http://www.economist.com/blogs/buttonwood/2010/02/china_paper_money_and_west.

Price takes the path of least resistance: We wait for the market to reveal its hand.

USDJPY at crossroad

Multiple Time Frame Analysis is a very important technical study to master for FX trading.

The principle to follow in Multiple Time Frame Analysis is this: the chart in the higher time frame shows the larger picture or trend. It is stronger and will have influence on the lower time frame. It is therefore good practice to have a top down approach to analyze a particular chart.

As an illustration, let’s look at the weekly chart of USDX.

USDX Weekly shows a long tail doji resting on the top of a channel

From the chart above, USDX has a rally which seems to be defined by a price channel. Last week’s candlestick showed a long tailed doji star.

This two observations allow us to put together this picture:

1. USDX will continue its uptrend as long as it stays in the channel
2. Channel lows are supports, they are good retracement levels to go long
3. Channel highs are resistances, they are good profit taking levels
4. Doji star shows bulls struggling and the entry of bears

As this doji star was on a weekly chart, we can see that it can be broken down into 5 daily candles.

5 Daily Candlesticks make 1 Weekly Candlestick

To continue our multiple time frame analysis, we recall that it is good practice to have a top-down approach. So lets start by doing the weekly analysis.

Weekly Analysis 15 – 19 February 2010

Last week’s candlestick ended as a long tailed doji star. It means that the weekly charts might predict profit taking although the daily charts could show a reversal pattern. As the doji star was on the top of the price channel, this reinforces the likelihood that the USDX might take a respite from its rally.

Daily Analysis

We cascade down to inspect the daily movement of the USDX in the same week. Candles show big swings and had twice 1 day reversals (see 16-17 Feb and 18-19 Feb), which simply reflect the market’s indecision.

Putting together the two analyses, traders could do the following:

1. Because we are at the top of the weekly channel, any signal could be used for profit taking for the bull
2. Nimble traders could step in for a quick counter trend short in the lower time frame
3. Uncommitted bulls can also use any support in the day chart to buy but the optimum buy zone is the channel low in the weekly picture.

Conclusion

The higher time frame will provide a clear picture of the prevailing trend as well as show strong boundaries. These are the support and resistance and will clearly dictate movement of less committed traders using the lower time frame picture. While currency traders are unlikely to be trading the weekly charts, the concepts and principles covered here are equally applicable to other pairing time frames such as the 1-hour/4-hour or the 15-min/60-min.

When the 1-hour and the 4-hour charts are paired, the 4-hour chart gives the larger and stronger picture. When the 15-min and the 60-min charts are paired, the 60-min chart gives the larger and stronger picture as well.

Resistance and support lines in the Aussie define a broadening formation – one that has characteristics of high volatility with little direction. Traders would typically be on the lookout for swing trades at the turning points.

Broadening formation in Aussie defines swing highs and lows

The intraday chart can provide more clues to the trader and few techniques can do so better than chart patterns since it deals exclusively with price action. An inspection of the hourly chart and each of the swing high and swing low reveals powerful reversal patterns.

The January swing high shows a ‘head and shoulder’ pattern where traders can look for a short into the right shoulder. A confirmation is given when price moves below the neckline. While a pullback cannot be guaranteed, price made a pullback allowing late bears an entry.

The recent swing low is no different. Price printed an ‘inverted head and shoulder’ that gave a high probability chance to go long at the right inverted shoulder. A classic confirmation is given once again at the break of the neckline and a throwback completes this highly recurring formation.

Intraday charts provide critical clues for swing trade

Ms. Binni Ong, Chief Trainer

Chief Trainer Ms Binni Ong has been invited to ‘Independent Dynamics’ – an Entrepreneurship conference organised by NTUC Club nEbO.

This conference will be targeted at university students primarily from NTU, NUS and SMU. The projected number of participants will be 150 with a total of 28 entrepreneurs invited for the event.

The event will be held on Saturday 20 February 2010 at NTUC Auditoriums at One Marina Boulevard.

nEbO, an initiative by NTUC (National Trade Union Congress) Club, was set up on 07.07.07 to engage youths to develop and realize their potentials in the areas of interest in Music & Events, Sports, Care, Gaming, Lifestyle and Entrepreneurship. nEbO is Not The Usual Club but an exclusive lifestyle membership club for the youths – the back bone of the future workforce. It is a club for the youths, by the youths. By building an emotional connection with the youth at an early stage of their lives, it can help foster a continual relationship with NTUC when they enter the workforce in years to come.

For the past 2 weeks or so, we are seeing the US Dollar Index moving in a trading range, which also defines its current support and resistance level.

The COT Report released last Fri points to a slightly lower Total Open Interest and a slight unwinding of the shorts of the Net Commercial Sentiments.

The trading range seems to be a consolidation after the recent rally after the bull flag in Jan 2010.

Lastly, it is noted that the upward trend of USDX seems to be strong as it is yet to be violated.

We are excited that TerraSeeds Market Technician Pte Ltd was featured on the The Business Times on Thursday 11 February 2010.

TerraSeeds covered in Business Times on 11 Feb 2010

For press information, please contact:

Mr. Soh Tiong Hum

* Director, Ethics & Compliance Manager
* corporate[at]terraseeds.com

*Latest update* – 18 February 2010

This event has been postponed till 07 March 2010. For further details, please contact the organizer SharesInvestment/???? at +65 67458733.

—

Ms Ong will talk about the technical direction of the STI.

Registration and payment can be found here.

In the post on Breakout Knocking at GBPJPY?, we saw a symmetrical triangle on a weekly chart and anticipated 2 possible breakouts – Bullish breakout or Bearish breakout.

Now, we see a possible breakout on the hourly chart of GBPJPY which is forming a Symmetrical Triangle.

If it breakout from the Triangle to the upside, then it will have to break out the horizontal resistance at 141.41 in order follow on a  bullish up trend.

Likewise, for a bearish breakout, the horizontal support at 139.47 will need to be contended to resume the long term down trend.

From Last Friday’s COT Report, the Commercial Net Position has moved down to the level near Jan 2010, a net short level which is unseen for the past 5 years.

In addition, the Total Open Interest remains on a high level. Together, these indicate that the current uptrend for USDX remains strong.

Previously, we talk about how the Tflow system can be used to earn 500 pips in 1 week.

Just yesterday during our Forex live hands on session, we see another powerful move shown by Tflow on GBPJPY, one of the most volatile currencies traded.
Have a look again how we had anticipated a Big Move and our profit target zones before we start our trade.

510 pips for GBPJPY in a day!

It’s all in a day’s “work” for GBPJPY. We targeted about 510 pips near the low before it quickly pullback.

Shouldn’t you be curious how Tflow System can do this? Come and register for our free Tflow Course Preview by click here.

Following up with my previous post on Demystify the Correlation of Currencies.

We mentioned about Positive and Negative Correlation, and now we look into what is correlation coefficient.

Correlation coefficient for Currencies is a number to describe the closeness of the correlation for any two currency pairs. It is usually in the range between +1 and -1, where +1 is to say that A and B are positively correlated and moves in the same magnitude and vice-versa. In general, a good positive correlation pair will have a correlation coefficient of 0.8 to 1 and a negative correlation pair is between -0.8 to -1.

There are 2 websites which has sampling data for most of the major currencies: Mataf.net and OANDA.

We shall have a look at a typical correlation table shown below.

FX Correlation Table

Currency Correlation Table sample, courtesy of OANDA

As observed, the EUR/USD pair has strong negative correlation with USD/CHF and USD/CAD and positive correlation with AUD/USD, GBP/USD, NZD/USD, XAU/USD (Gold) and XAG/USD (Silver).

Attached a chart of EUR/USD with USD/CHF on the same chart.

FX Correlation of EUR/USD and USD/CHF

FX AccuCharts, courtesy from CityIndex Asia

Noticed that when EUR/USD is declining, USD/CHF is climbing. Likewise, a bottoming of EUR/USD coincides with a topping of USD/CHF.

Thus, with a proper analysis of the currencies all at one screen, it can be very profitable trading on multiple currencies that are highly correlated to each other.

Pennant in upward channel

Pattern requires break of short blue trendline to confirm.

This is my contribution to Erwin’s discussion on the AUDUSD in his blog.

What is different in my chart is the introduction of another trendline – one that is steeper.

Trendlines have 2 commonly discussed values:

• Gradient of trendline defines trend
• It acts as support and resistance

Another important input that a trader can get from trendlines is the momentum of a trend. The steeper a trendline, the stronger the trend, the more momentum price has, the more it takes for a reversal but also the more likely for a violation/retracement.

The blue line is such a steep line (1.). A trader would who has an existing position would be happy with the speed of movement downwards whereas one looking for a low-risk entry would be wary of a short term violation.

Therefore, the gentler yellow line (2.) is a reasonable place to look for a low-risk short. A goodway is to look for a level with as many confluence.

Lastly, a long-side view should only come in if we see a reversal chart pattern and if the gentle trendline is violated decisively as well.

Moment of Aussie is strong but possible short term violation likely

In Tflow System, we are able to trade with precision and one of the most amazing techniques taught is advanced Fibonacci prediction. This means that even before we enter a trade, we know in advance the actual price of our risk and multiple targets.

This is unlikely a fixed profit target whereby one might be taking 10, 40 or even 80 pips per trade and missed out the possible 100 or even 1000 pips which the trade can give. Remember “cut your losses short, let your profits run“.

The chart below shows you how it can be done.

With advanced Fibonacci prediction by Tflow, we can find an entry shown by the red arrow and projected 5 possible target levels as shown.

So after 8hrs…

Surprised?! The market is so kind that Target 1 and 2 (210 pips and 255 pips) were all hit in 8 hrs, which is 2 bars after the entry, and the profit taking was near to the low of the bar before a pullback. So the prediction turns into reality for the 2 targets.

If suppose you went to sleep and work for the remaining days, without checking back on your trades for the next few days…

320 pips pocketed and near the lows after 16 hours or about 2 full working days. And you don’t have to glue to your screen and constant monitoring of the trade. It is as simple as “Set and Forget” or in auto-flight mode. Isn’t that gives you more time for yourself and perhaps a less stress trading strategy?

So let’s see if the next target is coming.

445 pips in 3 days! Yet, if you noticed, the price is very near target 4 then a pull back before dropping below target 4.

In  Tflow system, there is a way to identify the pullback and allow a re-entry to continue shorting GBPJPY.

After 3 days, GBPJPY has moved almost 480 pips, will it reach our projected target of 510 pips?

Whoala! 510 pips in 4 days!

Apart from having a good strategy,  patience and discipline are also important for a good trade to last for a long time.

Noticed again how Price had hit on the Target level and made a pullback.

As you had seen, this is a swing trade which one can made within a week and have the peace of mind to let it run for a long time – 4 days!

A 510 pips might mean USD 510 for a mini lot or USD 5100 for a standard lot.

So the risk / reward ratio will be USD 600 / USD 5100, which is 1 to 8.5.

Have you know of such strategy that you can trade with confidence and yet allowing it to run, without affecting your lifestyle?

If you are in search of one, then make time to hear what Terraseeds can offer you! Come for the coming course preview on the Forex Tflow Course.

Gold is currently near the Support Zone and formed a lower high away from the recent high at 1226.

The current support zone near 1070 seems strong as it was formerly a resistance then turn into support.

If the Bulls were to continue their rally, then they will have to breakout of the resistance at the lower high (1160) before overcoming the Yearly Resistance of 1226.

In the same way, if the Bears were to overcome the Bulls, then they will break down  every support zone (currently between 1074 and 1025) till both Bulls and Bears meet for a temporary standstill.