FXML’s Forex Signals Analysis of December 8-14, 2014

Hello again Forex traders wherever you are located. We closed the second week of December and the cold has really kicked in over northern hemisphere.
It looks like the December weather has clouded our trading as well.
We ended another week in loss, making this the fourth loosing week in more than a year which is tolerable and not uncommon at all in this industry.

The market this week

Since the waning of the 2008 financial crises began in the summer of 2012, the currency market has quieted down and has been pretty dull, trading in 30-50 pip ranges on normal days.
But during the last two months we have seen the volatility intensify. This week was no different, with 100-200 pip daily average range on most crosses. The daily trends have been strong and the retraces have been shallow. The biggest highlight of the week was petrol/oil, as it fell more than 10 dollars closing around $57 per barrel even though the USD has showed weakness this week. The currencies of oil rich countries have fell in their backsides, with Canadian Dollar on a constant downtrend and Russian Rubble getting massacred the entire week.
The Japanese Yen has seen a relief rally this week. It started the week at extreme levels,
around 121.80 last Sunday evening, but finished 300 pips lower this Friday.
Does anyone remember when this used to be one of the most boring pairs to trade?
That´s not the case anymore, the average daily range for this week was 150-200 pips.
We´ll cover this pair in the analysis section. EUR/USD showed similar behavior this week making 120-150 pip daily movements with very shallow pullbacks. GBP/USD followed the pack during the first part of the week making a 220 pip range on Monday but it calmed down as the week progressed.
After the gold referendum last week in Switzerland, traders were waiting that the SNB would pull the rabbit out of the hat after their meeting this Thursday. The market was expecting that the SNB would introduce negative rates, same as the ECB has shown, or at least to give some clear signs about another possible intervention in its currency during the statement press conference. But none of these expectations materialized and EUR/CHF crawled ever closer to the 1.20 peg.

Economic data

The economic calendar this week was somewhere in the middle, with not too many important events but there were a few.
One thing that I noticed is that the action in the Forex market has not been affected much by the data and the trends have been stubborn in a one way direction. On Monday we saw the Chinese trade balance pick up, but the components such as imports and exports both fell.
No impact on the commodity currencies though. On Tuesday we saw the UK manufacturing production fall into negative territory month on month. GBP/USD wobbled lower but it resumed its uptrend a couple of hours later. On Wednesday the Chinese inflation came below expectations but that´s probably due to lower energy prices, therefore there was no impact on the market either. In the evening the New Zealand central bank press conference and rate statement sent NZD surging 160 pips higher. As we mentioned above the SNB conference was on Thursday, but it didn´t deliver what the market was expecting and the EUR/CHF dropped as low as 1.2005. The ECB LTRO program was out an hour later. It was below expectations and that´s supposed to be Euro positive as it means less Euros in circulation but it went unnoticed by the Euro crosses. Then, by midday we had the US retail sales and unemployment claims, both better than what was expected and that was one of the few pieces of data that correlated with the currency moves this week. On Friday morning the Chinese industrial production came at 7.2% from 7.7% a year ago, confirming the slow down on the global economy. In the afternoon the University of Michigan consumer sentiment reached the highest point since 2007 at 93.8, but that didn´t really help the dollar.

Signals

You have witnessed our performance this week and again it wasn't good, I'm afraid.
At minus 48 pips, it doesn't sound as terrible as last week but we´re supposed to help you make money, not lose it. There´s still about ten working days left till the end of December taking into account the holidays where the markets are closed, so we hope to get back to positive territory. 
But even if we don´t, this will be the first month in more than a year where we end up losing and we know that losing months are not uncommon in this business. 
One of the main reasons for this is the strong trends. We have been trying picking tops and bottoms, which is fine in range trading, but it doesn't work in trendy markets. 
So, we´ll reevaluate our strategy and hope for the best.
We have issued 35 signals this week, which is more than the weekly average. Most of them have been in EUR/USD and GBP/USD as usual, but we have also covered other currencies like CAD, AUD, NZD etc. 
We had two long term signals on USD/JPY hitting profit targets, so we had a sort of revenge on this pair from last week´s long term losing signals. 18 out of 35 were losing signals, hence the loss. 

Pair analysis

EUR/USD were in a strong uptrend this week, which is in itself a correction of the broader downtrend. Thursday was the only bearish daily candle, but Friday followed as an outside bullish engulfing one, meaning that the uptrend might continue. Right now we are right below the 1.2500-50 resistance and the Stochastics are reaching overbought levels. This might be a good opportunity to open a long term sell position, since whenever the Stochastics have touched overbought levels, the pair has resumed the downtrend. But we´ll wait for a confirmation, because the US dollar has been showing weakness this past week.

Price getting close to resistance and the Stochastichs nearing overbought levels.

Moving averages providing support and resistance during the uptrend. 

Good opportunity of buy based on 100 MA and oversold Srochastics

USD/JPY has traded the same as Euro, but on the other direction and with more intensity.
After all that spectacular uptrend a correction was due and looking at the daily chart the correction might have happened, because the price touched the 20 exponential MA on Wednesday and Thursday, but looks like it has been rejected. Also the Stochastich just reached oversold levels. We had two long term sell signals on this pair earlier this week and we might consider opening a long term buy signal, but we´ll consult the H4 and hourly charts as well to get a better entry point in order to minimize the risk and maximize the profits. 

In Conclusion

As we head into next week, there are a few important events to take into consideration.
First, the Japanese elections on Sunday. This is very important for Yen pairs because Prime Minister Abe and his policy on monetary easing to aid the economy are at stake. 
If he is not re-elected, the QE program will probably stop and the yen will surge.
It will be vice versa if he gets re-elected, but with less impact since most of it might be priced in. The other main event is the Fed statement this Wednesday. The market is expecting that they give clear signals about moving forward with the interest rate hike agenda, so we should keep that in mind too.
We wish you good luck next week and a happy week to us all.  

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.