Tuesday, January 31, 2017

The USD/JPY Move To The Downside Continues. The Divergence Has A Limit Below 106.00.



The USD continues losing ground to other currencies and keeps falling. Whether the reason for that are the controversies surrounding the Trump administration and the reaction to those controversies or it’s due to purely technical factors is a matter of debate. The fact is, the USD continues moving to the downside.

For the past two days alone USD/JPY has fallen with 262 pips from 114.948 to 112.077 and today it formed a new low at the latter level.

Although the pair has reached a strong support zone around 112.50 – 112.00, in my opinion, its stay in this zone will be short-lived and corrective, after which the move to the downside will continue. The pair’s next target is at 110.30 - 109.90, but I doubt that is the end of it.

The RSI divergence on the daily time frame that formed from 25th November 2011 (113.895) to 15th December 2016 (118.660), as you can see on the picture above, has a limit at 105.886.


Monday, January 30, 2017

The Forex Calendar For This Week



Today is Monday, and although there were no high impact events influencing the market, to say that the rest of the week will be eventful would be a significant understatement. I think there will be considerable volatility on the market caused by news and their schedule is as follows:

On Tuesday the ECB President Mr. Mario Draghi will speak and make the opening remarks at a joint conference by the European Central Bank and the European Commission in Frankfurt.
There will also be a speech by the Bank of Canada Governor Stephen Poloz regarding the art of making monetary policy at the University of Alberta School Of Business.

On Wednesday we can expect the data on the British Manufacturing PMI, the US Crude Oil Inventories, a FOMC Statement as well as the Federal Funds Rate.

On Thursday will be announced the Bank of England Inflation Report and the Official Bank Rate and then the BOE Governor Mark Carney will hold a press-conference regarding the Inflation Report.

And finally, on Friday, being the first Friday of the month, the US Non-Farm Payrolls will be announced.

Thursday, January 26, 2017

One USD/JPY Divergence Reaches Its Limit, Another Is A Signal For A Drop



The RSI divergence signaling for a move to 114.30>>>  that I wrote about yesterday reached its limit and even slightly surpassed it – the pair rose to 114.47.
That is a good thing, because divergences occur quite often and to be able to calculate how far the currency pair will move in either direction is important for opening profitable positions.

On the M5 and M15 time frames there is a new RSI divergence, and although it is only between two highs, I expect it will reach its limit, which for now is at 113.73, as well.

It is possible for the divergence to deepen, which will become clear soon and we’ll have to adapt according to the situation.

For now the question remains whether USD/JPY will continue moving to the upside, in order to reach the limit of the trend channel it broke above, which is 346 pips and that means it will rise toward 117.50. I hope that the technical analysis will provide us with an answer in the following hours.


Wednesday, January 25, 2017

USD/JPY Is At A Crossroads



After the pair renewed its move to the downside from 115.615, it fell toward 112.514 without a problem, but at that level it met a pretty strong support, which was confirmed by the RSI divergence between three lows that could be observed on the M30 time frame. The limit of that divergence is at 114.30. At the current levels (113.60 – 113.80), however, the pair once again met strong resistance at the trend line and it has been consolidating in this zone for twenty hours now.


If the pair breaks above the resistance trend line I think we could expect a move to the upside toward 114.30 , which means that it will reach the limit of the divergence, and if it continues moving to the upside it could reach 117.00.

If the pair cannot break above the resistance trend line I think we can expect a renewal of the move to the downside and a drop toward 110.80 – 110.50.


Tuesday, January 24, 2017

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Monday, January 23, 2017

Watch Out For A GBP/USD Breakout Or A Reversal At 1.25



The pair reached 1.24716 and although it looked like the divergence between three highs on the 15M time frame would have the expected result, that is, the pair would start dropping, nothing of that sort happened.
GBP/USD continued rallying and at the moment it is trading slightly below 1.25.

1.25 is, however, a strong resistance level, so I don’t think that the pair can break above it and remain above without forming at least a small correction.

So the possibility for the divergence to deepen and for the pair to start dropping isn’t completely out of the question yet.

On the other hand, in case the pair breaks above 1.25 and remains above that level the next strong resistance level is at 1.28.

USD/JPY Renewed Its Move To The Downside



After a small breakout above the trendline and a slight expansion of the trend channel it’s clear that the pair has renewed its move to the downside.

In my opinion, the zone around 112.70 – 112.50 is just a temporary stop and a support for the USD. After a breakout below that support we could expect another drop toward the support trend line of the channel.


If we examine the M5 time frame, we can conclude that there will be a correction up to 113.00 – 113.20 at the above-mentioned levels, but even if that correction were to occur it will be only temporary before a renewal of the move to the downside.

The target of this drop is the support trend line of the channel, i.e. around 111.50 – 111.00.
What is more, after a correction at those levels I think there will be another drop toward 110.00 – 109.50.

Friday, January 20, 2017

EUR/USD Is Moving In A Bullish Channel



EUR/USD is moving in a bullish channel, which is especially noticeable on the 4H time frame.

That move to the upside within the channel began from 1.0340 on the 3rd January and continues to this moment. For now I expect it to reach the resistance trend line of that channel again.

Usually the best thing one can do during such a movement is to open a long position when the pair reaches the support trend line and to sell when it reaches the resistance trend line, while being on the lookout for any breakouts in either direction.

For the moment, however, the pair continues moving slowly to the upside, and I think that it will probably reach 1.0760 – 1.0780.  A move to the support trend line is also possible, toward 1.0620.

Apart from trading the movement within the channel one could alternately wait for a trend channel breakout, which requires a bit patience, analyze the pattern it formed, figure out its limit and trade that instead.


USD/JPY Broke Above The Trend Line



USD/JPY broke above the trend channel, reached the resistance at 115.50, retraced to test the trend line and continues slowly moving to the upside for now.

It is possible for the test of the resistance trend line not to be over yet and for the pair to retrace again toward it. It is also possible for this to be a false breakout and for the pair to renew its move to the downside.

Still, we should not discount the possibility for a further move north.
Whenever there is a trend channel breakout one of the possibilities is for the pair to reach its limit, which in this case is 365 pips.

If the pair does continue moving to the upside to reach said limit that would mean it will test the resistance zone around 118.50 – 118.70, which is marked on the screenshot with a thick blue line.

In the alternate scenario the pair will begin consolidating sideways as the pair wouldn’t have the energy to reach such an ambitious limit. In that situation we should be on the lookout for patterns (a triangle, a flag, a pennant or others) that are a signal for a move to the downside.

For the moment, however, I think the least likely possibility is for the move to the downside to begin right now.

Thursday, January 19, 2017

USD/JPY Is Testing The Resistance Trend Line




USD/JPY has been moving in a clearly defined trend channel during its move to the downside from 118.606 to the low at 112.569.



The limit of the RSI divergence on the 1H time frame for this pair was at 113.883. USD/JPY, however, managed to climb with over 100 pips more, reaching 114.971, i.e. reaching the resistance line of said trend channel and for now it is consolidating close to it, likely to test it.

If the pair breaks above the trend line and continues moving to the upside the next possible resistance it could test is at 115.50.

In case it cannot break above the trendline I think it will renew its move to the downside.