Forex Analysis of May 26-30, 2014
Our experts trade Forex and analyze trends on many different markets each and every day. This is an analysis of the activity of the passing week of the most interesting and influential currency pairs available on the market.
Every day our experts pick two currency pairs and explain their analysis and the trades that they chose to make including their explanations and reasoning.
Forex Analysis – May 26
Today is a bank holiday day in Britain and the US. Nearly half of the world’s FX trading is carried by institutions, banks, hedge funds, pension funds, investment funds, etc. based in the UK, especially in London and almost 20% by institutions in the US, so the liquidity and volatility will be extremely low today. Retail traders usually don’t trade in these conditions and consider UK bank holidays as a day off. For those of us who have to trade even during these days, the best plan is to look for patterns on 5-15 min charts and find 10-15 pips scalping opportunities.
In the AUD/USD chart below, we have a slight uptrend channel with price ranging from 0.9230-35 to 0.9250. Trading channels is usually pretty easy, buy the bottom and sell the top. Near the edges there are long wick candles suggesting buying/selling pressure. That’s the time to jump in. Additionally you can wait for overbought levels in Stochs and RSI.
AUD/USD 15 min chart – hard to miss the plentiful scalping opportunities.
The charts below are for EUR/USD. The 4 hour charts shows that the price is nearing overbought levels according to Stochs. This level has been support for this pair during the last two weeks, so we’re hoping that it now turns into resistance. By the doji and inverted hammer candles on the 4 hour chart, we can see that it is struggling to break past this point, but that said, we should keep in mind that today is bank holiday and there’s not much willingness or guts out there to stretch the moves. Also, at 1.3650 comes the 20 MA, adding a little extra pressure on the top.
On the hourly chart, the second below, we can see some divergence between the price and the Stochs, but on such a quiet day that sort of pattern doesn’t really play out, just keep in mind anyway. We took a short at this level with stop above 1.3675 hoping it will go our way.
EUR/USD 4 hour chart – price nearing overbought levels according to Stochs.
EUR/USD 1 hour chart – divergence between the price and the Stochs can be seen.
Forex Analysis – May 27
Today’s analysis will concentrate more on the psychological aspect of trading rather than the technical or fundamental aspect. EUR/USD and GBP/USD have been grinding higher during the last 1-2 days and especially during the Asian session. On this basis, my plan this morning was to buy dips. First my eyes were on the Euro. I opened my first long on this pair around 8 am GMT where the first black mark is. Technically it looked right at the moment, since it was kind of oversold, the yellow 50 MA was holding on first attempt, the previous candle closed as a hammer and the 1.3640-ish level has been support and resistance during the past three weeks. As seen in the chart the level didn’t hold, which didn’t make much sense and I got whacked. Then I took a long again in the afternoon at the second black line, but the price continued to slip further.
EUR/USD 1 hour chart – 50 MA shown by yellow line.
GBP/USD was in a short term uptrend as well, especially during the Asian session. After missing a short this morning around 1.6880, I was looking for short term trades on pullbacks here as well. I entered long around 1.6840 where the first black mark is at 10 am GMT, because of the resistance this level offered and because there’s a confluence of moving averages. It went down quite fast, and another stop hit. Then I entered long again at the very strong trend shown by blue line, dating back a year. And down it went again, but missed my stop by a few pips. I entered long on AUD and NZD against the USD and was underwater on everything.
I couldn’t figure out what was going on, the only thing I knew was that I was on the wrong side of everything. That line alone tells the story and the basic rule of trading, don’t try to figure everything out, just go with the flow.
Today during the European and US sessions it was all about dollar strength. I later learned that gold broke some pattern and was falling like it has no life in it, causing all the cash to go on the USD side. And here I was trying to catch the falling knife, not once, not twice, but several times. Now all pairs have bounced against USD and my positions look a bit better, but lesson learned for today.
Everyone in this business knows the saying that the markets can stay irrational longer than you can stay solvent. On the other hand, we do have to have some sort of a plan related to technicals and fundamentals, but we should adjust as well. Trading is an ongoing struggle and every day we learn something new, it doesn’t matter how long you’ve been in the business. All in all, what doesn’t kill you makes you stronger, so don’t trade too heavy and you won’t kill your account in a few trades.
Forex Analysis – May 28
Following yesterday’s analysis, where we were caught on the wrong side of the trend, we tried to get on the right side today by only looking for shorts on GBP/USD, so lesson learned. Same as yesterday, today the downtrend is very strong. The stronger the trend, the smaller the timeframes should be because bounces are very small and they turn into sellers pretty quick.
So we changed the chart to 5 min and 1 min. Also, in strong trends the smaller moving averages offer resistance/support, like the 20 MA in grey below. Looking at the 5 min chart, there were several opportunities to short on the first half of the day, where the 20 MA rejected the price. Later during the afternoon, using the 1 min chart, there were more opportunities on the short side. These opportunities marked in black can be utilized for scalping. If you are more adventurous you can add on to the shorts on every attempt at the 20 MA without closing them, until you reach a level you find reasonable.
Looking at EUR/USD, the first chance to hop on the train heading south was at 6 am GMT, around 1.3630, again rejected by 20 MA. This level used to be a support and now has turned into resistance. Same as in GBP/USD, in strong trends we change to shorter timeframes, this time using the 15 minute chart. Looking at the second chart below there were three opportunities to short the pair with considerable profits to be made.
Forex Analysis – May 29
The last two days have been a constant downtrend. When I started the day today, after having a look at the EUR/USD chart, the first thing to do was to figure out if the downtrend was going to continue or not. After two days of sliding, the move looked a little exhausted and I thought that today might be a consolidation day. That idea became clearer after the first test of yesterday’s bottom and the failure to break it. Figuring out at the start of the day what kind of day it will be, whether it will be a trend or a consolidation is something that really increases your chances of having a winning day.
But said and done is a world far apart. The best thing to do on consolidation days is to trade the range/channel. The top of the range was 1.3620s and the bottom was yesterday’s bottom. As seen in the chart below, there were several possibilities to trade within a 25-30 pip range that could have resulted in a good 90 pips profit with a little help from the RSI and Stochs. I took a couple of these chances and came out in the green.
USD/JPY is in a downtrend also. From the chart below we can see that two days ago it was struggling to break the 102 mark and the yellow 50 moving average, which has acted as resistance before. I spotted this two days ago and took a short around 102.00. We can see that Stochastichs were overbought and RSI was heading down. Adding to that, the previous two days’ candles closed as dojis, which is a reversal sign.
So the best thing to do today is to look for short trades. On the 4 hour chart below we can see that the green 100 moving average has acted as resistance and support and it is calling the shots today. So reason tells us to take shorts at that level, around 101.75-80. To get a better entry we look at the 1 hour chart. After the doji and rejection by the 100 smooth moving average at 13:00 GMT, there is a good opportunity to place a short. The Stochs and RSI are nearing overbought levels too.
Forex Analysis – May 30
Continuing with the coverage of the GBP/USD, we have seen the decline from the highs of 1.70. From the daily chart below we see how the price has been going down in waves. The blue trend line provided support on the first leg down and after a retrace higher, it gave way on the second leg down. Looks like right now we might be at the end of this wave and at the beginning of another retrace higher, possibly to the trend line.
Yesterday, after two days of steep decline we saw consolidation and failure to break the previous day’s low and the daily candle closed as a doji. This is the sign of exhaustion and that we can expect to see a move higher as I mentioned before. Adding to that is the fact that there might be some profit taking on the shorts before the end of month and week, which will push the pair higher
Looking to ride the retrace up, we change to the 1 hour chart to have a more detailed look and to find a better entry. As we can see, yesterday the price was ranging and today it broke the yellow 50 MA. Then it came back to test the same MA, which held its ground. After making a sort of a doji on the H1 chart and both RSI and Stochs, that would be the best time to jump in on the long with the best risk/reward ratio and hope we see a decent retrace.
The daily chart below shows NZD/USD moving lower and breaking the resistance around 0.8510-20. The fall was contained by the green 100 Moving Average and yesterday’s candle closed as a pin. It slowly crawled higher for the last hours of the US session yesterday and during the Asian session today it hit the 100 MA on the 1 hour second chart below, which comes at the same level as the support now turned resistance.
A good opportunity is to short it after the pin on the H1 chart at 6 am GMT with stop above resistance. There is also divergence between the Stochs and the price which supports the short on the hourly, but because the pair is severely oversold on the daily, the profit target should be realistic and modest since a retrace is overdue.
Further Reading
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
- Read our latest reviews on: Avatrade, Exness, HFM and XM
