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Return to 61.8% could see shorting opportunities in EURUSD

thanhlangtu — Sat, 29 Oct 2011 06:32:38 +0000

Yesterday saw a relief rally in EURUSD following news out of Europe. Hindsight is always easy and finding the turning or stopping point in any market on days like that is a hard task. The price shot through the 50 percent Fib level of the May highs and October lows and and stopped on the preferred 61.8 percent level. Since then we have seen a fall away in the price. We may soon see a return to that level, which could offer an opportunity to take a short ahead of a Friday profit taking rally.

source from: tradingfloor

Big picture G10 currency charts

thanhlangtu — Fri, 09 Sep 2011 16:19:47 +0000

The charts below are for each of the G10 currencies versus an evenly weighted basket of the remainder of their G10 peers. The charts are small (as we work on updating the blog to allow links to larger graphics), but they nonetheless do cover quite a bit of ground – 2500 data points for each in fact, which hopefully gives an interesting perspective. Each of the time series starts at indexed 100 as of early February 2002. (The start point of the index changes with every refresh of the charts on a rolling basis.)

Note that the charts were cut before the last leg of the action in the early US session after the news that Stark will resign from the ECB (rumored because of disagreements on bond buying) and on news ECB will back off on penalty rates for banks accessing emergency facilities.

USD

The US dollar has been dropping forever – note that while the dollar index crossed the 200-day moving average, the USD/G10 basket has not yet crossed this important level, though it is trading at the highest level in months and may be confirming a transition to a bullish trend after the recent basing action and loss of downside momentum.

EUR

How ironic is it that, as the EU is experiencing its worst existential crisis to date, the Euro is back close to its lowest levels in years….which are also the lowest levels since the Euro was launched amid intense skepticism over the entire idea of a single currency back in 2002.

JPY

The JPY remains resilient and relatively strong – but will likely only be so as long as rates remain absurdly low and/or the BoJ and Japanese government steal a page from the SNB’s book on the intervention front

GBP

GBP is experiencing a bit of a revival on Euro misery and as its down trend has been losing steam for a long time. Could the market be getting too complacent on further GBP weakness?

CHF

The magnitude of the run-up and the subsequent reversal is breathtaking, but leaves us, amazingly, still poised above the 200-day moving average! There’s a lot more room for franc weakness if the SNB’s intervention project succeeds.

AUD

AUD is extremely overvalued if the Asian growth story in any way derails. The focus has been intense on Europe, but many risk appetite signals are flashing around the world, which are most often associated with Aussie downside. Aussie hasn’t been garnering sufficient notice.

CAD

CAD has been a relatively low beta currency over the years relative to some of its peers. It is generally out of favor now, but could put up a fight or at least avoid broad weakness if the US economy and USD prove stronger than the market is currently expecting.

NZD

The NZD bull market has enjoyed an Indian summer, but it may fade on the potential for an Asian hiccup and if the post NZ earthquake GDP bump fades in the months ahead.

SEK

The krona is gaining favor as a safe haven from Euro turmoil. It may rally passively for a while, but historically has a hard time if its export markets are threatened.

NOK

NOK is very credible as a safe haven from a fundamental standpoint and has room to rally further, but what point does the Norges Bank begin to rattle it saber when EURNOK is already at almost decadal lows?

source from: tradingfloor

Stock Market Volatility Reaches Twice the EURUSD

thanhlangtu — Sun, 14 Aug 2011 13:11:42 +0000

A look into the market volatility reveals forex movements are about half as volatile as the stock market. Therefore, choose to trade a pair that meets your volatility appetite.

The crash in stock prices we have seen in the past 2 weeks has created a significant increase in volatility. For the past 3 trading days, the stock market movement has seen little net progress though the daily trading ranges have hovered near 5%.

The chart above shows how the Average True Range (ATR) has tracked as a percentage of the price. So yesterday, the ATR value for the EURUSD was 205 pips and the closing price was 1.4239. Therefore, the calculation is :

.0205 / 1.4239 = 1.4% Average Daily Range

This means the average daily range is running about 1.4% of the price. When the percentage increases, that means volatility is increasing. The chart above covers the past 4 years of data so we can see how these percentages move during quiet and volatile market conditions.

The picture is fairly clear. The stock market has typically been a more volatile market to trade relative to the EURUSD. And lately, that volatility has picked up in stocks with less of an uptick on the EURUSD.

Since August 1, 2011, the EURUSD Average Daily Range Percentages have been running about 1.1% to 1.4%. During the same time period, the US30 (a CFD that tracks the Dow Jones Industrials) has grown from 1.6% to 3.6%. So the stock market is running about twice as volatile as the EURUSD.

In my webinars this week, I asked the listeners about how much volatility they like to trade. Depending upon your volatility appetite will depend on which pair you should consider trading.

The above chart lists the ATR percentages for the 7 majors. The USDCHF, NZDUSD, and AUDUSD show the most volatile pairs involving the US Dollar. The least volatile majors are the EURUSD, USDJPY, USDCAD, and GBPUSD. If you find yourself thirsty for volatile pairs, consider the CHF, NZD, AUD and their crosses with each other.

If you want less of a roller coaster ride in the market, lean towards the EUR, JPY, CAD, GBP and their crosses with each other.

Also, volatility in your trading account also depends on the amount of effective leverage utilized. Relatively less effective leverage will smooth out the peaks and valleys of the equity in your account. If you find the market upsetting your stomach, check the pair you are trading AND the leverage you are using.

source from: dailyfx

EUR/USD Weekly Outlook

admin — Sat, 09 Oct 2010 21:07:25 +0000

EUR/USD Weekly Outlook

EUR/USD soared to as high as 1.4028, just inch below mentioned target of 100% projection of 1.1875 to 1.3330 from 1.2587 at 1.4042. A temporary top is in place and initial bias is neutral for some consolidations first this week. But downside is expected to be contained by 1.3636 support and bring another rise. Above 1.4028 will target medium term trend line resistance at 1.4585.

In the bigger picture, price actions from 1.6039 is a correction to long term rally from 0.8223 and could have finished with three waves down to 1.1875 already. Short term outlook will remain bullish as long as 1.3330 resistance turned support holds and further rally should be seen to upper trend line resistance (1.6039, 1.5143, now at 1.4585) next. Break there will target a new high above 1.6039.

In the long term picture, considering the five wave impulsive structure of the long term up trend from 2000 low of 0.8223 to 2008 high of 1.6039, price actions from 1.6039 are viewed as a correction only. Hence, we’d expect another high above 1.6039 eventually, after correction from 1.6039 is confirmed to be finished.

source actionforex

EUR/USD Channel Line

admin — Fri, 27 Nov 2009 14:53:56 +0000

A long term perspective may be taken with an existing channel line and an opportunity for entering the market may exist for the EUR/USD pair. The original trend line (1) has been drawn, connecting with yesterday’s closing price of 1.4732. A parallel channel line (2) has been drawn from the prominent peak of 1.3630. Notice [...]