Some food for thought: Indecisions punish the procrastinators. Fortune favours the brave. Have we been able to get it right in trading, in our lives? Courage vs. Foolishness vs. Randomness.

July has come and gone. How has our beloved EURJPY performed in the month of July?

‘Somewhat better than June!’ we can say.

Having bounced off the low of 2010 early in the month, price attempted to break the high of June no less than 10 times in the latter stages.

On the Daily chart, price finally closed above 113.40 on Tuesday Week 30! Hooray! Bulls came charging in to bring price to a high of 114.78. However, bears came back to take their revenge and brought price below 113.40 on Friday. Was this a failed break then? All we can say is that there is no successful trend reversal, for now.

Doesn’t quite matter because Tflow® students were BOTH the bulls and bears! On the lower time frame, the bull-charge on Tuesday would have rewarded the Tflow® hunter between 84 pips – 120 pips whilst the Tflow® bear-revenge starting Thursday would have made a simple meal of 123 pips! Either way, decisiveness reaps its due rewards!

EURJPY Failed Break?

The opening and closing prices for Week 30 is almost the same, i.e. Doji for Week 30. However, on the H4 chart, what we have for Week 30 when compared to Week 29 is a higher high (HH) and a higher low (HL). Price has been obeying an upward Equidistant channel that has been in play for the past 5 weeks. Will this pattern continue to hold its ground with yet another HH and HL in Week 31?

EURJPY Upward Equidistant channel

Going into Week 31, we have 2 scenarios to look forward to:

a) Bulls will continue to charge up (Blue arrow) the ED channel, once the stubborn resistance of 113.40 (Yellow horizontal line) is breached. The target level in this case would be the upper border of the ED channel. However, to do this, we would definitely want to buy LOW e.g. at the bottom of the ED channel. Even bulls have to be patient!

b) Bears (Red arrow) will still attempt to bring price down towards the bottom of the ED channel, if the intermediate support of 112.00 (Week 30 low – lovely number!) is breached. Price would then head towards the low of Week 28.

And the Doctor’s Advice for the Week: Courage vs. foolishness vs. randomness. Where do we stand?

EURUSD is now inside a conflict zone between bulls and bears. That’s because there are two equally compelling setups that traders can look at based on the daily chart.

Bull and Bear point of view for the EURUSD

Bears will probably point out a resistance trendline that started in December 2009 (see long downward equidistant channel and red downward line). The red line is the place that bears will look to sell.

Bulls point out the inverted head and shoulder like chart pattern and its subsequent reversal and support at around 1.2465 (see horizontal blue line). Bulls will look to buy at this blue line.

Between this two views, a region has been defined. While scalpers can trade either way within this zone, swing traders or investors who want to take a longer view may want to wait till market shows hand.  If the blue line gives way, the picture becomes bearish. If the red line fails, a bullish picture prevails. The outcome may not be immediately visible if price gets caught and ‘ping-pongs’ in this zone.

In the analysis yesterday, I mentioned that EURJPY has what appears to be bullish reversal pattern. This ‘inverted head and shoulder’ pattern is only validated if the ‘neckline’ is broken. Otherwise bears will continue to hold the line as the momentum is still very much pointing to a down trend. The levels which I predicted turn out to be very good and now we see resistance at the neckline. I also asked readers not to play breakout but to buy only at strong bases or throwback after a valid breakout.

This highlights a few salient features of FX trading:

1. Simple concepts of support and resistance, chart patterns (with its own equally simple rules) do very well in FX and have predictive powers.
2. A good FX traders plan for various possible outcomes but should not stick to a persistent bullish or bearish view.
3. Preparation and planning will help the trader to take advantage of developments.

This motto will guide you ‘Plan but let the market tell you’.

In the case of EURJPY, prudence tells us that the patient bullish swing trader will wait for support (red horizontal line ~ 109.22) to come before attempting a long trade again. Short traders who are already in position might take partial profit at this level because of the bullish theme. If price goes beyond the red line, we should have  a clear short view again.

EURJPY caught in range

In fact there is a possible bullish reversal pattern in the 4-hour charts. The reversal must be validated by a break of ‘neckline’.

Possible ways to play this trade is to buy at base 109.11 or wait for the neckline to break followed by a new base built at this line. Playing breakout would be folly as the daily chart still paints a downward momentum and so plenty of bears would be eager to short resistance or failure.

EURJPY remains in downward channel but cues for long trade

Only registerd users (ie TerraSeeds Tflow® graduates) can view this post. Graduates please log in with your UID and password that you use for Forum. Find out how you can be part of our privileged trading community. Email forex@terraseeds.com

On H4 Chart, we can see uptrend equidistant channel.  Price has been trying to to break Resistance Zone as shown in chart above. This is the second attempt already.  If price fails to break, it will form a potential double top.

On h1 Chart, we can see a another equidistant uptrend channel. Should price breaks below the equidistant channel, the immediate support zone will be at the blue trendline (also the ED channel support). Of course, we will look for confluence from Fibonacci according to Tflow® trading plan.

Are you a person who “Walks Your Talk” everyday of your life?  Following my posting on  EURJPY earlier this week, I did not!  I will explain why so later.  You may have heard this before, that how humans trade is a reflection of how we lead our own lives.  Some food for thought from the doctor:  When was the last time you said you would do something but still have not?  Is it about time to finally get going such that you can put some weight behind your words?

I had mentioned earlier in the Week (http://bit.ly/ahAOda) that we were waiting for the market to reveal the current trend of the EURJPY.  On the daily chart, EURJPY found support at the low of May.  I had highlighted that we would be looking to go long, should we find support towards the bottom of the purple equidistant (ED) channel on H4 chart.  Students of tflow® were able to fine-tune an entry on the lower time frame and depending on whether they went in for a long trade on Tuesday or Thursday, they would have pocketed 190 pips or 175 pips respectively, based on H1 alone.  Perhaps it is nothing like the 390 pips free fall that took place two Fridays ago, but hey, I would gladly pocket 190 or 175 pips any day!  Hence, if only I had carried out what I had writen, and was in time to take the trade…

Anyway to re-cap, there was no new low for the EURJPY in Week 23.  Instead, price found support and began to retrace up.  But question is, where to?  On the daily chart, we will once again put in a series of crucial support (Green lines) and resistance levels (Yelloq lines), only to find price caught at a resistance level.

Support and Resistance of EURJPY

Switching to the H4 chart, Week 23 reveals a price movement that sees the EURJPY successfully finding higher support levels to move up from the low of Week 22, and thereafter closing above the lows of Week 21 and 20.  Has the moment which the bulls have been yearning for finally arrived?

Here is what we can look forward to moving into Week 24.  On the H4 chart, we can put in a blue upward ED channel (According to Tflow®, do you know that ED Channel is a very powerful tool to use?).  The upper boarder of this ED channel also touches critical levels in the 2 weeks prior.

a)      Bulls Will Continue their charge up (Blue arrow) towards the support zone if the immediate resistance level (White line) and the top border of the blue ED channel is breached.

b)      Bears Will Take over (Red arrow) should the immediate restaince hold strong (bearing in mind, excuse the pun, that we are also close to the top border of the ED channel).  In this case, the support zone mapped out on the daily chart would be tested again.

At the end of the day, we will look for Tflow® triggers to execute the trade.

The Doctor’s Advice for the Week:  “Walk Our Talk, in ALL that we do”!

The long term view of EURUSD is still bearish and the current bullishness could be a good opportunity for a short entry!

The breakout from the daily down trendline shows some bullishness for EURUSD. While some bulls could be on a good entry, it is noted that yesterday’s high near 1.2150 happened near a level that is a classic “Support Turns Resistance”. This might hamper the bullish sentiments for the time being.

EURUSD Daily Chart

In the shorter term, there seem to be a resistance near 1.2150 level, as the 4 hourly chart reveals weakness and confusion via candles pattern

For any trade, we need to have triggers (most important in Tflow®!) Therefore, even though we see Dojis, this doesn’t mean we are shorting. We need to go to lower timeframe to wait for signal for an entry.

Note also that Price has broken up from the equi-distant channel (purple), thus, a near term support could be on the top of the channel) too.

Therefore, the short trade might not be easy – as price is trapped in a resistance and support zone.  The way to manage it is to fine tune in lower timeframe to minimise stops. That’s how we did it in Tflow®

Gold has surged up yesterday from a low of 1210.77 to 1244.75 and it is resisted by top of 4 hourly equidistant channel shown below.

4 hourly chart of Gold

Short Term Bears may want to short near the top of the channel, since it is near to a resistance zone but Gold may find support at

(1) a resistance turn support level near the weekly breakout,

(2) uptrend line (blue) and

(3) bottom of the equidistant channel.

As we go into the sixth month of the trading year, here is a quick review of USDX price action and its possible future moves.

USDX 6 Monthly Review

As with previous posts, the Dollar Index is on a bullish up trend, moving within an equidistant (ED) channel (blue).

The bullish trend gained momentum since Apr and shifted to a steeper slope, breaking out of the long term ED channel (blue).

In addition, the top channel (blue) has now become a support for the current up trend.

As of last Fri, USDX has broken above May’s High and there is a possible consolidation in the coming days.

4 Hourly chart of USDX

Looking at a shorter timeframe, the 4 hourly chart showed an ascending triangle (purple), which is a trend continuation pattern. It is worth considering that this consolidation pattern formed in 3 weeks, thus, could imply more bullish move for USDX.

Thus, for bulls who missed the boat, or waiting for a  re-entry, a nice throwback to near the monthly breakout line could be the next best trade to consider (see green highlighted zone).

GBPUSD Doji bar for Week 21

On the Weekly Chart of GBPUSD, we had a doji candle for Week 21. The doji represents indecision in the market. However, notice that since Week 18 till this Week 21, the rate of change of downside is getting smaller (i.e. the candlesticks are getting shorter). Let’s examine what’s happening in the 4-Hourly Chart below.

4-Hourly Chart facing immediate resistance at 1.4500

On the 4-Hourly Chart of GBPUSD, price has been trading in a range of 1.4500 to 1.4225 before it broke out of the range on 27^th May, 2010. Unfortunately, the price couldn’t sustain and came right down the next day, 28^th May 2010.

Is this a bull trap?

However, GBPUSD seems to be moving along the equidistant channel at the moment, but do expect price to face an immediate resistance at 1.4500 as price has been testing this level and price couldn’t close above 1.4500 this week.

Do take note of the Non-Farm Employment Change and Unemployment Rate on Friday, 4^th June 2010, 8:30PM.

In the past three weeks, EURJPY has visited the lows of late 2008 and early 2009.  In the process, a new low for 2010 was attained.

EURJPY support at precedented levels on weekly chart

Nevertheless, since Week 19, EURJPY has been falling within an equidistant channel (Blue parallel lines).  This equidistant channel was obeyed by the markets going into Week 20 from Monday 17^th May to Thursday 20^th May.  A series of lower lows and lower highs was observed.

EURJPY at crossroads of 2 patterns

Alas on Friday 20^th May, perhaps buoyed by news coming out from Europe, price broke out of the equidistant channel!  There may also have been an attempt to test the support offered by the upper boundary of this channel.

Question on everyone’s mind is: Are we looking at a reversal of the downtrend?  Here is what we can look forward to, going into Week 21.

a)      Reversal of the recent downtrend (blue arrow) is only confirmed when the neckline resistance of the double bottom is broken (white neckline).  A next potential resistance level would be the high of Week 20 (brown horizontal line).

b)      Continuation of the downtrend (red arrow) will take place if the white neckline proves to be a strong resistance.  In this case, the upper boundary of the equidistant channel and low of Week 20 (Yellow horizontal line) could serve as potential support levels.

The battle between the bulls and bears continues.

Yet, here is one interesting fact for you: Students of tflow® at Terraseeds are able to execute trades before confirmation of a double bottom!

A) Is EURUSD downtrend in an equidistant channel?
B) Is EURUSD reversing uptrend because of an inverted ‘head and shoulder’?

If your answer is ‘both of the above’, you may well be right!

For now, both Euro-bulls and bears have a story to tell. It is necessary to be patient. Buy only at support and sell only at resistance.

Do not play break out.

Bears should short EURUSD after a re-test of the upper boundary of the channel. Bulls should go long only after the neckline of the head and shoulder becomes established as support. Only time will tell who is right.

EURUSD prints mixed story; at resistance now

The Weekly chart of USDX shows that it is on an uptrend since late Oct 2009 and may be facing resistance in the near term.

USDX 17 May 2010 Weekly Chart

The daily chart shows that the uptrend is strong as the bulls are willing to push it up high and fast. This is revealed by the shift of the uptrend line to  steeper slope. However, it could be that USDX is also on an equidistant (ED) channel too.

Thus, the recent Price Action shows a possible resistance for USDX at the top of the ED channel and on multi-month resistance level.

USDX Daily Chart

In the shorter term from the 4 hourly chart, aggressive bears might take chance to push USDX lower along with short term bulls cashing out the gains.

Yet, with the strong up trend in the background and a thick support zone underneath, USDX is likely to be consolidating some gains before resuming the uptrend.

USDX 4 Hourly Chart

Weekly chart- GBPUSD losing gains of year 2009

From the GBPUSD Weekly Chart, we can see that price tested the support of the uptrending Equidistant Channel (Blue Color) thrice before the bear pushed it to close below the channel support last week. Despite GBPUSD created a new low of 2010, last week, price still manage to close above the horizontal support level (Green Color).

Let’s review what happened this week:

1)      Price did a Re-test of the channel (Blue) but was rejected and now became a Resistance.

2)      Price closed below the horizontal support level (Green).

3)      Price is now moving in the Downtrend Equidistant Channel (Red).

Will GBPUSD ultimately go down to test the Support zone created in year 2009?

GBPUSD in downtrend for daily chart; may test resistance

On the Daily Chart, GBPUSD continues to be in the downtrend.

Two possible scenarios that could possibly happen for this coming week:

Blue arrow: Price to do a retracement back towards the (previous support turns resistance) horizontal line with the confluence of the Weekly Uptrend Equidistant Channel in blue, before the bear finds it attractive to go for short.

Red arrow: Price may accelerate downwards to the Downtrend Channel in Red, provided price breaks down the horizontal line (brown color) and making a new low this year.

However, please note that price is getting near to the low of this year, created in 7^th May, we might see some profit taking take place and thus, it will be more risky to jump in for a short without any retracement.

Economic news to watch out for the coming week:

1. Monday: TIC Long-Term Purchases (USD), 9:00PM
2. Tuesday: CPI y/y (GBP), 4:30PM
   1. BOE Inflation Letter (GBP), Tentative
   2. PPI m/m (USD), 8:30PM
3. Wednesday: CPI m/m (USD), 8.30PM
4. Thursday: Retail Sales m/m (GBP), 4.30PM
   1. Unemployment Claims (USD), 8:30PM
   2. Philly Fed Manufacturing Index (USD), 10:00PM
5. Friday: Public Sector Net Borrowing (GBP), 4.30PM

Week 19 (10 MAY – 14 MAY)

Good day to all! This week Aussie retraced upwards after touching a strong support in week 18. It started falling down significantly after it was unable to even reach the high of this week and this was confirmed from the break of the trend lines. Thus far Aussie has been surprising us, now it has formed a new equidistant (ED) channel in Blue. At this point in time, Aussie is at the low of the week.

AUDUSD 4-hour chart breaks trendline

Week 20 (17 MAY – 21 MAY)

I’m sure everyone is on their toes to find out what’s going to happen in the coming week. With this enthusiasm, I’ve painted a few possible outcomes which might brighten and warm up the coming autumn chills and  ’dark clouds’ from down under.

AUDUSD scenarios for week 20

1. Blue arrow: After creating a new low of the week, it is possible that it might want to test the previous week high. With the ED channel in mind, could this possibly be a bullish flag?

2. Red arrow: As you know, my best friend, his name is, Trend. As you already know, he might just disregard the blue ED channel and force his way down to the low of Nov ’09.

3. Green arrow: I have just realised how fascinated I am with ED channels, let us just simply say that this Aussie bloke is going to be a little shy and be contained in the channel.

From a fundamental point of view, there doesn’t seem much news worth taking note of. We might want to pay attention to the other ‘A’ (America).

1. Australia Monetary Policy Meeting Minutes – Tuesday, May 18 @ 9:30am (+8 GMT)

2. US Producer Price Index (PPI) – Tuesday, May 18 @ 8:30pm (+8 GMT)

3. US Consumer Price Index (PPI) – Wednesday, May 19 @ 8:30pm (+8 GMT)

4. US unemployment claims – Tuesday, May 18 @ 8:30pm (+8 GMT)

The Kiwi (NZDUSD) is slowly picking up an up trend move and could be facing some resistance soon.

This is shown on the daily chart as it forms an upward equi-distant channel. The dramatic movement on 6 May created a big long legged doji, which could hint the top of the equi-distant channel is a Resistance Zone for NZDUSD.

Daily Chart of NZDUSD

The 4 hourly chart trend analysis shows that the current up swing is steep and the upward momentum might break the resistance zone.

However, if the up swing fails on the resistance, it is likely to find support on the lower of the equi-distant channel.

4 Hourly Chart of NZDUSD

Week 18 Review (3rd – 7th May)

As discussed in my last post, GBPJPY met with multiple resistance levels and was due for a downward correction. GBPJPY formed a double top in the first half of the week and headed south for its downward correction as expected. What began as a downward correction turned into a free fall on the 6th May. We witnessed a historical moment, known as “Black Thursday” as the Dow Jones suffered close to 1,000 points fall, and GBPJPY collapsed 1,200 pips amidst uncertainty surrounding UK Election Results.

Week 19 (10th – 14th May)

Moving into the new week, we have to bear in mind two things. (1) GBPJPY hit a 14-month low (last hit 129.70 in 17 Feb 2009), and (2) We are in an extremely volatile markets, evident in its daily average of 500 pips. The implication of hitting a 14-month low could point to price doing an initial upward correction before heading south again.

Equidistant Channel in GBPJPY weekly chart

On the Weekly Chart, we see GBPJPY moving in a well defined Equidistant Channel.

Momentum on 4-hour chart suggests likely flag formation although retracement will not be surprise

Currently, on the Four-Hourly Chart, we are expecting price to be supported by both ascending trendline and previous horizontal support. Ideally, that leaves us with a bullish scenario whereby GBPJPY would recover some of its last week’s losses. The recovery could be capped at the Previous Resistance & Support horizontal line. The caveat here is that the Official Bank Rate news on Monday evening (May 10) could throw the technicals out of the window.

Conclusion

Looking ahead, GBPJPY remains in a precarious state. By virtue of price hitting a 14 month low, we could see further downside after an initial upward correction. As the week progresses, it would be both tricky and risky to trade GBPJPY as long as the daily range continues to average 500 pips per day.

News to watch out for

1. Official Bank Rate – May 10, 7pm (Singapore Time)
2. Asset Purchase Facility – May 10, 7pm (Singapore Time)
3. MPC Rate Statement – May 10, Tentative
4. BOE Inflation Report – May 12, 530pm (Singapore Time)
5. BOE Gov King Speaks – May 12, 530pm (Singapore Time)
6. Trade Balance – May 13, 430pm (Singapore Time)

The 4 hourly chart of Kiwi Yen, NZDJPY shows that it is on a up trend and may be facing a possible trend resistance soon.

The monthly equidistant channel and the weekly equidistant channel are still on an up trend.

However, NZDJPY was being resisted by middle line of both equidistant channels.

Thus, NZDJPY might find support on the lower channels of monthly or weekly channel, before resuming the up trend movement.