GBP/USD Short Opportunity - Trendline Hit In 4hr Chart

The GBP/USD is in a downtrend since late Nov 2009. With the strong gains (+240 pips) during today's US session (30.12.09), the pair has reached the upper trendline of the of the downtrend channel.

Applying a trend following strategy this is an opportunity for a short entry.

• P: 1.6080
• SL: 1.6200
• First target 1.5800

Please consider that liquidity is relatively low during holiday trade, which can lead to price spikes in either direction.

EUR/USD Ready For Explosive Break-Out?

The EUR/USD is trading in a narrow range along the 1.4730 support area since the steep fall initiated by the NFP release on Fri 04.12.09. The longer the pair stays range-bound, the more likely a strong breakout becomes.

The daily chart (see below) clearly shows the 1.4730 area as support/ resistance zone (Sep swing high / Oct-Nov swing low). The daily long-term uptrend is still intact. Positive economic news could trigger risk appetite leading to investments in growth assets / currencies, resulting in a lower USD/ higher EUR.

However, the fall under the 20 day simple moving average and the fall initiated by the NFP data created a short-term downtrend (see 1hr chart below). Also the mantra of the past months “better economy > more risk appetite -> lower USD” might not continue indefinitely. The US NFP results (-10k jobs instead of the predicted -100k) were a first indication of that change. More positive US data could trigger a market opinion that US interest rates might rise earlier than currently expected. That would lead to higher USD -> lower EUR/USD.

Currently the direction is not clear. But the longer the EUR/USD stays within the 1.4730 range, the stronger the breakout will be. In which ever direction it will go. I will stay sidelined for now and go with the trend if a strong breakout moves prices out of the 1.4690 – 1.4760 range. Don’t get caught on the wrong foot!

EUR/USD - daily

EUR/USD - 1hr

GBP Panic

Now that was stress. I got caught on the wrong side today. Was long EUR GBP and hell broke loose ;-) Within 2 hrs -110. Luckily I had a stop at 0.9270. Due to the strong move I went aggressively short and closed the position 0.9225. That way I got out with a little gain.

Will stand aside for now.

GBP outlook vs USD and EUR

Fundamentally I am still bearish on GBP. And as long as GBP USD is lower than 1.6130 the downtrend stays intact as well.

However, with equities and gold going higher almost every day, the USD is weak. Can this continue forever? Most likely not, but I am not the one trying to catch the reversal. Too expensive!

Therefore I entered long EUR GBP yesterday @0.9320. SL 0.9270.

GBP USD short closed @1.5790

GBP USD short closed @1.5790 with 240 pips profit.

I still think there is some potential, but for now the pair is locked in between 1.5750 and 1.5850. I might re-enter tomorrow depending on the fundamental news out of UK and US. At the moment the USD is quite weak. EUR up to new highs.

Update on GBP USD Short

Update re GBP USD short trade. Initial analysis here:
http://market-trading-ideas.blogspot.com/2009/10/gbp-usd-short-opportunity.html


The GBP USD short trade analysed on 08.10.09 turned into a good profit during the first day (+200 pips by now). On Monday the pair traded lower during the first hours of the London session and reversed immediately. Since then the pair is trading in a narrow range between 1.5780 and 1.5830. I moved the Stop Loss to 1.5950 to secure some profits.


Important economic data, which will be released on Wednesday and Thursday this week, might act as a catalyst to push the pair significantly lower. However, the event risks also have the possibility to move the price against the trade.

• Jobless Claims Change UK, GMT 08:30 AM, Wed 14.10.09
• Advance Retail Sales United States, GMT 12:30 AM, Wed 14.10.09
• Import Price Index United States, GMT 12:30 AM, Wed 14.10.09
• USD FOMC Meeting Minutes, GMT 18:00 AM, Wed 14.10.09

GBP USD Short Opportunity

Current GBP USD price seems like a good short opportunity to me

• Downtrend in the weekly chart
• Downtrend in the daily chart
• Price is close to resistance at 1.6130

GBP USD is locked in the 1.5870 - 1.6130 range since the Head-Shoulders neckline was broken (since 28.09.09). We are currently trading at the upper end of the range. With the weekly and daily trend pointing down, that opens up a nice short opportunity with a good risk-reward ratio. I entered

• P: 1.6029
• SL: 1.6150

I keep position size "medium", risking 2% of trading capital based on the stop above. If the trade goes in my favor I normally add to the position and pull stops up to break even.

Targets are

• 1.5870 (previous swing low)
• 1.5790 (lower range support)
• 1.53 (about 100% extension from neckline and also a former consolidation zone)

Weekly Chart

Daily Chart



4hr Chart

USD / GBP: Will BoE Meeting Break The Range

• The long-term trend (weekly chart) in GBP / USD is down
• Prices broke under the neckline of the Head-Shoulders pattern in the daily chary
• Prices moved sideways since 28.09.09

The GBP/USD prices stabilised in the 1.5850 - 1.6130 range after the neckline of the Head-Shoulders pattern was broken downwards. The pair stayed in that range since 28.09.09, however, a breakout is possible today.

GBP/USD, weekly


GBP/USD, daily



The Bank of England Monetary Policy Committee Decision on interest rates and the Asset Purchasing Target are due at 11.00 GMT today. This event can act as a catalyst and move the pair over 100 points in either direction within the first hour of trading. In the past a further extension into the initial direction was often recorded. By trading with the trend profitable trades were feasible in the past.

In case the pair breaks out of the 1.5850 - 1.6130 range further potential opens up over the next week. If the 1.6130 resistance falls, upward potential to 1.6400 opens up. In case of a break below the support at 1.5850 a fall 1.53 is possible.

Recent UK fundamentals and the comments by BOE Governor Mervyn King in regards to the economic advantages of a weak GBP might suggest a surprise to the downsize. E.g. by increasing the target for the asset purchasing scheme. Of cause that's pure speculation.

EUR/USD Short Opportunity

A short opportunity exists in the EUR/USD pair

• The long-term uptrend is showing signs of exhaustion
• The short-term trend in EUR/USD is down
• The price has reached a first resistance level

The EUR/USD has carved out a swing high at 1.4815. The uptrend in the daily chart shows signs of exhaustion. The chart becomes "less steep" (green trendlines in daily chart).

The short-term trend is down (orange channel in the daily and 4hr chart). The short-term downtrend (orange) has reached the lower end of uptrend channel (green). If prices can break this trend barrier, further downward potential is opening up. Current resistances to the downside are at

• 1.4530 former swing lows in the 4hr chart
• 1.4400 former swing highs in the daily chart (blue horizontal line in daily chart)
  

The long-term uptrend is showing signs of exhaustion in the daily chart



The short-term trend in EUR/USD is down (4hr chart)



Trading Strategy
Sell on EUR/USD rallies. I opened a short position at 1.4635 after the NFP release rally on Friday 02.10.09. My initial target is 1.4400. If the short-term trend continues, I might add small short positions. EUR/USD is currently strongly impacted by the markets risk perception. As long as the share market goes down (or stays flat), the EUR/USD will most likely continue to fall due to the "safe haven" character of USD.

My entry was P: 1.4635, SL 1.4775, TP 1.4400

USD/JPY Update

The USD/JPY long has been stopped out.

Original trade set-up:
USD/JPY Long Opportunity

Trading September 09 NFP Release

The NFP data (non-farm payroll) gets released on the first Friday of each month at 08.30 New York time. This is currently EDT (Eastern Daylight Time), which equals GMT-4. Info on NFP.

The NFP data release can move the USD +/-100 pips in a few seconds. I wrote an abstract before with a suggestion how to trade the release (Link). The main recommendation is to wait at least 30 minutes after the release before entering a trade. The initial reaction often goes into the opposite direction compared to the price development for the rest of the day.

Today there are 2 major factors to consider, when entering trades

• NFP Results
• Dow Jones Opening Trend

Currently the USD price action is mainly driven by “risk/ risk aversion”. Indications for a better economy lead investors to taking on more risks. Therefore commodity currencies (impacted stronger by economic growth) like AUD and CAD rise on good economic news and the USD falls. If the indicators provide a negative signal on the economy, the “safe haven” currencies USD and JPY are most likely to rise.

NFP Results
A Reuters survey of experts expects a change in the September NFPs of -180,000 (compared to the -216,000 in August). Goldman Sachs however recently revised their estimate from -200,000 to -250,000. If the NFP results indicate a stronger economy (e.g. 150,00 or less jobs lost) the USD will most likely fall vs EUR, CAD and AUD.

If results are 250,000 or larger indicating the economy is worse than expected then USD will most likely rise vs EUR, CAD and AUD.


Dow Jones Opening Trend
The US stock market opens at 09.30 NY time, one hour after the NFP release. Yesterday the Dow was down 203 point / 2.09%. If the downtrend continues, the risk aversion will most likely drive up the USD further. This effect might start before the opening at Wall Street as futures get traded earlier and give an indication on the opening direction.

USD/JPY Long Opportunity

The USD/JPY formed a Hammer pattern on the daily chart. This is a bullish reversal pattern that indicates a rising price in USD/JPY.

The medium and long-term trend is still down. Therefore the long position size should be kept small.

I entered long today

• Price: 0.8995
• Stop-Loss: 0.8885
• Take-Profit: 92.00

Update EUR/GBP GBP/USD

I had a very large exposure to the GBP. I was short in the GBP vs EUR, USD and JPY.

Pls see my earlier analysis/ trades here:
GBP/USD short opportunity – Head Shoulders Pattern In Daily Chart, 24.09.09
EUR GBP Update, 08.09.09
EUR/GBP establishing an Uptrend, 04.09.09


EUR/GBP
I closed the EUR positions, which were about 50% of my expose. I booked large profits here, because I added to the positions while the GBP was falling. In total I closed 3 positions with profits between 200-400 pips. I expect we have seen a high at 0.9300 and that there will be some retracement. Also I expect the USD to be stronger than the EUR in the short-term. Therefore a GBP/USD short is currently more attractive. If we see a retracement to about 0.9000 I might consider to buy EUR/GBP again (short GBP).


GBP/USD
I am keeping the GBP/USD position open for now. But I locked in profits by setting my Stop-Loss to 1.6000. Medium term I expect further falls to 1.57 and possibly to 1.53. However, a retracement to 1.6100 / 1.6150 is possible after the strong decline.


GBP/JPY
I opened a very small short position this morning at 142.95. The pair moved into profit and I adjusted the Stop-Loss to 142.80. This is a "very attractive pair". The moves a very large and huge profits are possible. However, it is easy to be stopped out as well. Most likely I will concentrate on GBP/USD in the short/ medium term.

Trading The Monday Opening Gap

With Forex “being on” 24 hrs, gaps normally only occur on Mondays after the weekend close. Being in Sydney has the advantage to see the gaps first while the rest of the world is sleeping.

This morning I saw the EUR/USD chart below. And the general rule is
GAPS ALWAYS GET CLOSED!





Of cause there is no 100% guarantee, but the chances are on your side. And this is what Forex trading is all about. All successful traders have loosing trades. But a good win-rate plus good money management (Stop-Loss/Take-Profit) will result in profits.

After seeing the charts above, I placed the following trade.
Limit Order, Sell EUR/USD
P: 1.4710
SL: 1.4740
TP: 1.4650

On top of “the gap rule”, I took a few additional considerations.

• The short term-trend on the 1hr chart was down. So I was going with the trend
• US shares on Fri were down. The USD is currently very much impacted by the “willingness to assume risk”. Meaning the USD falls with rising shares markets and vice versa. So the negative Wall Street result (Dow -0.44%) indicated a stronger USD and therefore a lower EUR/USD

The trade turned out very nicely. Two hours later the chart looked like this (see below). The Sell Limit Order was executed and the Take-Profit target was hit. It does not always work that perfect, but chances are good for making a trade with profit.




And what happened next. Well, of cause afterwards its always easy ;-) It was going down for an other 60 pips.

GBP/USD short opportunity – Head Shoulders Pattern In Daily Chart

• The long term trend in the weekly chart is down
• The upwards retracement of the steep downtrend has potentially reached its top
• This opens a short opportunity for the GBP/USD currency pair

From July 2008 to January 2009 the GBP/USD dropped from 2.0000 to 1.3500. The following upward retracement found its maximum at 1.7000 on 05.08.2009. See weekly chart below.






There is a good chance that the retracement found its top at 1.7000 on 05.08.2009. The daily chart displays a Head-Shoulders pattern that supports that possibility. The Head-Shoulders is a top reversal pattern, so in this case the GBP/USD could turn down again. The neckline of the pattern at 1.6200 has not been broken yet and therefore the pattern is not confirmed. If the pair closes below the neckline, further downward potential to 1.5300 opens up.





Entry Strategy
The most conservative entry option for a short position is to wait until the Heads-Shoulders pattern gets confirmed by a break of the neckline at 1.6200.

A more aggressive option (with more risk and more reward) is to enter a short position before the neckline (resistance) gets broken. Recent price action has been kept under the 1.6500 level. One option therefore is to establish short positions on intraday rallies towards 1.6500.

I took up a small short position at 1.6388. Stop Loss 1.6500. The position is “slightly in the money” with 30 pips (morning 24.09.09, Sydney time). I will consider increasing the position in case the pair goes lower.

EUR GBP Update

Update on the trade suggested on 4th Sep 2009. Link to original trade analysis:
http://market-trading-ideas.blogspot.com/2009/09/eurgbp-establishing-uptrend.html

The EUR/GBP continued the uptrend until today (see 4hr chart below). I took profits at 0.8980. I am still holding a small position in case the trend turns into a longer uptrend. However, at this time I expect a consolidation after the strong rise. The uptrend since early Aug stays intact as long as the pair keeps above the resistance at 0.8800 - 0.8820. I will consider to extend the long position again if a pullback and reversal pattern emerges above the resistance zone.

USD CAD at resistance at 1.0700

I looked at USD CAD yesterday (09.09.09, 08.00 GMT) and found the chart below. I was considering a long position at 1.0700. Unfortunately the market moved up quickly +100 pts so I missed the entry. I will be watching the pair for a better entry (1.0700 – 1.0730).

USD CAD daily

USD CAD weekly

EUR GBP Update

In the recent article I out the opportunity of an EUR/GPB long trade: http://market-trading-ideas.blogspot.com/2009/09/eurgbp-establishing-uptrend.html

I entered at long at 0.8740. The pair moved up quickly to 0.8790, breaking the first resistance. I closed 50% of the position and pulled up the stop to 0.8690. I will hold remaining position and see if a long term trend up can be established.


EUR/GBP 4hr chart



EUR/GBP weekly

EUR/GBP establishing an Uptrend

The EUR/GBP pair is potentially establishing a long term uptrend.





The daily chart displays

Double Bottom: The trend reversal formation has been completed by the break of the resistance (=top between the two lows) at 86.55 on 21.08.09. The second bottom (0.8450) did not quite reach as low as the first (0.8430)

Trend Reversal: The daily chart moved from a downtrend (lower highs / lower lows) to an uptrend (higher highs / higher lows). After the lower high on 24.07.09 (= the between the double bottom pattern at 0.8650, daily close) the price formed the characteristics of an uptrend in the chart

• higher low (05.08.09; 0.8480)
• higher high (27.08.09; 0.8830)

Currently we are seeing a retracement from the higher high at 0.8830. This retracement can be used as an entry for a long position. To determine the entry point I will wait for a reversal patter (like a "Hammer" candle) in the daily or 4hr chart. Currently the retracement stands at the 38.2% Fibonacci level. The price might drops further to the zone between the 50% and 61.8% Fibonacci level. This zone (0.8650-0.8680) falls together with the top between the two bottoms of the reversal pattern. This former resistance had been broken and acts now as a support. A reversal candle in this zone would be a strong entry signal for a long position.

Trading Strategy: Wait for a reversal of the current retracement to enter a long position on the EUR/GBP. Consider the support level between the 50% and 61.8 Fibonacci level.

Non Farm Payrolls (NFP) Trading Strategy

The release of the Non Farm Payrolls (NFP) and Unemployment Rate by the Bureau of Labor Statistics today was one of the most anticipated data releases.

The payroll releases often create increased volatility in the Forex market immediately after the data release. Spikes can go in both directions. Most times it is better to wait for 30 minutes after the release.

The chart below displays the EUR/USD price action after today's NFP release.

• The price went first up 25 pip(1.4255 to 1.4280)
• Then jumped erratic within a 20 pip range (1.4260-1.4280)
• And then fell about 70 pips to 1.4200

The lesson is to wait at least for 30 min after the data release before entering a short-term trade. After that follow the trend.

Update on AUD/USD short

This is an update re the analysis and suggested trade from this post:

http://market-trading-ideas.blogspot.com/2009/09/short-audaud-resistance-at-08466.html

• I closed 50% of the position at 0.8263 (169 pips gain).
• I re-entered short at 0.8350.

Considering the initial Price (P: 0.8432), Stop-Loss (SL: 0.8533) and Take-Profit (TP: 0.8210) combination, this was a bit “un-disciplined” skewing the risk/reward ratio. On the other hand, a 1 day gain of 169 pips was just too tempting.


I re-entered short today at 0.8350. Considering weakness in the share markets, especially in China (see Shanghai Composite), I predict some risk aversion in the near future. This will most likely lead to lower prices on the AUD/USD, because the Australian economy is highly dependent on natural resources/ exports too China.


The next TP targets are just above the recent lows at 82.00 and 78.00. If 82.00 gets reached, I will exit again 50% of the position. I adjusted SL to 85.05

Short AUD/AUD - Resistance at 0.8466

The AUD/USD hit the 0.8466 resistance 3 times since early August and could not pass that barrier. This morning (01.01.09; 9am; EST) I entered a short position. The expectation is that the AUD/USD will not be able to break the resistance and will fall back to the support at 82.40


P: 0.84323
SL: 0.8533
TP: 0.8210




The timing of entering the position was risky, because the RBA interest rate decision was released at 14:30. However, this played out to my advantage. The expectation was a hawkish commentary (indicating rising rates). But the RBA stayed neutral and therefore the AUD droped 0.8412 by now. More event risk tomorrow Wed 02.09.09; 11:30 EST with the release of the Australian Q2 GDP figures.

Also indicating a weaker AUD is the fact that the Australian economy is largely depended on China's hunger for natural resources. China's Shanghai Composite Index dropped 20% over the last two weeks on worries about over-capacities and restrictive lending.

EUR/USD - Daily Chart - Sidelined For Now

The uptrend on the daily EUR/USD chart is intact. The USD was weak during the last NY session and the EUR reached 1.4400 before pulling back to 1.4350. The current prices are in the middle of the June to September uptrend. Long-term there are good chances that the EUR/USD uptrend continues. For new entries I would wait until either

• a pullback & reversal signal on the lower boundry of the uptrend (currently at around 1.4150)
• a significant breakout above the recent highs (1.44.30, early Aug)

Follow-Up: USD/JPY Forex Post from yesterday

3rd Update, Tue 01. Sep 2009: The position below has been stopped out. The approach is stil valid. e.g. yesterday Daily FX recommended a buy at 92.05 click here.

At the moment I will wait to see if we reach the former lows at 91.80 and 87.00



2nd Update, Thu 27.08.09, 22.14 GMT: The USD was weak during the US session, especially vs. the EUR. That also impacted the USD/JPY exchange rate. The US$ dropped to 93.20, just before the Stop-Loss of 93.15. Since the USD came back to 93.50 forming an other candle with a long lower shadow. This indicates the market is rejecting the lower prices. Chances for a reversal are there. However, event-risk (J and US data on Fri) and the negative USD momentum are still a considerable risk. For new positions better wait till next week.

An update re my post from yesterday. I mentioned to wait for a reversal formation around 94.00 in the 4hr or daily chart. A Hammer Pattern formed in the 4hr chart. I went long with a small amount. Stop-Loss at 93.15.

Possible Bottom in US Dollar (USD) vs Japanese Yen (JPY) Forex Chart

There are indications that the USD is finding a bottom in the long-term chart against the JPY.

1) Chart Analysis

The weekly USD/JPY chart displays a long-term downtrend starting July 2007. This trend is defined by

• the lower lows in March 2008 (95.55) and Dec 2008/ Jan 2009 (87.10)
• the lower highs in Aug 2008 (110.60) and April 2009 (101.40)

Indications that the long-term downtrend might be exhausted

• No lower low was established since January 2009 (7 months). The time between the former lower lows was 8 months (Jul 07 to Mar 08) and 9 months (Mar 08 to Dec 08)
• The last low (support at 87.10) was tested and holding twice (Dec 08 & Jan 09)
• Since late Feb 2009 the chart is “almost” in a sideways range between 94.00 and 99.00 (with breakouts in April 09 at 101.40 and July 09 at 91.75
• The daily chart (see below) displays lower highs within that range (101.40, 99.80, 98.80, 97.80). However, the decline since the last lower high (April 09, 101.40) seems slow down significantly compared to the previous declines 07/07 to 03/08 and 08/08 to 12/08

2) Fundamental Analysis
Fundamental reasons why the USD could raise vs the JPY are presented here

http://www.bloomberg.com/apps/news?pid=20601083&sid=azC.43anvdTY

http://www.cnbc.com/id/15840232?video=1193259733&play=1&__source=RSS*tag*&par=RSS




3) Possible Forex (FX spot) Trading Strategy

• The USD/JPY pair moved from a downtrend (lower highs, lower lows) into a sideways range (lower high, higher low). To establish an uptrend (= higher high, higher low) a high above 101.40 would be necessary
• Currently the pair is trading at the lower end of the sideways range at 94.00.This support level hast been tested and held up in 03/09 and 05/09. In 07/09 the support was broken, but priced pulled back into the range
• A long entry now (Aug09, 94.00) is a high risk/ high reward strategy. Capital should be limited
• Reward: Move upwards within the range up 97.00 – 97.50
• Reward: Possible to catch the bottom/ turn around in the long term trend. A new high above 101.40 would establish an uptrend on the weekly chart (higher low/ higher high)
• Risk: Fallback to previous lows at 91.80

Possible Trade Setup

• A reversal pattern (like Hammer or Morning Star) on the 4hr or daily candlestick chart around the 94.00 support level could indicate a reversal in price movement
• Entry depending on the level at the reversal pattern: 94.00
• Take-Profit (TP): 97.00 - Based on the former highs/ resistances. Taking only a part of the profit at 97.00 and moving the Stop Loss (SL) up to breakeven for the outstanding position is another possibility
• Stop-Loss (SL): 92.90 – Based on a risk/ reward ratio of > 1:2 and former lows
• Money Management: Limit the position size so that the maximum loss of 110 pts (94.00 – 92.90) does not risk more than 2% of your trading capital
• Do not enter without a reversal pattern on the 4hr or daily candlestick chart. The price may breaks the 94.00 support and continues to fall to lower resistances at 91.80 or even 87.00
• This is a medium/ long term setup. The initial target of 97 could be reached within 1-2 weeks
• Event Risks: On Thu, 27 Aug 2009 and Fri, 28 Aug 2009 a number of important data regarding the Japanese and American economy gets released ( JPY Manufacturing Index, JPY Jobless Rate, JPY Household Spending, JPY Consumer Price Index, US GDP, US Personal Consumption, US Jobless Claims, US Income, US Confidence Index). These may impact the exchange rate strongly. Waiting for next week (starting 31.08.09) might be better

Warning: Forex Trading involves significant risk of loss and is not suitable for everyone. All the information on this site is provided "as is" for INFORMATIONAL PURPOSES ONLY, not intended for trading purposes or advice.