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AUDUSD Weekly Forex Forecast – 1st to 5th May 2017
The AUDUSD broke below the big psychological number 0.7500 but it also broken below intermediate swing low points opening the door for more downside. The first support level only comes at the 0.7400 round number. The weekly close below 0.7500 should also indicate more bearish pressure. A break below 0.7400 can trigger even more selling pressure all the way down to the 0.7300 support level.
We have a busy calendar from Australia with lots of risk events that can trigger some volatility. Tuesday we have the RBA interest rate decision. The outlook for the interest rates is still dependent on the labor market, which has shown signs that the Australian economy is healthy.Thursday we have the Australian Trade Balance which remains in surplus. The RBA Governor Lowe is also scheduled to speak on Thursday. Friday will bring the RBA monetary policy statement.
Previous AUDUSD Weekly Forex Forecast
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USDCAD Weekly Forex Forecast – 1st to 5th May 2017
The USDCAD has successfully broken above the big psychological number 1.3500 but we’re already in overbought territory based on the stochastic indicator and a pullback should happen sooner rather than later. On the downside, we have the first level of support at 1.3600 previous swing high. A break and a close below this level can trigger more selling pressure all the way to the 1.3500 big round number.
On the upside, we can expect to find resistance at 1.3700 followed by 1.3750 levels. The Canadian economic calendar looks empty and the only notable risk event of the week is the unemployment figures on Friday. But we also have a proxy risk event the Fed interest rate decision which is expected to keep rates unchanged. The rate announcement is not followed by any press conference and this encourages us to believe that the monetary policy will be kept unchanged. On Thursday the BOC Governor Poloz is due to speak at the CanCham Mexico and Club de Industrialists, in Mexico City.
Previous USDCAD Weekly Forex Forecast
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GBPUSD Weekly Forex Forecast – 1st to 5th May 2017
The GBPUSD technical pattern remains bullish and possible, we can see a break above the 1.3000 big psychological number. We need a daily close above 1.3000 to suggest more upside is on the horizon. The price structure suggests that any retracement should be shallow, however, there is still a risk for GBPUSD to fill in the last week range, but for that to happen we need a daily close below 1.2900.
The stochastic indicator in overbought territory and we might see some further range activity early in the week. The UK economic calendar looks soft and there are no major risk events on the docket that can produce a high level of volatility. Monday is also Labor Day and the liquidity should dry away. Wednesday we have the PMI Construction figures which are expected to come flat. Thursday we have the Markit Services PMI figures which are expected to come one tick down to 54.5. The biggest risk event of the week remains the NFP figures scheduled on Friday. Based on the general consensus we should expect a good number of 180k new jobs added while the unemployment rate is expected to tick higher to 4.6%.
Previous GBPUSD Weekly Forex Forecast
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Weekly Forex News Events for EURUSD – 1st to 5th May 2017
EURUSD had started last week with adjustment. However, the week ended by producing a bearish Spinning Top. The next week is going to be the first week of May. Thus, we have to keep our eyes on the news calendar. Those news events normally set the tone of the pair for the whole month. Let us have a look at the next week’s schedule of the news events… not listed here is the final round of the French election on the 7th May. If you are trading EURUSD and other currencies this week… it’s best to exit all positions as another round of crazy move might just happen. Stay safe…
It might not create that volatility, but traders might consider this event before making their intraday trading plan for that day.
EURUSD traders should care about these three news events. All of them are high impact news events, so the pair might get huge volatility. Some good trading opportunities might come after these news events though.
Two huge news events that must be taken into account by every EURUSD trader. Surely, there will be extreme volatility around these two news events.
This news event might create volatility as well. However, this can be used to find opportunities as well.
An important event, which must not be ignored by the EURUSD traders.
Write this time and date on your notebook if you trade on EURUSD. The pair is going to get extremely volatile around these news events.
The pair might already take its route because of the earlier news events. However, intraday positions might get hit around this event.
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USDCHF Weekly Forex Forecast – 1st to 4th May 2017
Technical Outlook: The USDCHF remained a tad weaker but managed to post a higher low, well supported above the major support level near 0.9894 – 0.9861. With the daily Stochastics currently oversold, the bias remains to the upside. Question is whether USDCHF will breakout to the upside, invalidating the descending triangle pattern or if the support at 0.9894 – 0.9861 will be breached for further declines. Price action has been strongly consolidating at the current levels and it is best to stay on the sidelines for USDCHF until further clear bias is established. However, in the event of a break down below the support, it is best to sell USDCHF targeting 0.9784 and 0.9643..
Fundamental Outlook: A slow week for the Swiss franc will see focus turn to the U.S. dollar which will be looking at a very busy week which will see key events that include the state of the economy in the manufacturing and services sector. This week will see the release of the ISM manufacturing and non-manufacturing PMI numbers. Manufacturing is expected to see another weak month and is expected to pull back for the second consecutive month.
Previous USDCHF Weekly Forex Forecast
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USDJPY Weekly Forex Forecast – 1st to 4th May 2017
Technical Outlook: USDJPY posted multiple attempts near 111.65 but failed as noted in last week’s analysis. This indicates a near term pullback in prices as the U.S. dollar is likely to test the e11.65 resistance level once again. Notice that the daily chart shows multiple inside bars being formed in the past three sessions which indicates a potential breakout that is likely to come. Look to purchase USDJPY on any dips, potentially near 110 – 109.50 levels, as we can expect another go towards 111.65 followed by a longer term rally towards 115.00.
Fundamental Outlook: After a somewhat busy week, the Japanese yen takes a breather with focus shifting to the BoJ’s core CPI measure. Last week’s inflation report showed a somewhat mixed bag with the national core CPI rising 0.2% as expected while the Tokyo core CPI fell 0.1%, less than expected. The main driver for USDJPY will of course be this Wednesday’s FOMC meeting. No changes to interest rates are expected from the central bank, while on Friday the monthly payrolls report will be coming out, all of which will signal increased volatility for the markets.
Previous USDJPY Weekly Forex Forecast
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EURUSD Weekly Forex Forecast – 1st to 4th May 2017
Technical Outlook: EURUSD posted strong gains from the start of the week following last Sunday’s French elections. With less than a week to go for the second and final round of voting, the EURUSD could be looking to take a breather. Besides the French elections, last week saw the Euro react to the ECB’s meeting and the Eurozone flash inflation figures which showed a rebound. On the 4-hour chart, EURUSD is seen consolidating below 1.0950 resistance level. We can therefore expect to see price posting a correction towards 1.0735 at the very least. Establishing support here will keep EURUSD supported to the upside with the potential to rally back to 1.0950 in the coming weeks. This bearish view is also supported by the bearish divergence seen on the 4-hour Stochastics..
Fundamental Outlook: A busy week for the euro, focus will be on the manufacturing and services PMI numbers for the month of April. The data is broadly expected to show underlying strength in the economic recovery in the eurozone. The main data point will of course be the flash or preliminary GDP numbers for the first quarter. Following a largely better than expected performance, the eurozone GDP is expected to rise 0.6% – 0.5% in the three months ending March. This could bode well for the common currency. However, traders should note the underlying risks as the second round of French elections are due next Sunday.
Previous EURUSD Weekly Forex Forecast
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The Canadian economy did not grow in February 2017. USD/CAD is stable around 1.3640. Canada was expected to report a monthly growth rate of 0% in February 2017. The Canadian economy expanded by 0.6% in January, starting the year right-footed. USD/CAD remained on high ground ahead of the publication. Note that the US released its first estimate [...]
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The US economy grew by 0.7% in Q1 2017 on an annualized level. This is below official expectations but perhaps above the “whisper numbers” especially after yesterday’s mediocre durable goods orders. The dollar is not really sure how to react. The US was expected to report a growth rate of only 1.3% annualized in Q1 [...]
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With all the excitement caused by the Draghi drag and with the jump in inflation, it is easy to forget another euro story: the French elections. Daily opinion polls provide a reminder towards the second round on May 7th. Centrist Emmanuel Macron topped the first round and already began celebrating. However, the polls that showed him easily [...]
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The drop in inflation seen in March was just a blip. CPI is back on track, rising 1.9% y/y in April. Moreover, core CPI jumps to 1.2%, much better than 1% expected and the highest level since 2013. The rising level of inflation should make the ECB happy, but they will be less welcoming to [...]
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Brexit begins biting: the economy grew by 0.3% in Q1 2017. This is below 0.4% expected and far worse than 0.7% seen in Q4 2016. Year over year, GDP advanced by 2.1%, also short of 2.2% predicted. GBP/USD is trading at 1.2915. The pair jumped all the way to 1.2944 but retreated in the very [...]
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France has been at the center of attention due to the presidential elections, but it also has a data flow. The second-largest economy in the eurozone reported a growth rate of 0.3% q/q, under 0.4% expected. In addition, year over year growth posts a similar shortcoming: 0.8% instead of 0.9% predicted. And what about the elections? We [...]
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Although the RSI was featured in Wilder’s book „New Concepts in Technical Trading Systems“ in 1978, it is still widely used today. The RSI is, just like the MACD or Stochastics, a momentum oscillator, and requires therefore additional confirmation for opening buy and sell positions.
The relative strength index measures the size of recent gains and losses for a specified time period, and also includes the speed of these price movements in its calculation. Due to these characteristics, it is primarily used for identifying overbought and oversold situations in a financial instrument.
The standard setting used with RSI is a 14-day period. This is recommended by Wilder himself. If the average gains are larger than the average losses during a particular period, the RSI will have a higher value. And if average gains are smaller than average losses, RSI will move downwards. Like all trading topics, a chart is the best description. Let’s look at the USD/JPY chart with an RSI indicator included (red).
An Introduction to the RSI Indicator
It is also possible to use the RSI with time frames other than the daily, but in this case special attention is needed as the RSI can become more volatile on shorter timeframes, thus creating more false signals. The RSI indicator has a normalized value in the range from 0 to 100. This means, if over the periods indicated in the settings the price moved only up, the RSI would have a value of 100. It the price moved only down, the RSI would be 0. The RSI is a very effective indicator in creating trading signals, which only added to its popularity. The most popular use of RSI includes identifying overbought/oversold areas.
The RSI is widely recognized to have the ability of identifying overbought and oversold situations in a currency pair. Usually if the RSI is under 30, it indicates that the pair is oversold, while a value over 70 indicates an overbought area. With a strong upward move in the price, the RSI will get a higher value. If the price moved too quickly and the RSI is above 70, the presumption is that a correction move is ahead and traders should prepare for a fall in the price. This is considered an overbought situation.
Similarly, if the price moved quickly downwards and the RSI is below 30, traders should expect a possible upward move and prepare accordingly. This is an oversold situation. A popular trading strategy regarding overbought and oversold conditions, is letting the RSI move below 30 and waiting to break above 30 again, for opening a long position in oversold conditions. Letting the RSI move above 70 and waiting to break below 70 again would be used as a signal for entering a short position in overbought market conditions. The RSI can stay in oversold and overbought areas for a long time during strong down- and uptrends, and utilizing this strategy avoids entering counter positions in these situations.
Like all momentum indicators, the RSI can also produce false signals from time to time, especially during strong trends or on lower timeframes. Traders should therefore use other confirmation signals as well, and not solely rely on technical momentum indicators.
Trading the RSI Indicator on USDJPY
In the chart above, the first two red arrows show the RSI making false sell signals, while the price is still in an uptrend. The next three red arrows show that the RSI went above 70 and then moved back below 70, creating sell signals which resulted in nice drops of the price as the chart shows. The last green arrow follows the rule for opening a buy position in oversold conditions. The RSI went below 30 and came back above 30, which sends the signal of opening a buy position. As the chart shows, this would also result in a profitable position as the price moved up. Stop-loss orders should in both cases be placed just above/below previous swing highs/lows.
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The Canadian dollar remains under pressure. The pair reached a new high at 1.3670, reaching yet another 14-month high. The next level of resistance is only at 1.3850. The last time the pair saw these levels was in the wake of 2016. The crash in oil prices sent Dollar/CAD shooting all the way to 1.4690. Yet the fall [...]
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While markets focused on the Draghi show, and for good reasons, the US released a big bulk of data. And the data has not been that good. Durable goods orders came out at 0.7% for March, much lower than 1.5% expected. It came alongside an upwards revision from 1.7%, which did not compensate. Core orders slipped by 0.2%, [...]
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Taking a Behavioral Aspect on Technical Analysis for Better Trading Results
Financial markets are not only ruled by economic forces. Neoclassical finance has been the prevalent economic theory in the financial world for many years, and claimed that all financial practitioners are making rational decisions. However, empirical evidence and psychological studies have challenged the neoclassical finance in the last decades.
Behavioral finance explains how human psychology affects market prices, and raised as a strong alternative framework to neoclassical finance. Financial markets consist of humans and their psychological set-ups, and therefore the behavior of market participants systematically influence individual decision makers and market prices. According to Ricciardi (2008) “the different behavioral finance theories and concepts that influence an individual’s perception of risk for different types of financial services and investment products are heuristics, overconfidence, prospect theory, loss aversion, representativeness, framing, anchoring, familiarity bias, perceived control, expert knowledge, affect (feelings), and worry.” These concepts are reflected in market prices and charts, and therefore play an important role in technical analysis. By studying the historic prices of markets using charts, one is actually indirectly studying behavioral finance.
Technical analysis is another theory which challenges the neoclassical finance and efficient market hypothesis. Technical analysts believe that certain price patterns will repeat themselves in the future and thus provide profit opportunities. According to a leading technician, Martin J. Pring (1985), “technical approach to investment is essentially a reflection of the idea that the market moves in trends which are determined by the changing attitudes of investors to a variety of economic, monetary, political, and psychological forces. The art of technical analysis is to identify changes in such trends at an early stage and to maintain an investment posture until a reversal of that trend is indicated.” 25 to 30 percent of foreign exchange traders base most of their trades on technical trading signals (Cheung and Chinn, 1999), and technical analysis is used as either a primary or secondary source of trading information by more than 90 percent of foreign exchange market participants in London (Allen and Taylor, 1992). They report that traders base their long-term expectation on fundamentals, but use technical analysis for short-term investing and entry-exit signals. A survey made by Menkhoff and Schmidt (2005) report that 36% of German fund managers allocate their funds using alternative strategies including technical analysis.
According to Rolf Wetzer (2011), “academic interest in technical analysis started in the late 1950s. Ever since the first paper on this subject was written, researchers from universities and institutions, such as central banks, have tried to prove whether technical analysis is worthwhile or whether it is just pure nonsense. For decades, the prevalent regime was the “efficient market hypothesis”, i.e. the idea that market prices discount available information instantly and therefore, not only technical analysis but virtually every kind of analysis is useless. This quarrel has not yet been solved, but for over 20 years there has been a growing body of evidence that technical analysis can be profitable.”
Behavioral models suggest that technical trading strategies may be profitable because they presume that price adjusts sluggishly to new information due to noise, market power, humans’ irrational behavior, and chaos (D. Vasiliou et al., 2008).
Andrew Lo and J. Hasanhodzic (2010) explain that the efficacy of both technical and fundamental analysis is disputed by efficient-market hypothesis which states that stock market prices are essentially unpredictable. However, as long as anomalies in the market exist, technical analysis can be used to exploit inefficient prices.
According to psychologist Scot Heuttel, it takes only two similar particular events for the brain to expect they could occur also in the future. In behavioral finance this is called the “Heuttel bias”. “Financial professionals are a close group, sharing information in real and virtual space, thus becoming prone to emotional herding. The behavior of analysts for instance is closely observed by others and their opinions influence the investment public” (Raluca Qawi, 2010). This also explains the behavioral aspect of forming trends, bubbles or repeating technical patterns.
Technical analysis and behavioral finance can be efficiently combined to better understand the behavior of market prices, and thus provide investors with more relevant information in decision making. Exploring the behavioral aspect of technical analysis will give a practical framework for taking advantage of the human psychology in markets.
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After the ECB left the interest rates as well as the QE program unchanged, President Mario Draghi meets the press. The focus is on the tone: optimistic or pessimistic. There are reasons to be cheerful, leading us to favor the “glass half full” scenario over others. On the other hand, Draghi has proved his dovishness [...]
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The European Central Bank left the main lending rate unchanged at 0%, the deposit rate at -0.40% and the QE program at 60€ as widely expected. The April meeting does not consist of new staff forecasts. The focus shifts to the press conference by ECB President Mario Draghi. Will he see the glass half full? This is our [...]
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GBP/USD reached 1.2915, the highest level since October. This is above the previous high of 1.2905 seen after the announcement of the UK elections on June 8th. After reaching the new high, Sterling became shy once again. Is this a false break? Perhaps, but one that could preclude a second, more determined move. Momentum is [...]
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The French presidential elections will set the tone for EUR trades in the coming weeks. The 4 candidates – the far right Marine Le Pen, the independent Emmanuel Macron, the center-right Francois Fillon and the left-leaning Jean-Luc Melenchon – couldn’t be more different for the future of France. One thing is sure – an eventual victory of Le Pen would hit the euro hard. With Le Pen building her campaign on an anti-European tone, threatening that France would leave the EU and Eurozone in case she becomes the next French president, the euro is put under enormous pressure not seen since the sovereign debt crisis in Europe.
The first round is already over, with the independent Macron and Le Pen going to the second round of elections on May 7th. Last Sunday, Macron gained 23.7 percent of vote, while Le Pen got 21.7 percent. As the exit polls indicated a victory for centrist Macron, the euro hit a five month high against the dollar when the markets opened Sunday evening in Asia. The currency gained 2 percent on that day, hitting $1.0939 in early trading. EUR/GBP also rose 1.5% to .85 pence per euro. The market is confident that Macron will easily win against Le Pen on May 7th, with voices took over from Mr Melenchon as leftwing voters are committed to prevent Le Pen from gaining power.
Market Reaction to the First Round of French Presidential Elections
As Macron is known for his pro-European tone, the exit polls increased the confidence in the single currency, and increased flows in the European equity market could additionally support a stronger euro in the future.
With released market tensions and risk-on mode, French bonds are becoming increasingly popular among investors. The premium over German Bunds has narrowed to its lowest level since January 2017, at 44 basis points. The yield of a French 10-year bond is now 0.80 percent, compared to 0.36 percent of a German 10-year Bund. Gold also traded lower from a recent high of $1295, hitting $1265 as markets opened after the first round of French presidential elections.
Gold Selloff as the Market Reacts to the Macron 1st Round Win
The French stock-market benchmark index, CAC 40, also enjoyed increased market optimism. The index rose 4.1 percent, making the best trading day since 2015. European stocks also traded higher. The euro stoxx banks index, which trails the European financial stocks, gained 7.2 percent and touched a 16 months high.
“Now that the initial adjustment higher has taken place, we do not expect the French elections to have much further impact on the euro in the near-term,” said Lee Hardman, currency analyst at MUFG.
“The market’s focus will begin to shift away from political risk in Europe and more on to the improving economic fundamentals, which should begin to offer the euro more support.”
Jim Cramer, host of “Mad Money”, advised investors not to panic ahead of the French presidential elections. “Selling because of European politics has been a mistake endlessly,” Cramer insisted, stressing that recent Brexit sell-offs were largely caused by the trading of hedge funds. “No one ever made a dime panicking. But loads of money’s been made taking the other side of the panic”, he also added.
The market has already absorbed the expected win of Macron, but a definite victory in the final round would probably push the optimism even higher, continuing a risk-on investment environment. The impact of the final round, which takes place on May 7th, will also be determined by the percentage difference in exit polls. If Macron wins by a solid margin, we could potentially see the euro stabilizing at around 1.10 against the U.S. dollar.
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Developing Your Own Winning Forex Trading Strategy
You may decide to develop your own trading system or you may prefer to purchase one that has already been developed for use and has a proven track record. In this article, we will look at the basics of developing your own trading system. In essence, a trading system is any set of rules that must be conformed to when trading, so you could for example detail the following rules.
If a 5-period exponential moving average (EMA) crosses up over a 13-period exponential moving average (EMA), enter a long trade. If a 5-period exponential moving average (EMA) crosses down over a 13-period exponential moving average (EMA), enter a short trade. You have now created the basis of your trading system. Of course, this would not be nearly enough to produce a successful trading system, so now you need to enter some safeguards. If the 5 period EMA crosses up over the 13 periods EMA enters a long trade and immediately place a stop loss order at 50 pips below the entry value. If the 5 period EMA crosses down over the 13 periods EMA enters a short trade and immediately place a stop loss order at 50 pips above the entry value.
So far you have only one criterion for trade entry and this could lead to many false signals. To help prevent this you might well add one or more technical indicators as a filter, but keep in mind that the more filters, the less trades will be signaled and although this can be a good thing, it is important to maintain a balance. Continuing with the system building process, you might choose to add MACD as a filter.
If the 5 period EMA crosses up over the 13 period EMA AND MACD are rising above the signal line, enter a long trade and immediately place a stop loss order at 50 pips below the entry value. If the 5 period EMA crosses down over the 13 period EMA AND MACD are falling below the signal line, enter a short trade and immediately place a stop loss order at 50 pips above the entry value. It will be necessary to back test your trading system with various time frames to establish the optimum time frame(s) for the system.
Backtesting can be carried out by using a backtesting program or by visually looking back at the charts and identifying the points at which “your trading system” conformed to the trade entry rules. Then look forward to seeing if the trade would have been successful. Make sure that you make precise notes regarding each theoretical trade. Next, you will need to develop a rule or set of rules for exiting the trade. There are many ways to do this. Developing a reliable exit method is in many ways more important than developing a reliable trade entry system.
One popular method is to use a trailing stop and to continue to trail price until the trade is eventually “stopped out” in profit. A trading system, no matter how good, will not produce a winning trade for every trade entry. Your goal is to establish a system that is successful more than 50% of the time. The higher the percentage the better the system will be. If your system checks out favorably during back testing you should proceed to trade it in REAL-TIME but use a DEMO ACCOUNT only. It is most important at this stage not to put any real money at risk because backtesting is not reliable enough to prove a trading system’s worth.
If after a month or two of REAL-TIME testing the system shows a consistent winning average of above 50% then you can consider making further adjustments to improve the average. Each time that you make an adjustment, it is most important to go through the whole testing process again from the beginning, to ensure that the adjustment has made a favorable difference. There is no reliable shortcut to this process. Make sure to only make changes one at a time and carry out the whole testing process for each change. If you make more than one change at a time, you will never be certain which of the changes were beneficial and which were not.
Finally, after all of your testing has been carried out and you are ready to fund a live account, it is essential to apply a system of money management. This needs to be a rigid set of rules that might, for example, include – Never trade using more than 2-3% of your trading account on any one trade – and so on.
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GBPNZD had a bullish day yesterday. The price has been on the correction today so far. The price has produced an H1 reversal candle at an important level of support as well. This means the pair might head towards the north later today. Let us have a look at the H1 chart of GBPNZD…
GBPNZD Free Forex Trading Signals – 27th April 2017
Today, the price came down up to 1.85875. Then, it produced a Spinning Top and an H1 bullish candle afterwards. If the price continues to go towards the North and breaks the level of 1.86760, then the price has enough room to travel. In fact, the level of 1.87700 should be easily reachable as far as this setup is concerned.
Let us have a look at the summary of the trade…
Buy Stop Order: 1.86760
Stop Loss Level: 1.85875
Take Profit Target: 1.87700
In this trade setup, we have to remember a thing. If it takes too many candles to make the breakout, we might as well not take the entry. I mean it is going to be a Stop Order, so we should set our Expiry 3 hours maximum. If the price takes too long to make the breakout, then it might offer us an entry on ABC pattern. That would be a different ball game. Here we are looking for a breakout with good amount of liquidity. This is what attracts more traders to take an entry on a trade setup. In this case, it will attract more buyers if we have the breakout with a good amount of liquidity.
You can also take a look at our previous (and most likely profitable) Free Forex Trading Signals Here.
We hope that you enjoy our Free Forex Trading Signal today: GBPNZD Free Forex Trading Signals – 27th April 2017
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Overpromise and underdeliver seems to be the modus operandi of the Trump Administration. Edging closer to the 100 days mark, Gary Cohn and Steve Mnuchin unveiled a “once in a generation” tax plan. It came five days after the idea was first announced. The ideas in the plan seem quite ambitious indeed. Significantly lower taxes could make a huge [...]
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EUR/USD certainly has an interesting week. It began with a significant 200 pip Sunday gap on the French elections, reaching 1.0930. When things cooled down, it found itself at support some 100 pips lower. That 1.0830 level worked as the initial 2017 high. It moved up from there, settling above 1.0870, the December 2016 swing peak. [...]
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Australia releases its inflation figures only once per quarter, making every publication a big market-mover. Volatility did not disappoint this time either. The headline q/q figures came out at with a minor miss of 0.5% instead of 0.5% expected. Year over year, the miss was similar: 2.1% against 2.2% projected. AUD/USD still responded with a downfall, dipping [...]
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Is Forex Trading Charts Important in Your Trading Journey?
The movements in the price of currency are represented by numerical figures usually accurate to within 4 or 6 decimal places and also in graphical terms with a currency price chart. The pricing chart is mainly used as the essential instrument when performing any form of technical analysis. In order for a trader to increase the chance of a winning trade, the analysis needs to be performed on the currency pair being traded to try and get a level of confidence about the right entry and exit points into and out of the market. This analysis can be both technical and fundamental in nature and it is significant for a trader to be skilled in both.
It is no great shock that technical analysis deals with the technical factors influencing the price movement, factors that are definitive and measurable. In order for any technical analysis to be undertaken the information regarding the currency in question is displayed on a trade price chart. This way a trader or analyst can easily interpret the data being looked at as well as factor in any further influences they may think will affect the currency’s’ movement. Analysts and traders who view themselves as technical first and foremost employ pricing charts as their primary tool for collecting data and calculating their present and forward strategies.
A major advantage of Forex charts is their adaptability. An analyst or trader can look at a selected time period of data whether that in seconds, minutes, hours, days or weeks. The adjustability of a trading chart allows a trader to configure it exactly as needed. So if the strategy requires multiple entries and exits every day (scalping) then the chart can be set to show a very narrow time frame with great detail. Conversely, if a longer time frame is required, so trends and repeat patterns can be highlighted then this can be done easily as well. So charts can help traders whatever their selected strategy may be, both short and long term.
So the Forex chart is now showing the correct time intervals to be useful to the technical trader’s strategy. This is just the starting point from which the important data has to be looked at and analyzed. The many chief indicators that technical traders and analysts use are:
This is only the beginning of the depth of technical analysis that can be performed using trading charts but you can see why many Forex traders spend a great deal of time learning the different technical indicators, how to interpret them and ultimately use them to guide their trading decisions.
To complement the technical aspect to trading is a fundamental analysis which looks at outside influences that may well affect currency prices. Fundamental analysts schedule key financial and economic decisions and announcements into a global calendar so that they are prepared for the effects these may have on the foreign exchange market. Of particular interest would be national or federal budget announcements, GDP figures including official projections as well as unemployment figures and interest rates. Planned or expected decisions such as these often impact the Forex market but often unplanned events can have a bigger effect, such as terrorist attacks or natural disasters.
Charts are a crucial requirement to perform technical analysis but some traders trust these charts alone to guide their decisions and disregard all fundamental factors. This is a mistake as many traders, especially non-professional traders cannot react quickly enough to market reactions to fundamental factors. Regardless of traders preference toward either technical or fundamental analysis it is undeniable that unless you use both of them, trade charts won’t help you that much in achieving your Forex trading goals.
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Monthly Forex News Events that Might Affect EURUSD Volatility – May 2017
The EURUSD technical pattern has become more complex the same way the macro fundamental forces have become more unpredictable. Last month EURUSD continued to exhibit the same ranging pattern that has characterized EUR/USD over the past one and a half year. The biggest market uncertainty for the month ahead remains the 2nd round of the French election. After the first round, the centrist candidate Emmanuel Macron and far-right leader Marine Le Pen have qualified to the runoff on 7 May.
May is set to be an interesting month with major risk events that can disrupt the EURUSD volatility. Seasonally speaking the US dollar has a strong tendency to strengthen during the first half of the month, but at the same time, we can also note the EURUSD tendency to find a significant swing low at the end of the month. The seasonal pattern only gives us the tendency of a particular currency to exhibit a certain behavior at a certain time, so we have to carefully monitor the pattern and how the fundamental forces interact with the price action.
Going forward, we’re going to analyze and disseminate the major news event for the upcoming month that can be the catalyst for higher EURUSD volatility.
“Don’t risk significant money in front of key reports, since that is gambling not trading.”
– Paul Tudor Jones
The month of May will bring several risk events that can be the catalyst for the EURUSD to exhibit higher volatility. If the fundamentals align with the current technicals the EUR/USD can be in the process of reversal. However, we need the fundamental to shift and current monetary policy stances to reinforce the higher EURUSD exchange rates.
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The most important part of trading starts from right the beginning which is choosing your Forex Broker. Your Forex Broker is your partner and in many ways your banker. If you get the wrong partner from the start, then what would happen to your business venture? Yep… it’s pointless even if your business is profitable because your partner will swindle you so fast before you can even say “Yikes!”
How to Select the Right Forex Broker – one of the Forex Broker we use
Cost of Trading
The main cost of trading with an online foreign exchange broker is the spread. The spread is the difference between the price that a financial product can be purchased and the value at which it can be sold. The price to purchase a financial product is called the ask price and the price it is sold for is referred to as the bid price. The spread is how the broker makes money on the trade orders you are placing with them and varies greatly between brokers. Some brokers will also charge a commission on each trade order they execute for you. Usually, this is done with professional level trading accounts that have $50,000 or more in capital and come with lower spread costs. Most brokers will not charge a commission on trade orders placed with lower capital level trading accounts. The minimum amount of money you will need to open a beginner level account ranges from $100 to $500 typically.
The Spread and Pips
The spread will always be given in units called pips. A pip represents 1/100th of 1% and is referenced from the fourth decimal place in a currency pair quote. For example, the currency pair EUR/USD is quoted at 1.3387/1.3389 which means that you can buy 1 Euro for 1.3389 US dollars or you can sell 1 Euro for 1.3387 US dollars. The difference between the buy price and the sell price or the ask price and the bid price is 0.0002 which would be expressed as a spread of 2 pips. Pips will also be used as the unit to describe gains or losses with your investments.
Broker Location
A broker’s physical location can also be an important factor in selecting the right broker for a couple of reasons. You want to have a good internet connection with your broker of choice so that orders placed are executed right away. Things change fast in the foreign exchange markets and you don’t want to miss out on any profitable pips because of lag time between you and your broker. Also, spread values are different from one currency pair to another with the same broker as well as being different between brokers. A broker based in the United Kingdom will most likely have a larger spread on the USD/CAD currency pair than a broker based in the USA.
Leverage, Good and Bad
All brokers will offer some degree of leverage based on your credit up to a maximum limit for the broker. Maximum leverage amounts vary a great deal from one broker to the next topping out at around 500:1. Leveraging your limited capital to make money on money you do not have is an incredible opportunity, but before jumping in and buying 100,000 Euros with 500 US Dollars, there is a significant downside. Sure, you can make a ton of money on the fluctuating value of 100,000 Euro but if things do not go as planned you may lose the entire 500 US you put in plus any further losses taken before the broker was able to close your position.
A margin account is required to use leverage and funds will need to be deposited to cover the minimum margin level which is a pre-defined percentage of your investment. If your investment loses value to the point that the capital in your account does not cover the minimum margin amount then you will get a margin call from the broker which means that you will be required to deposit more funds into your account or the broker will liquidate your investment. It is your responsibility to maintain the minimum margin amount and your broker likely will not consult you before closing your position on an investment to limit the amount of loss taken. Movement comes fast in the foreign exchange markets which can be good or bad depending on the direction things move. Losses are a part of the big picture in foreign exchange trading and as long as you use proper risk management techniques, you will be able to continue to invest and offset your losses with some good profits.
Regulation
Finally, the foreign exchange market is not actually one single market, but multiple markets based all around the world. This fact makes it virtually impossible for a single group or organization to regulate the activities of all brokers and unfortunately opens the door for unethical people to take advantage of you. For the best protection possible, insist that your broker of choice be a member in good standing with the regulating body for the country in which they are based and doing business. The following are a few of the main regulators:
USA – Financial Industry Regulatory Authority and U.S. Securities and Exchange Commission
Australia – Australian Securities and Investments Commission
Japan – Financial Services Agency
Cyprus – Cyprus Securities and Exchange Commission
Switzerland – Swiss Financial Market Supervisory Authority
Germany – Federal Financial Supervisory Authority
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Trump calls out timber to the northern neighbor. Trudeau says Canada will respond firmly and reasonably. The issues of milk and lumber cause tension. The loonie is higher. What’s next? Here are two opinions: Here is their view, courtesy of eFXnews: USD/CAD: Breakout: A Strong Chance Of Hitting 1.40 – SocGen Societe Generale FX Strategy Research [...]
The post USD/CAD: Is this just the beginning? 1.40 is next? appeared first on Forex Crunch.
US consumer confidence drops to 120.3, a bigger drop than had been expected but still a high score. New home sales jumped by 5.8% to 621K in March, much better than 583K projected. The figure for February was revised down from 592K to 587K. The US dollar is slightly stronger in the immediate aftermath, rising within the [...]
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No changes in the latest OpinionWay poll. En Marche candidate Emmanuel Macron leads Front Nationale Marine Le Pen with 61% against 39%. EUR/USD remains on high ground. It isn’t over until it is fully over. The first round is behind us and the countdown to the second round continues. EUR/USD is not only holding its ground [...]
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The Trump administration seemed to have a cuddly relation with Canada while bashing Mexico on trade. This has probably changed. According to reports, the Trump administration is set to announce a retroactive tax on lumber. President Donald Trump said that Canada treated the US unfairly and took advantage. He recently complained about the mistreatment of Wisconsin’s dairy [...]
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EURNZD had a huge adjustment to start the week. Yesterday the price produced an ideal Pinbar Daily candle. Moreover, today’s price action has been bullish so far. By looking at the H1 chart, it seems that the chart would offer long entry with excellent risk and reward ratio. Let us have a look at the H1 chart of EURNZD….
As we see on the chart, that the price had an adjustment. Yesterday’s initial movement was bearish. However, the price then went up and ended up by producing a Daily Pin bar candle. Today, we had some solid bullish H1 candles. The game plan to trade on this chart would be, we wait for the price to make new higher high first (I assume it would be around 1.55750). Then, the price should make some correction. If we get a 15 M breakout at today’s higher high after the correction, then we buy the pair.
Let us have a look at the summary of the trade
The recommended pattern is an ABC pattern. We need to make sure that we take the entry after corrections. The price would have the good enough liquidity to move fast towards the North once we get the breakout. However, if the pace of the price movement is slow, do not lose patience. Be with the trade and wait for the price to go all the way to the recommended Take profit level.
You can also take a look at our previous (and most likely profitable) Free Forex Trading Signals Here.
We hope that you enjoy our Free Forex Trading Signal today: EURNZD Free Forex Trading Signals – 25th April 2017
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Buy Low and Sell High Using Range Trading Forex Strategy
Range trading is a simple strategy that can be used on almost any financial product although this article is mainly directed to currency pair trading. Range trading is pretty much just as is sounds, find the range that a product regularly trades in, buy low sell high in the case of a long order and sell high buy back low with a short order.
The indicators below will be very helpful when figuring out when to buy and sell in your range keeping in mind that the price dictates where the indicators move, not the other way around. You may find it easier and more comfortable to trade a product that you are somewhat familiar with like your home currency. Staying close to home will also keep your trading costs down and likely allow for more leverage.
Stochastic Oscillator (5, 3, 3)
The Stochastic Oscillator compares the price at which a security closed relative to the range of the price over a certain period of time using two lines. The first of the two lines is called %K representing closing price and the second %D represents a moving average of the closing price. The oscillator has a full range from 0 to 100. Leaving values set by default will be fine, but you should edit the indicator and set an upper level of 80 and a lower level of 20. When the oscillator goes over the level of 80, it is considered to be overbought. It is considered oversold when dropping below the level of 20. Generally, values will increase as the 80 level is breached and continue to rally while above this level. The oscillator leaving the overbought area and dropping back below the 80 level is an indication that the price may have reached a ceiling and start to fall. The same concept holds true for when the oscillator drops below the 20 level into the oversold area which represents a declining value. A return above the 20 level suggests that the price may start to increase.
Relative Strength Index (RSI) and divergence
The Relative Strength Index is an oscillator that follows the value of the financial product being traded. The RSI oscillator has a full range from 0 to 100. It will most likely have a default 14 day period which is fine, but the indicator should be edited to include an upper level of 70 and a lower level of 30. When the RSI oscillator goes above the 70 level, it is overbought. It is oversold when dropping below the 30 level. A level of more than 70 may have a continued rally until the level turns downward and returns below 70 suggesting a possible end to the rally. A level of less than 30 may have a continued decline until the level rises and goes back above 30 suggesting a possible bottom.
A divergence occurs when and new high or low in price is not also a new high or low in the Stochastic Oscillator and/or Relative Strength Index. Value of the financial product may have a correction and follow in the direction of the RSI. To make this indication of a coming price drop stronger, look for the RSI level to drop below the level of the closest valley or low level. Divergence in CCI is much the same in that a new high price is not expressed as a new high level in the CCI suggesting a coming price correction.
ADX and Commodity Channel Index Indicator
The Commodity Channel Index is a measurement of the amount of deviation between the current price of the financial product and the average price. This oscillator does not have a full range but is centered on a value of 0. When setting up CCI, the indicator needs to be edited to show a high level of +100 and a low level of -100. Between these two levels is a channel with 0 at the center representing the average price. A high level of CCI, which would be considered to be anything above +100, means that the current price is high as compared to the average price for the product. A low level of CCI being anything below the level of -100 would be stating that the current price is low as compared to the average price.
This trend indicator is based on a 14 day period comparing two direction indicators, the positive direction indicator (+DI) and the negative direction indicator (-DI). The Average Directional Movement Index shows the strength of price movement while the positive direction indicator (+DI) and the negative direction indicator (-DI) show the direction of price movement.
While it is possible to trade on technical analysis alone, it is really only half of the story. A great deal of the fluctuation in value that you are tracking with the technical analysis was caused by the release of information, reports and statistics relevant to your product and the countries involved. Economic news releases from the relevant statistics agencies from your country are essential to making good profits in currency pair trading just as financial reports and news updates are crucial to trading public company stocks. All statistics agencies have release calendars for important upcoming reports. For currency pairs, economic reports on GDP, trade balance, unemployment and income are a few critical reports that affect prices greatly. Find the agencies that release key economic numbers relevant to your product, bookmark them and be waiting anxiously minutes before their release. Find the analysts’ projections or forecasts on what the numbers should be before they are released. If the real numbers are better than the analysts forecast then prices will increase immediately, just as they will decrease if expectations are not met as real numbers are released.
Consider using a practice account for any new trading strategies before risking your money. Foreign exchange products are highly leveraged and often very volatile. Never invest money that you cannot afford to lose!
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