Analyst Picks

Walker England , Forex Trading Instructor

My Picks:  GBP/AUD Pending Daily Breakout
Expertise:  Technicals
Average Time Frame of Trades:  1 Week - 2 Weeks

Market Condition: GBP/AUD Pending Daily Breakout

Target 1: 2X ATR 1.6394 Pips

Target 2: 4x Range1.6068 Pips

Invalidation: Continued Consolidation

GBP/AUD Daily Chart

GBP/AUD Pending Breakout

(Created using Marketscope 2.0 Charts)

The GBP/AUD continues to retrace off of its 2016 low of 1.6720. Traders may look for bearish breakout opportunities below this value. Entry orders may be considered, that way pending orders to sell the market are waiting in the even prices drop below 1.6720. It should be noted that Daily ATR reads at 163 pips for the GBP/AUD. This places a preliminary 2X ATR target near 1.6394. Alternatively, a 1X ATR stop may be considered near 1.6883 to create a 1:2 Risk/Reward Ratio.

It is possible that price action may fail to breakout. In this scenario, traders may elect to leave pending entry orders, or opt to wait for a larger retracement before entering into the trend.

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Ilya Spivak , Currency Strategist

My Picks:  Holding Short EUR/GBP from 0.8631
Expertise:  Global Macro
Average Time Frame of Trades:  1-6 months

Check out the latest standings for the FXCM $10k trading contest HERE.

I argued that currency markets underestimated the risk that the "Brexit" referendum posed for the Euro ahead of the vote on June 23.The markets’ response immediately after the Leave campaign’s victory and in the period that followed suggests investors continue to downplay the Euro’s exposure. The EUR/GBP exchange rate soared as the results crossed the wires and continues to trend broadly higher two months thereafter, with prices touching a three-year high in mid-August.

On balance, this seems somewhat naïve. Negotiation of exit terms will take years to complete and uncertainly in the interim is likely to hurt trade and overall economic growth on both sides of the English Channel. Looking deeper, the political knock-on effects may be far more ominous. Opinion surveys suggest the Brexiteers’ success has stoked opposition to European integration at a decisively opportune time for those wishing to break down the EU and the single currency. The Five Star Movement is polling within a hair of Italy’s ruling PD party ahead of a constitutional referendum that may trigger early elections in October. Meanwhile, the eurosceptic FN and AfD parties in France and Germany respectively are enjoying growing support ahead of general elections due next year.

All this suggests that the epicenter of post-Brexit uncertainty has shifted to the heart of the Euro area. Fears that an anti-EU party may win outright or emerge as kingmaker in one or more of the region’s top-three economies may yet send investors scrambling. Meanwhile, jitters in the UK seem to have settled for now. Indeed, the BOE has gone into wait-and-see mode having issued the obligatory post-referendum stimulus expansion while the newly-minted Prime Minister Theresa May is in no hurry to invoke exit proceedings under Article 50 of the Treaty of Lisbon, making for a period of stasis in the near-term. Taken together, this may amount to sharp EUR/GBP reversal on the horizon.

On the technical side, the Euro failed to find follow-through after piercing July’s swing high and overturned the breakout, signaling a top with the formation of a bearish Dark Cloud Cover candlestick pattern. I entered short at 0.8631, initially targeting the 23.6% Fibonacci retracement at 0.8459. The trade has made some intial progress and remains in play. A stop-loss will be activated on a daily close above 0.8725, the August 16 high. Half one position will be booked and the stop-loss moved to breakeven when the first objective is hit.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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Michael Boutros , Currency Strategist

My Picks:  Near-term Setups in AUDUSD, NZDUSD & USDOLLAR
Expertise:  Short-term Technical
Average Time Frame of Trades:  1-2 Days

AUDUSD- As discussed in today’s webinar, I’m still holding a portion of the long with stops now raised to the U.S. session low. Ideally, Aussie rallies into structural resistance just higher where I’d be looking for favorable short-entries targeting a key support confluence at down into 7550.

NZDUSD Daily

Near-term Setups in AUDUSD, NZDUSD & USDOLLAR

The focus is on the 7200-7300 range with the broader risk weighted to the downside while below the July high-day close at 7296. Look for a break of this range this week with a move lower eyeing initial targets at 7148, & 7099. A close above 7300 shifts the focus towards a more significant resistance confluence at 7380/92. I’m also looking to play Kiwi weakness by way of GBPNZD – a trade we’re currently tracking on SB.

USDOLLAR 120min / Daily

Near-term Setups in AUDUSD, NZDUSD & USDOLLAR

The Dow Jones FXCM U.S. Dollar Index has been trading within the confines of a descending channel formation off the monthly high with price responding to near-term confluence resistance today, just ahead of the monthly open at 11936. The risk is lower while below this level with key near-term Fibonacci support seen at 11849/53. From a trading standpoint, I would be looking to fade strength while below the monthly open with a close below last week’s low needed to shift the focus towards the 2016 low-day close at 11783. Keep in mind Fed Chair Yellen is set to speak at Jackson Hole on Friday and is likely to charge plenty of USD volatility. I’ll update this setup on SB if something materializes.

Subscribe to SB Trade Desk to continue tracking all these setup and more throughout the week- Use coupon code: DFX2 at checkout to and take advantage of the DailyFX New Subscriber Discount.

Looking for more trade ideas? Review DailyFX’s 2016 3Q Projections

---Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex contact him at mboutros@dailyfx.com or ClickHere to be added to his email distribution list

Join Michael for Live Scalping Webinars on Mondays on DailyFX and Tuesday, Wednesday & Thursday’s on SB Trade Desk at 12:30 GMT (8:30ET)

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Tyler Yell, CMT , Forex Trading Instructor

My Picks:  Bullish EUR/USD
Expertise:  Elliott Wave, Technical Analysis, and Intermarket Analysis
Average Time Frame of Trades:  3- 8 Weeks

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Point to Establish Long Exposure: Daily Close > 1.1415

Spot: 1.1315

Target 1:1.1712 August 24 High

Target 2:1.1998 2015 Closing High

Invalidation Level: Close Below 21-DMA: 1.1162

Last Thursday marked the first time in two years that EUR/USD closed above the 100-week moving average. Whether or not this technical development is the first fruits of a kick-off higher or now will likely be determined by the Jackson Hole Symposium where Janet Yellen will speak to the theme, "Designing Resilient Monetary Policy Frameworks for the Future."

From a fundamental point of view, one would think the US Dollar should soon strengthen. Interest Rates Probabilities per Bloomberg’s data show traders are now pricing in a rate hike. However, new discussions over the neutral rate”—the rate that signifies the dividing line between an accommodative and a restrictive monetary policy may complicate matters for Dollar Bulls.

Robert Kaplan, CEO & President of the Dallas Federal Reserve recently stated in Beijing that, “a major driver of the decline in the neutral rate is a decrease in estimates of future growth.” Mr. Kaplan also goes on to note that the other forces driving down the neutral rate, which has picked up steam as a driving force of the U.S. rate hike path, seem to be putting long-term pressure on inflation expectations.

Therefore, the technical picture that will be described in more detail below and the fundamental components may be aligning for EUR/USD strength in the coming weeks, much like we saw in late August in 2015:

Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

Trade Setup:

Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

The price chart above (D1 EUR/USD), shows an uptrend in EUR/USD albeit, a choppy one. Here you can see the benefit of buying dips and the peril of buying rips or breakouts. Some traders may prefer to be long here as opposed to a breakout > 1.1415. However, what’s unique about 1.1415 is that since January 2015, we’ve been unable to spend more than a week above this level. Therefore, if we can break higher and sustain that break, it would appear from a technical view to be the clearest precedent for a strong move to and through the August high (1.1712).

Given this environment, a trailing stop would be used above an opposing down-fractal on the daily chart so that the trade would align 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.

Sentiment:

Right now, our Trader Sentiment Indicator SSI continues to provide a bullish bias.The ratio of long to short positions in the EURUSD stands at -2.31 as 30% of traders are long. Yesterday the ratio was -2.59; 28% of open positions were long. Long positions are 6.7% higher than yesterday and 10.4% below levels seen last week. Short positions are 4.7% lower than yesterday and 33.3% above levels seen last week. Open interest is 1.5% lower than yesterday and 14.8% above its monthly average.

We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the EURUSD may continue higher. The trading crowd has grown less net-short from yesterday but further short since last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

Key Technical Levels:

EUR/USD – Awaiting A Break-Away Move Above 1.1415

2nd Resistance: 1.1415, June 9 High

1st Resistance:1.1365, August 18 High

Spot: 1.1315

1st support: 1.1162 21-DMA

2nd support: 1.1044 August 5, Low

Shorter-Term EUR/USD Technical Levels for Monday, August 22, 2016

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.

Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

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James Stanley , Currency Analyst

My Picks:  Long USD/JPY
Expertise:  Price Action + Macro
Average Time Frame of Trades:  Few Hours - Few Days

Long USD/JPY at Market

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We’ve been discussing the macro setup behind this trade for a little over a week now. After the most recent Bank of Japan meeting underwhelmed expectations for an increase in stimulus, the Yen strengthened considerably to run towards longer-term resistance values. This has showed prominently in USD/JPY as price action is remaining supported above the widely-watched psychological level at ¥100.00.

The next Bank of Japan meeting is in September, but the long-side of this trade could see interest ahead of that meeting should expectations begin to rise (again) around another increase in Japanese stimulus.

Stops on the position can be set at ¥99.42 in order to get below the July swing-low and the ¥100-level in order to take on approximately ~160 pips of risk; and profit targets could be directed towards Fibonacci levels at ¥103.10 (1.3x risk), ¥105.35 (2.7x risk) and then ¥106.64 (3.5x risk).

Long USD/JPY

Created with Marketscope/Trading Station II; prepared by James Stanley

--- Written by James Stanley, Analyst for DailyFX.com

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