NZD/CAD Is Testing the Resistance Zone Around 0.96 for a Fourth Time

The pair is at a very interesting level – it has formed a triple top and the expectation was that it would begin moving to the downside, but it has once again climbed to test the still unbroken resistance at 0.96.

There is no such thing as a quadruple top in technical analysis – or at the very least I have never read about one. The pair testing the resistance for a fourth time means that we will most likely see a breakout and a further move to the upside above the resistance level, which means that NZD/CAD will reach historical highs.

Only a strong fundamental reason could ruin this scenario. There are persistent rumours that the Reserve Bank of New Zealand could lower its interest rate, which is currently 2.25, and that will inevitably weaken the New Zealand currency.

Either way, it’s a good idea to watch this pair carefully in the coming months.

The NFP Data Caused a Market Disturbance, but Only Briefly

As usual the NFP caused a market disturbance in the first Friday of the month (although this time they were announced on the second Friday).

As analysts predicted, they were positive for the American economy, even more positive than what was expected.

While some currency pairs reacted by moving in a set direction (such as USD/CAD), others simply formed whipsaws, for example EUR/USD and AUD/USD.

AUD/USD was especially interesting for me today, because despite the strong positive data it first dropped in favour of the USD in the first minutes after the news came out, after which it immediately started climbing in favour of the Australian currency. That once again supported my conviction that the important economic data is more of a catalyst, rather than the main reason for currency pairs moving in a predefined direction.

Regarding AUD/USD  - despite the sharp drops the pair once again started moving in the direction I actually already discussed in my last post>>>, i.e. it began a corrective movement to the upside. It seems that no news about economic data can stop this predefined movement in the mid- or long-term.

The Secrets of Bollinger Bands Part 3 - Indicator Description

The Bollinger Bands determine the natural highs and lows in a developing trend. If the bands are pointing north, then the price usually climbs, until there’s a good enough reason to stop.

The zone of stagnation develops either above the upper band or below the lower band.

This stagnation does not end until the Bollinger Bands begin to spread, moving away from the price bars, which is a signal that the resistance (or the support) has been overcome.

The price could move sharply in the direction of the current trend, sticking closely to the Bollinger band. Of course, one should always keep in mind that price movement depends on all levels of support and resistance, not just those that are associated with Bollinger Bands.

One should not look for ideal conditions to open new positions. We have to be aware that the conditions will never be perfect, and we need to learn to trade in imperfect conditions, even when we see false signals.

The USD/CAD Range Continues

And it is a rather wide range, which, however, is slowly tightening.

If you add the trendlines it looks like they form a figure that very much resembles a symmetrical triangle. And while there is a resemblance, we cannot be absolutely sure that it really is one.
For any triangle to be valid and for its limit to be reached it has to fit a lot of criteria – criteria for the number of waves, highs and lows within it, for number of the waves within each wave, as well as where there should be a breakout.

As you can see on the chart I have attempted to mark the supposed highs and lows and if this is truly the correct scenario, there should be a breakout to the downside. Still, this figure could lose its form and turn into something completely different at any given moment.

Either way, this figure is forming on the daily time frame, which means that it will take days before it is finished and before there is a breakout, during which time we have to follow how it is forming, so we can trade this. Until that time we will have to do intraday trades, because the picture isn’t clear yet.

AUD/USD – What Happens after the Rate Decision Announcement?

The new week for AUD/USD began with a 44 pips gap that was recovered only for a few hours. What is more, right after the beginning of the London trading session the pair continued rising and did not stop after the American trading session began, climbing with 92 pips for 18 hours.

Tomorrow the Reserve Bank of Australia with announce its rate statement for July, but financial analysists don’t expect a change this month. What direction will this pair take after the announcement? I would like us to focus on what the charts tell us.

You can clearly see that currently the pair is in a bullish trend, even though it is a corrective one.
The trendlines on the monthly time frame have formed a zone of a move to the upside, and in my personal opinion AUD/USD won’t stop climbing before it reaches the resistance trendline of the downwards channel (the purple line). I am deliberately avoiding mentioning any exact levels, since I am referring to the monthly time frame and it is difficult to make an exact prognosis. Despite that we are all aware of the influence trendlines have on the market as static levels of support and resistance that affect all the movements of all instruments.

 In the alternate scenario the pair will fall towards the support trendline of the upwards channel (the dark blue line) and might break below it. In my opinion, however, this scenario is less likely.

The Secrets of Bollinger Bands Part 2 – Indicator Description

Visually speaking the indicator consists of two lines that frame the price from above and below. They can be viewed as dynamic lines of resistance and support and most of the time they are plotted away from from the price.

The width of the Bollinger Bands itself depends on the volatility – when the market is more volatile, that width increases automatically, when it’s less volatile it decreases – also automatically. The main rule is that 95% of the price movement is always contained within the Bollinger Bands and about 5% remains outside of them.

The Bollinger Bands indicator consists of three lines:

-The middle line is a simple moving average.
-The upper band is the same moving average that is plotted a number of standard deviations away, usually 2.
-The lower band is the same moving average, plotted a number of standard deviations away, usually 2, but below the middle line.

If the indicator’s properties are set properly, then the middle line can be considered as a great level of support and resistance, and the bands can serve as targets of opened positions.


 To be continued...

The Secrets of the Bollinger Bands Indicator Part 1

The first time this indicator was described was in 1987 by Perry Kaufman in his book called The New Commodity Trading Systems and Methods. Later the indicator became widely popular thanks to the American analyst John Bollinger.

He was born in California and first worked as a cameraman, but quickly forgot his first profession and devoted himself to his work as a technical analyst of the Financial News TV channel. During the course of his work he had the opportunity to observe and study the financial markets. It was exactly during that period – between 1984 and 1991 - that he created his own system for rational analysis, which is being used to this day and is still as relevant as it was decades ago, now popularly known as “Bollinger Bands”.

In a series of posts I will do my best to introduce you to the nature of this useful and simple indicator, which gives us important information about the way an instrument moves, and also I will elaborate on the ways that it can be used rationally and effectively while we trade.