute chart above, we can see how there was a lower time frame move off the 61.8 as well as a break and retest of the counter trendline drawn where entries could have been scaled in. 1.32000 has proven to be a key level which could offer support if price can break and close above that area.
Remember to always use correlating pairs to your advantage and follow the fundamental events of the pairs you are trading to add confluence. Hit the subscribe button below to receive updates sent directly to your e-mail.
There were 4 key monetary policy decisions made today at the ECB’s Monetary Policy Meeting. It was speculated that the ECB would consider cutting interest rates in order to combat the deflation that was seen in August, but the decision has been made to hold rates for now, therefore confirming their accommodative monetary policy.
The interest rates on the main financing operations, the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively, which shows the ECB still has faith in the economy bouncing back from August’s poor inflation rate which came out at -0.2%. The negative inflation rate tells us that low demand in most industries are forcing European factories to cut prices in order to remain competitive in their respective industries. It is clear the ECB are looking to keep the key interest rates at their present or lower levels until the inflation rate converges sufficiently close to the projected level of 2%.
Quantitative easing will continue under the pandemic emergency purchase programme (PEPP) with a total of 1,350 billion euros. This has been put into place to offset the downward impact of the pandemic and to move towards the projected path of inflation. The Governing Council will conduct net asset purchases under the PEPP until at least the end of June 2021 in order to support the economic recovery.
Net purchases under the asset purchase programme (APP) will continue at a monthly pace of 20 billion euros, together with the purchases under the additional 120 billion euro temporary envelope available until the end of the year. It is expected that monthly net asset purchases under the APP will continue as long as it’s necessary to reinforce the accommodative impact of their policy rates, and to end shortly before the ECB decides to raise their key interest rates.
The Governing Council will continue to provide ample liquidity through its refinancing operations in order to support bank lending to firms and households. Overall, the ECB have chosen to keep their current monetary policy in order to stimulate economic growth as lower interest rates can encourage borrowing and investing which can subsequently push the inflation rate to their desired target.
With the ECB president, Lagarde, playing down the worries about deflation, we’ve seen EURUSD push to 1.90 for the first time in over a week and is moving towards the two year high of 1.20 which was achieved on September 1st.
Following fundamental events can be extremely beneficial to your trading style as it gives you an extra confluence and an overall directional bias on specific pairs. Remember to always stick to your personal trading plan and always use the correct risk management. Subscribe to this blog below to receive updates sent directly to your e-mail.
Welcome to another blog by AspireFX, today we will be covering what has taken place with the euro versus the yen since the last blog post.
Starting on the 4-hour time frame with the same zones drawn in as the previous post, I was anticipating a move into 126.000 which was achieved as we can see by looking at the downward pointing arrow. Looking at the upward pointing arrows, we see how the lower zone held as support leaving another two wicked rejections with price closing around the upper zone that was shown. After the second wicked rejection of the zone, price went on to create a higher high and the last rejection closed as a hammer leaving a huge wick to the downside. Looking at the fib drawn, we can see that the 78.6 retracement is still valid, and we could still see upside on this pair, however price has been consolidating around this area.
On the 1-hour chart above, we can see price has been struggling to break the resistance of 126.000 as well as the support of 125.300 so it’s clear that this pair is currently trading between a 70 pip range. Looking at the fib drawn on this time frame, we can see that the 61.8 lines up nicely with the previous support area and the current candle is attempting to engulf the previous one. At market open, price failed to make a higher high so we could see another move into the lower zone if the current zone fails to hold as support.
From a fundamental perspective, there will be GDP releases for both the yen and the euro tomorrow morning which will be very important to consider. The yen revised GDP for Q2 is forecast lower as there was a downward revision in capital expenditure meaning businesses and organizations spent less money acquiring/maintaining fixed assets. Household Spending in Japan for July will also be released tomorrow. Brexit talks will resume tomorrow as well, with the latest statement out of the UK saying that if a free trade deal is not reached by 15 October, both parties should move on as they have still not come to an agreement on key points such as fishing rights and state aid.
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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.
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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.
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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.