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- EUR/USD – Could We Predict The Bullish Move?
- EUR/USD Provides Bearish Signals
- Major US News Likely to Shake Up Market Today
| EUR/USD – Could We Predict The Bullish Move? Posted: 14 Jan 2011 02:54 AM PST
On January 10, after the EUR/USD pair saw a third failed attempt to fall below the 1.2870 support level, a bullish correction took place, and the pair gained about 580 pips within four trading days. Is it possible to predict such turn of events? Let's try to answer this using technical analysis. First, please observe the EUR/USD 4-hour chart below; this will be the main tool we'll work with in this article. Now, let's look for all the signs that could have driven us to suspect that a bullish reversal is about to take place. • As written on the opening paragraph, the bullish correction only took place after the pair saw several failed attempts to fall below the 1.2870 level. When a currency pair sees such a strong support level – traders must question whether the market actually desires to see the pair traded below this level. It is no coincidence that the pair's bearish move is blocked over and over again at the exact same level. • Look at the Slow Stochastic indicator. First, a bullish cross was completed below the 20-line. This often means that a bullish correction might be impending. In addition, no less than three additional bullish crosses took place afterwards, all within a very short period of time. The first bullish cross has signaled that a bullish move might take place, the other bullish crosses that followed have signaled that the market is reluctant to let the pair resume to a down-trend. • The MACD is probably the easiest to analyze. A bullish cross at the bottom of the section is very likely to predict a bullish reversal. As you can see, the MACD has never switched its indication, and continues to provide bullish signals. • The Relative Strength Index (RSI) has provided two significant bullish signals. First, it rose above the 30-line, reaching out of what is referred to as the over-sold area. When the RSI crosses the 30-line and continues to point up, it usually mean that the currency pair will follow its lead. The second signal was given once the RSI failed to fall below the 70-line. If the RSI would have fallen below this level, it should have warned us that the bullish move might have reached its end. However, once the RSI reversed its direction, and once again pointed upwards – it signaled that there is still significant bullish pressure on the pair. • The timing of the bullish correction could have been predicted using the Bollinger Bands. When the Bollinger Bands are tightening, it's a clear signal that a sharp movement is likely to take place. Considering all the bullish signals written above, traders could have suspected that the Bollinger Bands are signaling that the bullish correction will take place soon. • Last but not least – sophisticated traders could have noticed that a double top pattern has begun forming on the chart. Once the pair crossed the 1.3020 resistance level, the beginning of the pattern could have been observed by traders, and once the pair crossed the 1.3200 resistance level – traders could have seen it as a signal that the pattern will be completed, meaning that the pair will reach the 1.3450 level.
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| EUR/USD Provides Bearish Signals Posted: 13 Jan 2011 11:56 PM PST
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, as I demonstrate below, the 8-hour chart signals that a bearish reversal is imminent. Forex traders can take advantage of this imminent downward movement by entering short positions at an excellent entry price. • Below is the 8-hour chart of the EUR/USD currency pair. • The technical indicators used are the Slow Stochastic, Williams Percent Range, and Relative Strength Index (RSI). • Point 2: The Slow Stochastic indicates a bearish cross, signaling that the next move may be in a downward direction. • Point 3: The Relative Strength Index (RSI) signals that the price of this pair currently floats in the over-bought territory, indicating downward pressure. • Point 4: The Williams Percent Range has peaked near at the 0 marker, which means that there may actually be a strong level of downward pressure. EUR/USD 8-Hour Chart |
| Major US News Likely to Shake Up Market Today Posted: 13 Jan 2011 11:28 PM PST
The US dollar took a significant bearish turn yesterday, following the most recent US Unemployment Claims figure. Today, the dollar will have ample opportunities to recoup the losses it took, as a batch of news is set to create heavy volatility before markets close for the week. Here is a roundup of the day’s main news events: 13:30 GMT-USD Core CPI The Core CPI figure measures the change in price of goods and services in the US, excluding food and energy, over the last month. An increase in the CPI is typically a sign that inflation is on the rise, which tends to generate speculation of a possible interest rate hike. Today, analysts are forecasting the Core CPI to come in at around 0.1%. Should the actual result beat expectations; traders can anticipate the dollar to make significant gains in afternoon trading. 14:55 GMT-USD Prelim UoM Consumer Sentiment The Consumer Sentiment report is a survey that asks 500 people to rate the relative level of current and future economic conditions in the United States. This report is considered particularly significant because of the direct correlation between the economic outlook of the American people and the level of consumer spending. This month, analysts are forecasting a figure of around 75.5, which if true, would signal an increase over last month’s result. Providing the analysts’ predictions are correct, the greenback is likely to see a healthy boost to close out the week. |
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