Aug 5 – Market Analysis

Market Overview

  • Momentum has switched on several pairs:  AUDCHF is back to bearish.  EURUSD is now bullish.  GBPUSD is now bullish. EURCHF is now bullish. USDCHF is now bearish. Additionally several other pairs are looking to change momentum this coming week – these include GBPCHF, GBPAUD and EURGBP (all in favour of GBP).  Additionally AUDJPY in favour of JPY.   All in all, EUR and CHF continue to be the strong currencies with AUD being the weak one and GBP/JPY also being on the weak side.  USD is neutral i.e. in the middle of the rankings.
  • Stock markets are still going strong – mostly rising a little, particularly in the US.  The European markets are still higher following Thursday’s large rally on the BOE/ECB announcements.  Gold and oil are holding.
  • This week could be good for trades because there is only some news on GBP and very little on USD and EUR.  RBA is announcing interest rates overnight from Monday to Tuesday.  I am being very patient with my trading now.  Well either that or I am just too blind to see setups that I should be taking!!
  • The analysis I did on Thursday – I wonder whether I could circumvent the large downswings by buying FX options rather than trading in the spot market.  Or I could buy options as a hedge for my spot positions?  How much will the weekly premium decay and higher bid-ask spread end up costing me?  Something to consider.

Analysis of pairs with S1/S2 setups that also have strength/weakness combinations:

  • EURAUD – there has not been a significant retracement here.  But is there an edge if we bought this pair anyway – say to increase the odds in our favour by looking for a logical target?  This would be outside the STAM strategy.  For example today I could go long at 1.4900 and aim for 1.4980.
  • EURJPY – this pair is currently retracing.  We can go long if we get bullish PA on either the D or 4H chart.
  • GBPCHF – this pair is retracing strongly, and is currently trading just outside the channel that I had drawn onto the W and D charts, and that has been holding for several weeks already.  Is this a temporary retracement, thanks to the good GBP news this morning before CHF will just take over as the stronger pair, and then make a new low, this time below 1.40, or will this mark an actual turning point in the downward trend.
  • EURGBP – this is also retracing heavily.  Wait for bullish PA.
  • CHFJPY – this one is also retracing.  Watch for bullish PA.
  • AUDCHF – weakness/strength – there is a 3BBO setup here on the daily chart.  Strong bearish candles – and inside bar on Friday, followed by a bearish engulfing candle – this is all looking good.  On the downside there is the RBA interest rate announcement today.  This is about 18 hours away.  I am going to use a stop of around 120 pips – this is aggressive because it’s only half of the range of the 3BBo candles.  I will use a large target, because if this trend continues then there is a lot of downside potential so I want to take full advantage of it – I will use target of 8035 for ½ the trade – shortly before the triple zero level of 8000 – and a moving target for the other half of the trade.  The entry level will be just below the 3BBO range – at 8260.

Other pairs:

  • GBPJPY – this is not in a S1/S2 setup, and both pairs are currently weak – however GBP has got the short-term momentum thanks to the better than expected numbers this morning.  Why not go long aiming for the MA line on the D chart?  Is there an edge in trading with the momentum and having a good logical target in place such as the previous high – with some good-looking candles? Is this sufficient for trading with an edge? This would be separate from the STAM strategy – and it would revolve more around trading post-news.  Is this something that could be developed in Aug/Sep?  Add it to the Heronlea Markets pipeline!
  • USDCHF – it is S1 but is not strength/weakness – but I thought I have a look anyway to see whether maybe the chart looks good enough for a setup – it doesn’t – never mind.

Action points:

  • Keep an eye on EURJPY, CHFJPY and EURGBP for bullish price action, in order to go long.
  • Keep an eye on GBPCHF for bearish price action, in order to go short.
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One Response to Aug 5 – Market Analysis

  1. Update 8.30/9.00pm
    EURJPY – this was still declining – no bullish PA as yet.
    EURAUD – still no significant retracement
    GBPCHF – the daily bar is now turning a little bearish. How is it looking on the 4H chart? Is today’s top of 4305 as high as it will go? Should I consider a short position? Yes, consider a trade here. Stop 4355, short at 4235 (120), target ½ at 4025, ½ at 3940 – strength/weakness – yes, retracement – yes, bullish PA – yes on the 4H chart, topping out above the MA – bearing inside candle, bearish engulfing candle.
    AUDCHF – order to sell at 8260 is still pending – is it still valid? RBA announcement now 8-9 hours away – thin trading prior to then? Is it essentially becoming a news trade? How is it looking on the chart? Chart is still looking the same. The setup is still there on the D chart. However it is now getting very close to the interest rate announcement. Consequently I will take it off. However the question is one that I should ask my coach: Well if it is 50/50 then my downside target is bigger than my stop size – so does that not give me an edge? Incidentally when price dropped before the bid on FXCM reached 8261.8 – less than 2 pips than my limit order!
    EURGBP – still looking very bearish. Wait for bullish PA!
    CHFJPY – No clear bullish PA on either D or 4J. One other thing that I have noticed is that the pair has made a lower high – that’s not a good sign for a bullish trade. I think that speaks against a bullish trade.

    That’s the update. Have entered short order on GBPCHF. Have removed short order on AUDCHF.


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