Fotis on August 15, 2013
Hello, my friends.It has been a long summer and I understand that, this time of the year is particularly difficult for traders to work. When most of the people are having their holidays, it is difficult to work and concentrate on the markets.
For those of you that haven’t been on a holiday yet and you are reading Forex Mentor Pro, I believe you will be rewarded with some very good moves that are currently being formed.
Let’s look at the EURUSD first and the weekly chart:
We can see that on a weekly level we broke back again below the upper trendline, which is not a good thing for the Euro. Also, if the candlestick patter remains like this until the end of the week, we will have a bearish engulfing pattern, on a weekly basis. This will cause an attempt next week for a brake below 1.3200. As you can see from the chart, we need to brake above the upper trendline again and brake that resistance around 1.3400, if we are going to move to a higher area.
But let us also look at the Daily chart for more details:
We notice that as soon as the Euro approached the highlighted resistance, we had aggressive selling causing a 4 day drop. Many analysts and traders will consider this a double top formation, which is negative for the Euro. Please, also look once more for that bearsish engulfing pattern, we were showing you on the weekly chart. The same pattern has appeared here on the daily as well, causing a sell trigger below 1.3350.
Furthermore, on Wednesday we had some important fundamental data coming out. We had GDP numbers for the Eurozone area. Despite the fact that the numbers were good, for Germany in particular, the Euro failed to make a comeback.
The reason that this has happened is because of a possible tapering in September. Atlanta FED President Lockhart said in an interview that the call for taper can be on any of the FED’s next three meetings (September, October, December).
It is is important to read the news and identify what is the big story that affects the markets right now, which one carries more weight. In the current situation, we see that nobody cared about the GDP numbers, the main story is “tapering”.
PLEASE KEEP THIS IN MIND AS WE APPROACH SEPTEMBER BECAUSE THIS WILL BE A TREMENDOUS CATALYST FOR THE MARKETS.
From the charts, we can see that we are in a small downward channel and it would be wise to look for SHORT signals in the direction of the trend. Our view will change with a break out of the channel. You can use the excellent 4H strategies offered here at FOREX MENTOR PRO to pinpoint exactly your entry.
Last week we warned you about a possible big move in the USDJPY pair.
Clearly, there is no trend at the moment, as we are inside a triangle formation. I would wait for a confirmed breakout outside the triangle and I would go in the direction of the trend. This week we noticed some USD strength that, was mainly due to flows outside the Japanese equity markets due to the increased volatility. The risk seems to be too high for some investors, the volatility index in Japan is 29%, while at the same time the VIX in US is 12%.
Now let us examine another pair the EURGBP.
What a mess from a fundamental perspective!
The new Governor Carney has changed the policy approach and that was a major catalyst for the pound. Immediate expectations of new stimulus measures have been downplayed and there has been a new timeframe for the first rate hike in 2016. If fundamentals don’t justify the new policies, we will have lots of action in this pair.
Have a look at the chart:
We have another triangle formation after a strong rally. We will have to wait to see if we find support on the bottom trendline or, if we are going to have a confirmed break below it. Some patience is needed for this pair for now. But a possible brake will lead to a very strong move.
Remember what Warren Buffet has said, it is impossible to catch all the big moves that happen, all you need is one a year!
We will return soon with further analysis and more on portfolio theory.
Have a great week!
Fotis