Forex Analyst Picks & Strategies
November 25, 2015
My Picks: Looking to sell a failure in USD/CAD
Not much to say about the cable short. The retracement was a bit too aggressive for my liking and I stopped out of the remainder of the position for profit on the close above 1.5245. The overall structure still looks negative to me, but I am waiting for better levels to initiate another short. Focus at the moment remains on USD/CAD. A confluence of timing here suggests the exchange rate is vulnerable to a turn in the days ahead. A failure over the next few days somewhere around 1.3460 – 1.3500 followed by a clear change in behavior (i.e. break of support) would signal to me that a turn of some importance is developing. Continued strength after the first part of next week would invalidate the potential negative timing.
Remaining short position (1/2 original) in GBP/USD stopped out for profit on close above 1.5245.
The holiday in the US is forcing me to be cautious/creative on a potential short entry in USD/CAD. As such, I am looking to sell USD/CAD on a close below 1.3460 after a daily close above 1.3460 with a stop over 1.3510 (closing basis).
November 24, 2015
My Picks: Bearish AUDJPY as Topping Pattern Matures, Awaiting Key Support Break
Point to Establish Short Exposure: Close Below 87.30
Target 1: 86.05 Weekly S2
Target 2: 82.81 September 29th Low
Invalidation Level: Close above 89.00 (November High)
Fundamental & Technical Focus:
Right now, the Australian Dollar is the strongest currency in the G10. Selling the strongest currency or buying the weakest currency isn’t encouraged at the market. However, as many traders know, these currencies can be very attractive for a multiple percentage move in a reversion to the mean/ average. If the Australian Dollar is in fact, going to revert to channel support or the mean, then we can look for triggers that show us the move may be happening as well as attractive currencies to buy against a mean reverting currency. The fundamental cause for a potential AUD top turning into another downtrend is uncertain at best. Last, RBA Governor Stevens did not signal that attempts to weaken the currency were imminent however further stretch in the Australian Dollar while the Australian economy is handling the constant decline in commodities, like the highly important Iron Ore or Copper that continue to push multi-year lows, might be cause for verbal intervention.
The current market sentiment of AUD long or JPY short may not hold for long, and if not, AUDJPY could drop rather aggressively. Australia is acutely sensitive to China. Recently, the data from China has been disappointing, and that has caused many to foresee another Yuan devaluation. August was so far; the most turbulent month in markets this year, and the kick-off for the risk-off move was the Yuan devaluation by the Peoples Bank of China.
While fully possible that the Federal Reserve pulls another move akin
Technically, a few points stand out to me, least of which is that price pattern coming off the August 24th low. Additionally, an Andrews Pitchfork price channel (red) shows resistance internally and median line resistance on the higher-corrective pitchfork (blue). Should the pattern hold, a breakdown toward new yearly lows is likely. The current YTD low is 0.6891, and that is also the current Weekly S2 Pivot.
In addition to Andrew’s Pitchfork resistance, there is a multitude price and pivot support points around 87.30. A break below 87.30 on a daily close basis would show with credibility that the ~40% retracement of the 2015 range over the last 3-months could be finished that could resolve itself to the downside.
An important note is that this pair could easily move marginally higher to new 3-month highs before reverting. A short-term upside target before a presumed reversal lower is near the weekly R1 ~89.60. 89.60 is also the 50% Fibonacci retracement of the May / August range, which could be an attractive spot for a top, and that is another reason I’m not entering short at the market.
AUDJPY Resistance & Support Levels
2nd resistance: 89.59 Weekly R1 Pivot Level
1st resistance: 89.00 November Range High
1st support: 87.40 Weekly S1 Pivot Level
2nd support: 85.41 November Low
I am looking to sell AUDJPY on confirmation that price is breaking below key support. A daily close below 87.30, the Weekly S1 support level would help validate either AUD weakness or JPY strength could create a spillover effect that results in a sharp drop. Upon this development, a stop above the November high of 89.00, with a potential stop and reverse order in the case the signal is a false trigger, would be in order. The target is at 82.81, which is the September 29th low. This target aligns with a favorable risk: reward ratio that our Traits of Successful Traders report found to be one of the best things a trader can do to ensure long-term sustainability in your trading.
November 23, 2015
My Picks: WTI Pending Breakout
Market Condition: Pending Breakout
Target 1: November High $48.33
Target 2: October High $50.90
Invalidation: Bearish Breakout Under $39.87
WTI Crude (US Oil) 1Day Chart
(Created using TradingView Charts)
WTI Crude Oil (US OIL) has started Monday’s testing resistance of a trading range that has been developing for the last seven trading days. Currently resistance is marked by Fridays high at a price of $42.73bbl. If prices trade above this value it opens the possibility that prices are completing an A-B-C correction from the October high at $50.90. In this bullish scenario traders looking for a breakout may first target the November high at $48.33, followed by the previously mentioned October high.
If prices fail to breach resistance it would suggest that WTI is set for further consolidation, or a bearish breakout under support. Support is currently referenced from the November 19th low at a price of $39.87. A decline under this value would signal a potential continuation of Crude Oils current downtrend, which has already declined as much as $24.83 a barrel from the May 2015 high at $62.56. In this scenario the previously mentioned A-B-C correction would be invalidated, and traders may begin to target 2015 lows at $37.73
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November 21, 2015
My Picks: Short EUR/JPY Bias Reaffirmed
EUR/JPY's technical outlook remains structurally weak, and given recent shifts in central bank rhetoric on both sides of the pair, a weak end-of-year could be in the cards. The reaffirming of the recent break in prices this week reinforces our initial approach to the pair when we first discussed it 10 days ago in the article, "Risk/Reward of USD/JPY Long Not Appealing as Short EUR/USD," and the follow up report, "EUR/USD, EUR/JPY Eye Further Losses after Flag Breaks." Watch the videos in the articles for the overview.
Similarly, we posted the following chart on TradingView on November 10 (click the play button for the chart to update recent price action and see how the market developed since the chart was originally posted; visit the link at the start of this paragrah if not applicable on your browser):
At the time, our outlook was, "With USD/JPY trading up towards its former trendline support and EUR/USD's bear flag still biased lower, one pair that should draw interest in the coming days is EUR/JPY.
"EUR/JPY lost the ¥133.10/50 support region of its consolidation triangle (tests of support came in May, July, September, and October) on October 27, after the ECB's shift in policy. With price having thus treated the ¥133.10/50 region as resistance since October 27, it appears an exit from the triangle to the downside is developing.
"The bearish momentum profile on the EUR/JPY daily chart is improving. Price remains below its daily 8- and 21-EMAs, and both indicators, Slow Stochastics and MACD , have recently made moves into oversold/bearish territory; Stochastics have been oversold since October 27; and MACD has been diverging negatively since the ECB meeting on October 22."
The original outlook from 10-days ago remains intact as price has proceeded to fall by -0.89% from ¥131.87 to ¥130.70 on the weekly close. On the daily timeframe, remains below its 8- and 21-EMAs; and both indicators, Slow Stochastics and MACD, have recently reissued sell signals while already nestled in bearish territory.
A continuation effort lower may be emerging, and the next leg should begin anew below this week's swing low of ¥130.64, ultimately seeking a drop towards the yearly low of ¥126.08. In context of the latest moves in EUR/USD and EUR/GBP, the entire EUR-complex is looking rather soft on approach to the pivotal December 3 ECB meeting.
--- Written by Christopher Vecchio, Currency Strategist
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November 20, 2015
My Picks: Bearish EUR/GBP
EUR/GBP remains at risk of giving back the rebound from the July low (0.6930) amid the deviating paths for monetary policy.
Chart - Created Using FXCM Marketscope 2.0
Expectations for a major announcement at the ECB’s December 3 interest rate decision may trigger a further decline in the exchange rate especially as the BoE largely stays on course to normalize monetary policy, and the euro-pound may continue to search for support in the week ahead should the Governing Council show a greater willingness to further embark on its easing cycle. At the same time, we may see BoE Governor Mark Carney prepare U.K. households and businesses for higher borrowing-costs as the central bank head is scheduled to testify on the quarterly inflation report next week, and the sterling may continue to outperform against its European counterpart should the fresh comments boost interest rate expectations for the U.K.
--- Written by David Song, Currency Analyst
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November 13, 2015
My Picks: Pending NZD/CAD Short
NZD/CAD broke a 4+ year bullish channel in June. The cross re-tested former channel support as resistance in August and 2 weeks ago (last week of October). Former support turned resistance = bearishness. In other words, this is a new downtrend. I'll be tracking short term developments over at SB Trade Desk in the coming days (and probably weeks) for a precise entry.
November 12, 2015
My Picks: Short Gold (XAU/USD)
We discussed on Friday how to analyze the potential for a break down in Gold prices in the event the market trades near the 5 year lows at 1072. Well, today is that day.
With Gold prices dancing with the $1072 price level, today our internal Sentiment measure has risen to +2.9 suggesting traders are buying this dip. Based on this contrarian indicator, we have a set up for a breakout to the downside.
Market Condition: Breakout
Bias: Sell Gold (XAU/USD instrument on the FXCM platform)
Entry: Near $1071
Stop Loss: $1096
Gold Price Outlook – Sentiment Builds as a Break Below 1071 Looms
For those unfamiliar with the Speculative Sentiment Index (SSI), it is a contrarian tool that gauges the number of FXCM retail traders and how they are positioned. Since these traders are already in the position, it is a good contrarian tool because now these long traders become a future supply of sellers.
As we inspect the movement of traders more closely, we can see the number of traders who are net short is shrinking while at the same time the number of traders who are net long is growing. In fact, Long positions are up 1% over yesterday’s reading and the number of short traders is 6% below yesterday’s levels. The number of long traders stands at a 2 month high while the number of short traders plummets to a 5 month low. This type of movement builds the case for a breakout to the downside.
Gold Price Drops (Yellow Arrow) as Sentiment Rises (Purple Arrow)
Therefore, we’ll initiate on a break lower while placing the stop loss just above the swing high.
As we first noted in October (as a bearish scenario), one possible pattern is an Elliott Wave ending diagonal pattern. Therefore, if Gold prices are successful in reaching 1000, the market may have travelled far enough to where the pattern is approaching a termination point. We keep an eye on the pattern if it we close to that level.
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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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