FXML’s Forex Signals Analysis of September 8-14, 2014
Short summary of last week
Last Friday we wrapped up our weekly analysis at noon and the pip profit at that time was around 145 pips. As was mentioned there, we had a few more open signals and as the day progressed we cashed in some more pips and finished the week with a nice 204 pip profit and 28 signals in total, which is around our average weekly, so we closed the week in full confidence.
The market this week
This week has been really volatile with some nice moves, which better suits our method of trading. USD made significant gains against the Yen, breaking last year's highs and trading in an area not seen since 2008, prior to the financial bubble burst. I've heard many rumors this week and seen many traders trying to pick a top and getting burned. It's good we didn't try to predict reversal levels, but too bad we couldn't get in on the long side and ride some of that trend, we just stayed aside and let this pair do its thing this week.
The financial world's attention this week was focused on the Scottish referendum for independence and GBP/USD has definitely been in the spotlight. There were numerous polls coming from all kinds of sources which affected this pair and led to some hectic moves. We had one short-term signal and a long-term signal opened last week on EUR/CHF around 1.2060 with the idea of the 1.20 floor imposed by the Swiss National Bank in mind. On Wednesday the SNB moved rates to negative and our scenario played out with a nice profit on both trades. We still remained long biased and opened two more buy signals this week on this pair with the rumors that the SNB will increase the peg to 1.25 next meeting.
We didn't have many important news items from Euro zone this week and EUR/USD traded in a range between 1.2960 and 1.2880, so we took advantage of that and traded the range which we'll analyze in more detail in the pair analysis. Just like the Yen, the commodity currencies took a beating this week with USD/CAD finally breaking the 1.10 resistance, so it's good we stayed out of this pair as well, and didn't short at 1.10. The commodity currency dumping was perfectly illustrated when we had the Australian Employment Change Thursday morning, adding 121,000 jobs versus 15,000 expected and the Unemployment Rate falling to 6.1% from 6.4% the previous month. AUD/USD jumped some 60 pips on the good data then it resumed the downtrend falling more than 300 pips for the week. This is a clear sign that the sellers are in control on commodity currencies, so if you're planning to trade them, better wait on a retracement and then sell the hell out of them.
Signals
We broke a four month record regarding the number of signals this week, with 38 of them issued till now, two of which are still open. Once you get into a pair, you get the feeling and the moves of that pair in your blood so we concentrated mainly on EUR/USD and GBP/USD this week with more than 90% of the signals being on these two pairs. I'd like to point out again that a high number of signals/trades doesn't always correspond with a big profit and sometimes it even correlates negatively. So even though we had many signals out this week the profit until now is 111 pips, which is less than last week's 204 pips when we had only 28 signals.
Nonetheless this isn't a bad weekly profit and hopefully we'll get some more as the day progresses with some important US data due later today. We had 9 losing signals and the win/loss ratio for the week is 77%/23%. One of the main unsuccessful events, which reduced our profit by 60 pips was when we had two sell pending signals on Wednesday afternoon, when a few polls came out of UK and sent the cable flying more than 100 pips.
Pair analysis
EUR/USD 1 hour chart – EUR/USD was uneventful this week, trading in a tight range.
Because of last week's 200 pip decline following ECB rate cut, we kept a bearish outlook on EUR/USD, even though it hasn't made any substantial move lower this week. It traded in an 80 pip range so we decided to use range trading as our main strategy for this pair and it has made us proud, giving us 75 pips of profit as I type. When using this strategy the best indicators are support and resistance levels. We see the top line of the range on the hourly chart and that's where we took most of our shorts. I say shorts because all of our signals on this pair have been sell signals. We just didn't have the nerve to go against the main downtrend, as seen in the H4 chart and cut our hands trying to catch a falling knife.
EUR/USD 4 hour chart – the main trend is a downtrend so even though the price was trading in a range, we chose to sell at the top rather than buy at the bottom.
GBP/USD opened on Monday with a 55 pip gap which it hasn't been able to fill yet. We gave 16 signals on this pair but the profits have been minimal, only 8 pips profit this far. As we mentioned above, GBP/USD traded the Scottish independence polls most of the week. We got caught twice wrong footed by these polls costing us some 60 pips. At the beginning of the week the polls were showing a possible split of the once mighty United Kingdom and the pair was slowly declining. Then the percentage started to shift towards a “no independence” vote so the pair reversed and formed an uptrend, but the 1.6260-80 resistance prevented it from filling the gap.
GBP/USD 1 hour chart – this week started with a gap, and the price hasn't make it back up, at least not this week.
GBP/USD 4 hour chart – resistance at 1.6260-80 keeps the price below the gap.
All said and done, we still closed the week with 111 pips in profit. We've had many winners and a few losers, well you can't win them all otherwise everyone in this business would be a gazillionaire. We stuck to our strategy and it's made us a nice profit on one pair and a few pips on the other. Next week we might stay clear of GBP/USD because it is the week prior to the referendum, so the polls will drive this pair mad. Anyway we'll decide on the go. Regarding EUR/USD we still remain bearish biased but we might see a little correction up before the next move down. So keep a clear head and trade safe.
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