Forex Analyst Picks & Strategies
October 2, 2015
My Picks: Long Gold (XAU/USD)
Previously, we wrote about the potential for a 3rd wave increase and was bullish the yellow metal on September 17. This morning’s sell-off prior to the US non-Farm Payroll release tested nearly every point available to keep the 3rd wave interpretation alive.
There is another bullish wave picture entering the scene as well that calls for a move up towards $1200-1225.
Therefore, these are interpretations we’ll watch and as the market eliminates one possibility, we’ll focus on the other. For those not long Gold, here are two possibilities to enter the market.
First Market Interpretation
Market Condition: Breakout
Bias: Buy Gold
Entry: $1157 on a breakout higher
Stop Loss: $1130
First Target: $1245 where wave iii is 1.618 times the length of wave i
Second Market Interpretation
Market Condition: Trend
Bias: Buy Gold
Entry: Buy near $1110 on a dip prior to $1157
Stop Loss: Just below the September 11 low near $1090
(Click on the chart to zoom in; after zooming in, press the play button towards the right to set the market in motion)
We’ve been highlighting and anticipating a powerful 3rd wave move higher in Gold. As you can see above, if the Gold price does not accelerate higher such that prices eventually dip back towards $1110, then that shifts the larger wave picture to a less bullish outlook in the shorter term.
The second interpretation could be 5-3-5 zig zag higher where the ‘B’ wave is a bullish triangle. Should this second interpretation become the higher probability move, we should first see a dip back towards $1110 prior to $1170 which sets up a strong risk to reward ratio trade. We are anticipating that wave interpretation to eventually terminate below $1225 but only after another dip to $1110.
Retail sentiment is softening as traders turn more bearish. SSI as we write is printing +1.10 whereas yesterday it was +1.70. The number of long traders has shrunk by 21% since yesterday and short traders have grown in number by 30% compared to yesterday. This large of a short term shift in sentiment is near term bullish for Gold.
Kristian Kerr nailed the timing of a Gold pivot. See his piece below. He was calling for a turn at the end of this week which means a break outside of this week and last week’s range sets the table for the next move.
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October 2, 2015
My Picks: Sell EURUSD
Market Condition: Consolidating Triangle
Target 1: Triangle Support 1.1100
Invalidation: Bullish Breakout Above Resistance
EURUSD 1Day Chart
(Created using Marketscope 2.0 Charts)
The EURUSD continues to trade inside of a descending triangle, after today’s NFP news event failed to produce a breakout. The triangles line of resistance is formed by connecting a series of lower highs, starting with the August 24th high found at 1.1714. Price is currently trading at resistance, which is now found near 1.1300. A retracement from this value would potentially expose a move back towards support near 1.1100.
In the event that prices move above resistance, this suggests that the EURUSD is attempting to breakout towards higher highs. In this instance, price action would invalidate the current triangle pattern.
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October 1, 2015
My Picks: USDJPY Bias toward August 24th Lows On Macro Backdrop
Bias: USDJPY Bias towardAugust 24th Lows On Macro Backdrop
Point to Establish Long Exposure: Close below 119.22 (September 24th low)
Target 1:118.49 August 24th, 2015 Close
Target 2:116.082 August 24th, 2015 Low
Invalidation Level: Daily Close below 9/10 High, 122.33
The fundamental backdrop appears to be very JPY supportive. Whether you look at Glencore, Chinese growth and manufacturing, which confirmed contraction this week, or if you look at different commodity sectors which are a proxy for global demand there is a lot of discouragement right now given the quantitative easing behind us. In such an environment, you would expect the dollar to be performing better given how we continue to hear comments from Federal Reserve members about raising rates this year.
Currently, a majority of the support under USDJPY is hope of more BoJ action. This is ironic because it appears that Gov. Kuroda has rarely been so optimistic about the prospects for Japan’s future economic growth. If they hold out from new easing and economic data in the United States starts to turn over diminishing fears of rate hikes than we could be near the beginning of a sustained down move in this pair or at least sustained up move and yen across the board.
The August 24th daily candle should be your guide going forward and more specifically the open and close. After the price action on August 24, we’ve apparently got what appears to be a very clear symmetrical triangle nearing its end. If that is the case, we would expect to resumption of the down move started in May of this year, which would likely test the August 24 low as well as the December 2014 low around 115.50. The risk to this view is that the dollar breaks out higher as well, this is where the open on August 24 can be relied upon his key resistance. If this level breaks with the daily close above against the backdrop of increasing probability of a global downturn, you may do well to keep the yen long bias against a weaker currency pair like GBP, AUD, or CAD.
USDJPY Resistance & Support Levels
2nd resistance: 120.66 Sept. 21 high
1st resistance: 120.09 21-DMA
1st support: 119.26 Sept. 1 low
2nd support: 118.86 Sept. 8 low
3rd Support: 118.49 Aug. 24th Close (Key Support)
The ratio of long to short positions in the USDJPY stands at 2.51 as 72% of traders are long.Yesterday the ratio was 2.54; 72% of open positions were long. Long positions are 1.9% higher than yesterday and 0.6% below levels seen last week. Short positions are 3.0% higher than yesterday and 8.7% below levels seen last week. Open interest is 2.2% higher than yesterday and 7.4% above its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives signal that the USDJPY may continue lower.
USDJPY has stalled at a significant Volume at Price level around 119. Considering the macro backdrop (e.g. risk-off as Emerging and Developed Markets recede economic growth), a break below this level, most notably 118, could open the flood gates of JPY buyers. The risk here is that USDJPY may not be as attractive a sell as AUDJPY, NZDJPY, or GBPJPY potentially.
October 1, 2015
My Picks: Looking to buy GBP/USD early next week
The 61.8% retracement in time of the July 2014 - April 2015 decline earlier this week failed to elicit much of a response from GBP/USD. Focus now turns to the first part of next week as it marks a convergence of several key geometric timing relationships including the 261.8% extension of the time between the April and June lows, the 161.8% retracement of the time between the April low and June high and the 61.8% extension of the time between the June and August highs. This confluence of different timing relationships increases the possibility of a reversal in my view and key levels of focus for me heading into the window will be the 61.8% retracement of the April – June advance at 1.5085 and the median line of the June high near 1.5045. The 1.4880/60 area also looks like a potentially important support area as well if the decline gets more aggressive into the timing period.
Looking to buy GBP/USD around the support levels mentioned early next week (Tuesday).
October 1, 2015
My Picks: Short AUD/USD, NZD/USD, GBP/USD
My long USD/CAD position was stopped out as a pickup in risk appetite into the end of the third quarter drove the risk-geared currency higher. The dominant trend remains bullisih however and I will monitor positioning for a new entry opportunity.
Other active trades:
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September 30, 2015
My Picks: Long NZDUSD
Despite recent carnage in the commodity sector, the NZDUSD low from 8/24 remains intact. In fact, the rate is going to make an inside month and the month's range is the smallest since August 2014. Like dojis, narrow range bars (NR) indicate indecision and are useful reference points. Even if this is just consolidation before another move lower, risk is well-defined. I do think that the move is higher though.
For more analysis and trade setups (specific entry, stop, target, etc.) visit SB Trade Desk.
September 22, 2015
My Picks: Pending Long GBP/NZD
With USD-pairs in tumult, the GBP-crosses may be the simplest way to find exposure to a currency with a hawkish central bank. Ideally, we'd be looking to pair the GBP with a currency whose fundamental backdrop is eroding, and immediately three pairs come to mind: GBPAUD, EURGBP, and GBPNZD. Our focus today is on GBPNZD.
GBPNZD Daily Chart: June 2015 to Present
GBPNZD may be on the verge of its next leg up in its multi-month channel. The recent consolidation over the past three weeks has resulted in an ascending triangle after an uptrend, a potential bullish continuation pattern. While ascending triangles can occur at the bottom of a downtrend (signaling a reversal), regardless of where they occur, ascending triangles are usually bullish patterns.
Confirming the bullish potential higher are momentum indicators. With Slow Stochastics and MACD trending higher on the H4, daily, and weekly timeframes (and in their respective bullish territories), "full time frame continuity" exists that favors a bullish move shortly.
With the Bank of England offering more hawkish commentary of late and with the Reserve Bank of New Zealand reigniting its dovish policy burner, the fundamental bias may be higher in the pair over the near-term. In context of the combined fundamental and technical influences present, there's sufficient fuel to see follow through on a GBPNZD breakout to the topside.
Trade Idea: Long GBPNZD
Entry: 2.4630 or above
Stop: 2.4040 or below
Risk: -590-pips (or more depending upon exact entry/stop)
Target #1: 2.5200 (channel top one-week from date of publication) (+570-pips)
Target #2: 2.5550 (ascending triangle measured move) (+920-pips from 2.4630 entry)
--- Written by Christopher Vecchio, Currency Strategist
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July 15, 2015
My Picks: Sell gold on close below 1150
Gold is testing a key trendline as it's remained in 'neutral' territory for its longest stretch since 2010. A breakdown targets a much larger decline and a resumption in the multi-year downtrend. I like getting short on a daily close below $1150 with initial targets at March, 2010 lows of $1040. Max risk on the position would be a daily close back above key trendline support at $1150.
Comment and view the chart live update here at this link: http://www.dailyfx.com/charts/tradingview/view?id=kuPrcaGM
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