Following last week's turbulent price action, no surprise that today the markets have been a litte muted with the added bonus the Shanghai Composite only fell 5% in overnight trading. And with Japan closed for it's annual Coming of Age Holiday even the Nikkei could take a day off!
Meantime last Friday the euro was the currency to watch as it ended the trading week on a burst higher against most of its counterparts, and posting very positive candles on the daily charts. However, despite an early follow through today's trading session for the euro has been marked by some great trades to the short side, in particular against the USD, the Aussie, GBP, NZD & CAD.
The euro daily matrix illustrates this perfectly with the eur/usd, eur/gbp/ & eur/aud all exhibiting similar price action. The exception had been the eur/nzd, but here too the euro appears to be moving back to test the VPOC (volume point of control) at 1.6420.
Against the...
Good to see the Kiwi on a bit of tear (the white line on the currency strength indicator), but comes as no surprise given how oversold it was at the end of last week. We've been tracking the NZD/USD which has had a huge move higher overnight & broken through the VPOC on the daily chart and is now touching the 100 ma.
As we mentioned in yesterday's webinar although December price action can often seem erratic, it can nonetheless offer some great trading opportunities. And those of you who come along regularly to our webinars will know David & I are great fans of both the Kiwi and Aussie!
Kiwi Roaring Higher on the Currency Strength Indicator
The Kiwi (NZD) is roaring higher recently. This commodity currency shows strong momentum. The currency strength indicator highlights it clearly. NZD ranks at the top against majors. Traders spot bullish opportunities in NZD pairs.
CSI on Slower Timeframes
The currency strength indicator works across all timeframes. On...
This morning's highlight comes from Chancellor George Osborne here in the UK with his Autumn Forecast Statement, so expect lots of smoke & mirrors, volatility and opportunity to shake traders out of the market.For the British pound complex on the faster time frames, it's been a case of some good moves lower against USD, JPY & euro. The hourly currency strength indicator is also highlighting the GBP as heavily oversold, but as we have said many times in our forex webinars - currencies, markets and instrument can stay stubbornly over extended much longer than we think. And as we also say in the webinars your time horizon will always be a factor in any trading decision, and also help to quantify the level of risk associated with that trade.
Discover more about the currency strength indicator here....
Majors Wait for the FED
Major currency pairs often pause ahead of FED decisions. Uncertainty creates consolidation. Traders wait for clues on rates or policy. This builds tension. Volatility follows the release. Volume price analysis (VPA) helps navigate the wait.
Ahead of today's release of the FOMC minutes it has been the commodity dollars that have reacted most strongly to a stronger USD, whilst eurodollar and cable have been contained to a very narrow trading range. It will be interesting to see whether these two laggards will play catch-up once the minutes hit the news wires.
USD/JPY too has been contained, with the pair cautiously approaching the 124 price point, but finding the 123.60 price level so far difficult to breach. For USD/JPY, it will be a reaction in equities that determines whether we see further upward momentum in this pair, as the market waits for clues on the FED's interest rate intentions.
Why Majors Consolidate Pre-FED
FED announcements drive USD strength. Hawkish tone (hikes)...
Understanding PMI Data: What It Is, Key Global Releases, and Why Chinese PMI Matters Most
Purchasing Managers' Index (PMI) data is one of the most watched economic indicators in forex and global markets. It's a leading gauge of business health. Traders use it for clues on growth, inflation, and central bank policy. Volume price analysis (VPA) confirms reactions—high volume on moves post-PMI shows conviction.
New trading month sees the usual crop of PMI releases. China has already reported today we have the numbers from Italy, Spain and France as well as the UK.
Although UK economy is predominantly services based, the manufacturing number has been managing to hold above the key 50 level. From a technical perspective so far best move for GBP has been against the AUD with cable confined to a relatively tight range. However, we should start to see some movement once the PMI number has been released, and the new week gets under way.
Interestingly cable on the daily chart...
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Euro Tumbles on Draghi Comments
The euro tumbled sharply on Draghi comments. ECB policy hints drove selling pressure. Markets reacted to dovish tone. This created strong downside momentum in EUR pairs.
Mario Draghi's comments at the ECB conference regarding further stimulus has led to a dramatic fall in the euro across the board, and the eurodollar in particular. This weakness, however, was first signaled last week, and has been developing since the start of the trading week, and is a follow through from the two bar reversal posted on the daily chart.
Today's price action on the eurodollar daily chart has resulted in a volatility candle being triggered given the extreme move, and if there is no follow through, then it should be surprise to see the price action simply retreat to within the spread of today's candle.
In addition today's price move has seen the eurodollar move back through the volume point of control.
Volume Price Analysis Insights
Volume price analysis (VPA) confirmed the tumble....
Aussie Waits on RBA
The Aussie dollar waits on RBA decisions. Rate holds or changes drive volatility. Traders watch closely for clues on monetary policy. This often sets the tone for AUD pairs.
Some really nice two way price action on the Aussie complex which started overnight on the release of Chinese data, namely GDP, the Industrial Production and the Fixed Asset Investment numbers. The hourly chart for the complex clearly shows volatility candles being triggered across the board (as denoted by the purple arrows), with the Aussie rising sharply before moving back inside the spread of the volatility candle. This momentum was also signaled on the currency strength indicator before the currency moved into a consolidation phase in the transition to the European and London sessions.
Further Gains
There were further gains for the Aussie in the morning session, until bullish momemtum drained away which resulted in some great trades to the short side. These were particularly evident in the AUD/USD, GBP/AUD and...
Don’t Ignore the Kiwi – It Can Deliver Some Great Trades!
The Kiwi (NZD) is often overlooked in forex trading. But it can deliver some great trades. High volatility and commodity links create sharp moves. Traders who ignore it miss opportunities.
A currency often overlooked by forex traders is the New Zealand dollar, which is a great shame because this commodity dollar can often deliver some impressive and consistent trades, particularly on the slower time frames. And for a reason we only need to glance at the daily chart of the currency strength indicator.
Following a sharp move lower in August towards the oversold region of the CSI, the New Zealand dollar then spent the next four weeks trying to move away from this region, before finally finding some traction towards the end of September. Since then the NZD has moved sharply higher against most of its counterparts, with a number of pairs lifting off simultaneously.
Which NZD Pairs?
Of the pairs which make up...
The Aussiedollar weekly chart is another classic example of how patience can be richly rewarded following the extended congestion phase of March to August 2014 which saw the pair trade in an increasingly tighter range around the VPOC (volume point of control) in the 0.93 to 0.94 price area. This type of price action is always a signal of an explosive move once the breakaway occurs.
And as we can see clearly on the chart this phase of price action came to a dramatic end with a wide spread down candle which triggered the volatility indicator (the purple arrows top and bottom), as the price action moved outside the average true range in this time frame.
The Price Action
The price action to the downside was duly confirmed with a close well outside the volatility candle and further confirming the inherent weakness in the pair. Since last August the trend lower has also been perfectly confirmed and defined by the dynamic price pivots...
