The yen currency matrix in focus as equities fall

The overnight fall in the Nikkei 225 of 1.76% has resulted in an impressive two bar reversal (aka a shooting star) on the daily chart for the USD/JPY - so no surprise to see the pair move lower in this morning's trading session. What is perhaps more significant is this move in the JPY is not consistent across the JPY pairs we follow on our matrix, and in particular the EUR/JPY and GBP/JPY. The latter is a pair I am looking to short on a longer term basis, but patience is required not least because I want to see the JPY begin to move away from the bottom (oversold) on the currency strength indicator. This also highlights a key aspect of forex trading, namely individual currencies can stay overbought or oversold for much longer than we expect. Much, of course, will depend on risk sentiment, and in particular whether the current downwards trend in equities continues, and if so then we...
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EUR/NZD reverses recent trend for the New Zealand dollar

The EUR/NZD has delivered some excellent trading opportunities across all the timeframes this morning to the short side, following the recent heavily bearish sentiment towards the New Zealand dollar which has seen it weaken against all the major currencies. Indeed longer term the NZD is now looking increasingly oversold, so we may see this trend reflected on the slower timeframe charts in due course. This morning's move was signalled initially with a move below the volume point of control (VPOC) on the 30 minute chart ( the yellow line), a move that was duly supported with rising volume and confirming the bearish sentiment. In addition, the transition in the trend monitor indicator from blue to red also confirmed this reversal, coupled with a pivot high indicator prior to the move through the VPOC. Since then, momentum to the downside has increased with volumes also rising sharply and confirming the wide spread down candle as we approach a potential area of support...
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EUR/USD turns bearish moving through the VPOC

The EUR/USD continues to look bearish as it sits on support between 1.0885 & 1.0890 & just below the VPOC the yellow line on the volume point of control indicator. This level has now been breached on good volume and should take the pair to 1.0863. In addition the trend monitor has also transitioned from blue to red and with the US unemployment data coming up shortly, this could provide further downwards momentum if the numbers are on target or better than expected. The forecast this time around is 271k against a previous of 274k and whilst this is an important number it is the backwash from Janet Yellen's US dollar positive comments which continue to drive the US dollar higher, coupled as always with ongoing concerns over the Greek debt issues, which have yet to be resolved - if ever! The currency strength indicator is confirming the negative sentiment for the single currency with the orange line, the euro, reaching an...
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USD now moving into overbought on the 4 hour chart

Without wishing to downgrade this evening's FOMC minutes, which will no doubt result in the usual volatile market moves, stop hunting & general shenanigans, the main FED event takes places on Friday at 6.00 pm London time. This is when Janet Yellen is due to give an important speech about the US economic outlook, and so one to watch. Meantime USD strength has continued overnight across the majors and into this morning, with German PPI helping to give the eurodollar a shove lower. Other items of note this morning include the MPC (Monetary Policy Committee) of the BOE playing their standard formation (football parlance) of 0-0-9. In other words 9 defenders, no midfield & no strikers. For FED watchers FOMC Member Evans has been speaking in Munich and has been simply repeating his call for a delay in raising interest rates. No moves expected as he is re-iterating his well known stance as a dove. This is why we need to know where...
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Aussie dollar and the AUD/NZD the ones to watch

Here in UK election day is almost here & we can expect reactions as soon as the exit polls start posting as well as the actual results. Heaven only knows what is going to happen. So far GBP has been fairly well behaved - moving more as a result of USD & EUR. Meanwhile in Asia - AUD has employment data to contend with. On 4hr CSI we have seen the AUD pull back & is also showing the NZD as hugely oversold, but as mentioned many times before a currency can stay stubbornly over stretched for a considerable time. And in the case of the Kiwi where it is still falling on the weekly and daily charts it is likely to stay down on the 4 hr chart. Of course AUD/USD is the one to watch, but expect to see moves in the AUD/NZD cross with some interesting volume/price action now developing in the slower timeframes, and with the NZD (...
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Volume point of control (VPOC indicator MT4) confirms bearish sentiment for USD/CAD

In a relatively quiet day of trading in the forex markets with both the UK and Japan closed for public holidays, it's been the Canadian dollar which has moved significantly during the session, and picking up the longer term bearish tone once again. In early trading, the pair moved in a tight range, before finally breaking through the platform of support in the 1.2145 area and continuing lower to currently trade at 1.2095 at the time of writing. The price action has now continued lower with the volume point of control indicator (VPOC indicator MT4) remaining firmly in place above in the 1.2110 area on the 30 minute chart, and signalling further downside momentum in due course. The trend monitor has remained firmly red throughout the trading session, and with the currency strength indicator to the left confirming further strength for the CAD and weakness for the USD, the volume point of control (VPOC) is likely to move to the next...
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An interesting week ahead for the British pound

An interesting week ahead for the British pound

It was an interesting week for the British pound and in particular against the US dollar, with the pair selling off sharply on Friday and closing with a wide spread down candle on the daily chart. The move lower was in stark contrast to the recent trend for Cable which had been firmly bullish rising in tandem with the EUR/USD as US dollar weakness prevailed on the dollar index. The move on Friday came as no surprise to those traders using a currency strength indicator, with the British pound moving to a deeply overbought region on the indicator, and counterbalanced with the US dollar being equally oversold in the slower timeframes. With Thursday's election now on the horizon, and with a slew of opinion polls due for release in the next few days, these are continually signalling a close result with no party likely to have an overall majority in Parliament. As a result we can expect to see further...
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An extraordinary day for the Aussie dollar

In many ways an extraordinary day - particularly for the AUD/USD which has posted a huge candle on the daily chart. In fact the three main USD pairs David & I follow, namely the EUR/USD/ GBP/USD & AUD/USD have all ended in positive territory - with the Aussie the clear leader!! All three have, of course, benefited from relentless USD selling, and for a view of whether this is set to continue we will have to wait for tomorrow's advance GDP release and also the FOMC. The USD is certainly over extended on the medium term time frames (30 and 60 min) as can be seen on the currency strength indicator alongside the chart above. However, as we've seen with the Aussie today, a currency can stay over extended for very long periods of time. In the higher time frames there is still some room for the USD to fall even further. Indeed the monthly chart for the USD index is...
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Cable very bearish on the longer term charts

Ahead of the manufacturing production number the British pound has been particularly lively in the past couple of hours with 6 volatility candles alone being triggered on Cable on the 3 min chart. For Cable, yesterday's rally which saw the pair bounce off support in the 1.4760 region was a move more akin to a 'dead cat bounce' as once the pair hit the major resistance at 1.4840 at the start of the US session opened the floodgates for some heavy duty selling. This took cable down 1.4684 before it finally managed to find some support as the market moved into Asia. A number of reasons have been suggested for this move, including the tensions and uncertainty surrounding the upcoming UK election, and as highlighted yesterday, we are seeing a major sell off in UK gilts. In the face of such uncertainty It appears foreign investors would much rather move their money into US Treasuries and Asia, and Japanese investors in particular...
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Forex currency strength indicator explained

Question Hi Anna, Firstly, I just wanted to say I've just finished "Forex For Beginners" and I thoroughly enjoyed the book; found if extremely helpful and useful. Opened my first forex account on Friday of last week. Made some mistakes at first, lacked the discipline to follow my strategy, I think I was a tad over keen to trade at first. I've just purchased "A Complete Guide to VPA" so I'll start on that tonight. I have a quick question though if you wouldn't mind answering. In Forex for Beginners, you use the Currency Strength Indicator to look for potential indicators of an upcoming reversal. And then from this you use the currency matrix and analysis to confirm the reversal. I was just wondering, if you could use the same strategy to indicate a continuing trend? If this is explained in the book I've just purchased I apologise, I just thought I'd ask. For example, if both the Aus and Usd are...
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