FXML’s Forex Signals Analysis of July 28 – August 3, 2014
How did the divergence between the Stochastics and the price affect the price action of USD/CAD?
Why did the bad data out of US have no effect on EUR/USD?
These questions and many more will be answered in our weekly Forex signals analysis.
FXML’s Forex signals analysis of July 28, 2014
USD/CAD has been in an uptrend for about 18 months. There was a retrace the last 3-4 months which seems to be over now. At the beginning of last year the red 100 smooth moving average on the weekly chart acted as resistance and once broken it turned into support. (Read more about Support and Resistance levels). Now the retrace didn't even reach that MA, which indicates that the uptrend is not over yet and bound to resume. The weekly candle 4 weeks ago closed as a doji which indicates a reversal and so it went. Two weeks ago a reverse pin formed on the same chart which indicates the opposite, the reverse to the downside, but that didn't happen and last week's candle closed very bullish. So the end of the retrace is confirmed and we can say that whoever is on the long side is on the right side.
The break of the trend line on the daily chart, which stands now at 1.0780, is another indicator of the continuation of the uptrend. (Learn about 'Trend Lines' and how to spot them). We are now at the 200 smooth moving average, which has provided some kind of support during the retrace and that might be a bit of a hassle, but once breached, we have a clear way to the 1.1270s. Whoever took a long trade after the candle 4 weeks ago did well, since the risk/reward ratio was great. With a stop below the lows of the weekly doji about 30-40 pips and a potential target of 1.1270, the risk/reward at that moment was 1/18. I didn't spot it at the moment, so I missed it. Instead I took a small short just below the trend line last Friday with a 30 pip stop, which was overrun. That teaches you, me in this case, that only one indicator like the trend line isn't enough. I should have waited for a confirmation from another indicator.
USD/CAD weekly chart – The weekly candle 4 weeks ago closed as a doji which indicates a reversal.
USD/CAD daily chart – The break of the trend line, which stands now at 1.0780, is another indicator of the continuation of the uptrend.
USD/CAD 4 hour chart – we are now at the 200 smooth moving average, which has provided some kind of support during the retrace.
GBP/USD's short term downtrend, which is a retrace of a bigger uptrend, has continued last week and on Friday we had a doji candle on the daily charts, just above the 50 moving average coming at 1.6960. That indicates a reversal and a continuation of the uptrend, but today we had no follow up to that scenario and it looks like it's going to close as an inverted pin. The price had a few pops to 1.6990 but the sell off around that level has been constant, which is a confirmation that 1.70 has turned into resistance now.
Technically the chart screams long, but there's a heavy feeling to this pair and the market sentiment is more to the downside right now than to the upside. On the H4 chart, the 20 moving average is acting as resistance as well around 1.70. Notice that the stronger the trend is, the more the smaller moving averages come into play. On the bottom side we have the 50 MA around 1.6960 and if it goes then this might stretch to 1.69 or even further.
GBP/USD daily chart – doji candle on Friday indicates a reversal and a continuation of the bigger uptrend.
GBP/USD 4 hour chart – the 20 moving average is acting as resistance around 1.70.
FXML’s Forex signals analysis of July 29, 2014
USD/JPY started an uptrend at the beginning of last week after touching the 100 daily smooth moving average around 101, which has proved to be a tough nut to crack. This pair has been in a range between 101 and 102.30. It made a reverse pin two days ago at the 50 daily moving average but that didn't change the direction and it continued up yesterday and today. Right now we are just above the 100 daily simple moving average and if we close below it I might consider a short around here with stop above 102.30 ant take profit near the 100 smooth MA. That said, we have the US GDP data tomorrow, so I'll wait till then to see how it will be. If it misses expectations, I'll jump in quickly on the shorts, if it doesn't then I'll reconsider and see the price action.
EUR/JPY has been in a downtrend for three months, since the ECB bomb conference in early May. This has been mainly due to the Euro weakness rather than to Yen strength, because as we pointed on the previous analysis today USD/JPY has been playing the range. On the daily chart we see that we are in a consolidation mode right now, which might turn into a retrace. On the 4 hour chart we see the yellow 50 moving average providing resistance on the move down, but that's been breached now and has turned into a support. That chart shows that the retrace might well be under construction, but we need to break the 100 smooth moving average on the hourly chart first, while the 50 and 100 simple moving averages are providing support on the same chart.
FXML’s Forex signals analysis of July 30, 2014
We are in the second wave of the EUR/USD downtrend. The first wave started at 1.40 and dropped 500 pips reaching 1.35, then we had a correction to 1.37 and from there we started the second wave and are now 300 pips down just below 1.34. The red 100 smooth daily moving average provided some support last week but gave way this week and finally the pair broke clear of it and the 1.34 level this week, as we can see from the weekly chart. We had the GDP data at 1:30 GMT today and the numbers were really surprising, so USD rallied and the pair dropped to around 1.3360 which can be seen in the hourly chart. But the 30 pip fall from where it was prior to the release was pretty slack given that the numbers were really good, exceeding expectations by far.
But this was mainly because of the FOMC Statement later today and the market was weary of Yellen's dovish attitude. And indeed that dovish attitude showed during the Statement at 7:00 pm GMT so the pair rallied 30 pips and erased the drop from the GDP data. After that we reached 1.34 but were unable to break it, so this level might turn into resistance near term. We see a pin forming in the H4 chart, which suggests a possible reverse, but I didn't enter long because in such occasions with important fundamental data close, the technicals aren’t that reliable.
All in all with great GDP numbers and less hawkish FED contradicting each other we are in a consolidation mode right now, at least until tomorrow's unemployment numbers, then we'll see if the pair will continue the down move or make a retrace to 1.35.
The Stochastics on the weekly chart of USD/JPY were near oversold area two weeks ago when the pair touched the 50 weekly moving average, which has provided support before and it provided support this time again. That weekly MA was around the same level with 101 support and the daily 100 smooth moving average. The pair has moved up the past two weeks.
Today we had impressive US GDP numbers, but unlike EUR/USD which only had one bearish hourly candle, USD/JPY had 4-5 bullish ones and that means that the Yen is softer than Euro right now. This can be seen by looking at the hourly candle during the FOMC Statement as well. Euro had a 30 pip bullish candle erasing the post GDP fall, while this pair closed where it opened, highlighting the weakness. So the best thing to do right now in my opinion is to look for EUR/JPY longs. .
FXML’s Forex signals analysis of July 31, 2014
We've seen the latest slide in GBP/USD since the rejection near 1.72. We can see in the weekly chart that whenever the Stochastics and sometimes RSI reached the overbought zone highlighted by the black marks, the pair had a retracement. From where we stand now, we cannot say for sure if this is just a retrace or maybe a trend reversal.
The bottom channel trend lines have been broken, but both the US and the UK are doing pretty well so fundamentally it's unclear. Looking at the daily chart, we see the 50 moving average providing some mild support but it let go a couple of days ago and as I mentioned back then the pair had a heavy feeling, so it kept going down to reach the 100 MA today around 1.6850. Tomorrow we have the UK Manufacturing data and US Nonfarm Payrolls, so I'll stay clear of this pair until then.
USD/CAD has been in an uptrend during the past month erasing the previous month's losses. The price broke the simple 50 moving average and the 100 smooth daily MA on Monday and it broke the 100 simple MA yesterday after the US GDP numbers. Today, after the release of the US Unemployment Claims and the better than expected Employment Cost index, other currencies lost ground against the USD, but at the same time we had the Canadian GDP which came out at 0.4% vs. 0.3% expected.
This contained the pair from moving up, so after the initial jump it came down and right now it's where it opened. If it closes like this, there's a chance we might see a retrace of the uptrend, but we'll have to wait and see the US data tomorrow. We see divergence on the H4 chart between the price and Stochastichs and RSI and on the hourly the price went down after making an upside-down pin, but the move down has found support at the 50 moving average.
FXML’s Forex signals analysis of August 1, 2014
We had a GBP/USD analysis yesterday and we'll cover it again today to see the follow up and how it went according to our analysis. Yesterday the 100 moving average on the daily chart provided resistance and contained the pair from moving further down. But we see that today that moving average has been broken and if the price closes below that, the ultimate big level to target is 1.67. We had the UK manufacturing data this morning and as I've said before the risk is to the downside on this pair right now, because the market is used to better economic data so it isn't easily impressed. But worse than expected data, even if it is good data, will send this pair lower. That was the case today, the numbers were good but not as good as was expected, so the pair fell about 50 pips as we can see on the hourly chart, even though the manufacturing sector only accounts for about 11% of the UK economy.
I have mentioned on previous analyses that the stronger the trend, the more the smaller moving average act as support/resistance. We can see on the 4 hour chart that the grey 20 moving average has been providing resistance on small pullbacks during the downtrend, so there have been multiple chances to short GBP/USD at the 20 MA or close to it. The same moving average has been resistance on the hourly chart.
Yesterday morning there was a good opportunity to short it around 1.6920 when it made a reverse pin just above the 20 MA and the Stochastichs were overbought. I missed that chance but got in on the second opportunity at 1.6890 during the afternoon session and managed to pocket some 50 pips.
We had the US data out just now and it was worse than was expected. The Unemployment came out 0.1% higher, Nonfarm Payrolls 22,000 less, Average Hourly Earnings 0.2% less, Core Inflation 0.1% lower. On this news you'd expect EUR/USD to make a big move up, but it only jumped about 35 pips to come back down to where it was before the release. This shows that the market is long USD and the rallies in this pair are sold. Like we mentioned on the GBP/USD analysis above, the stronger the trend, the more the smaller moving average act as resistance/support, and we can see on the 4 hour chart that the grey 20 MA has done a god job of providing resistance on pullbacks, therefore opportunities to get in short on this pair.
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