Sep 12 – Market Analysis

Overview

Equity markets have all retraced a bit. Gold has moved down to around $1,340.  Oil is steady.  We have two big US figures on Friday afternoon – Retail Sales and UOM Sentiment index.  Thus be wary of USD pairs.

FX Market

  • Some Yen strength overnight across the board, on all pairs.  Sterling continues to show strength (but significantly less than Yen) across all pairs.  AUD has shown weakness overnight too – this is due to the negative employment numbers that came out at 2.30am GMT.  The reason for the Sterling is actually the Inflation Report Hearings that commenced at 10am.  I have not come across any quick obvious explanation for the Yen strength – therefore I won’t bother trying to understand why – there simply is some strength there.
  • GBP Inflation Report Hearings happening right now.  Draghi is talking this afternoon, so stay away from all the EUR pairs. 
  • No change in the matrix.  The rankings and points are still t he same.  On that basis the only pairs with potential setups to consider are EURJPY and GBPJPY (still in S1B).  Both are showing retracements at the moment.    Keep an eye on those.  Nothing to enter into the market as yet.
  • Weekly momentum is looking to change on four pairs this week – EURJPY (for EUR), EURUSD (for USD), USDCHF (for USD) and USDJPY (for USD).  Thus it look as if weekly momentum is shifting in favour of USD on quite a few fronts.  Bear in mind that the weekly momentum has a lot of lag.

S1/S2 Setups

  • Nearly every currency pair is actually in either  a S1 or S2 setup at the moment.  But we can remove the US and EUR pairs because of news, which, after the strength/weakness combos, leaves me looking at AUDCHF, GBPCHF and AUDJPY.
  • AUDCHF – this pair has rallied 400 pips over the last two weeks and is now consolidating – this has only just gone above the 89MA and thus gone into S2B.  It looks like I could have a 3BBO by the end of today and/or a Corn Trade off the 4H chart – so keep an eye on this – although they are currently both in the middle of the matrix, AUD is coming up from the bottom and CHF is coming down from the top!
  • AUDJPY – this one has been rallying strongly too.  But now has a strange formation on the weekly chart.  A very bearish looking pin bar – that is sitting all on its own.  The pair has fallen 150 pips for the day.  No wonder, given that AUD was weak and JPY has been strong.    To be honest, I am every tempted to just short this pair to go with the immediate momentum – to hop onto the trend.  But this is outside of my strategy parameters – so I will not trade it.  If I was forced to trade, then I would sell at market at 91.80, stop at 92.30 and target 91.10 for a 1.4RR.  From a STAM perspective, this is not a pair I would like to buy right because of the really weird price formations.
  • GBPCHF – this pair has rallied 500 pips over the last two weeks and has now run into resistance (a supply zone 4750-4820) – that dates back from May 2013.  Price entered into the zone but was rejected sharply.  Price is now consolidating.  The next likely speedbump should price break through could be just beyond 4900.  Given the recent strength I would think it is likely that price will test that area again and having a target of the previous high around 4780 (or a bit below) – currently 60 pips away, would be rather reasonable.  Enter order – pay 4748, stop 4668, target 4910 (risking £750, or 0.75R).  Technically speaking, there is no strict bullish price action – and the retracement has only been 100 pips.  But I feel like I have been very patient and selective so far, and am justified in taking a trade here.  The moving average on the 4H is rising steadily.  There was a 4H corn trade setup on Tuesday morning, there was a quite a volatile candle when the GBP claimnant count came out on Wed morning, since then price has been trading in a tight range – the Inflation report hearings have passed.  It just seems like price is now ready to move higher.
  • Basically this pair has rallied very nice and has now consolidated a little, however it is continuing to make higher highs and higher lows.

Actions to take

  • Look at EURJPY again later in day – say around 2pm – as Draghi talks at 12.40pm
  • The retracement on GBPJPY is slowing down – it is hovering on the fast MA on the 4H chart  – check it again later.
  • Look again through all the EUR pairs following the Draghi talk – is there anything worth taking there.
  • 10pm – keep close eye on AUDCHF for a potential long trade – is a 3BBO likely – enter long order if that looks to be that case.
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One Response to Sep 12 – Market Analysis

  1. EURAUD – Look for a bearish corn-trade setup on Friday morning. Nothing doing on other EUR pairs following Draghi.
    AUDCHF – 3BBO looks unlikely at this stage.
    GBPJPY is still retracing.
    GBPCHF – order not yet filled.

    Like

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