Category Archives: Currency market

Flavours for 2015

Evening traders/investors,

Apologies for the inactivity during the last few months. It seems to me that I trade less, and have less to say as a blogger too – probably all due to the more patient and relaxed trend-following approach I have been making a transition to over the last year or so. Belated Christmas and New Year greetings to all of you. As market participants, it is best to wish one another a better year ahead! Every year the word “volatile” is used to sum up the markets but it is inevitable that markets will fluctuate and throw up some surprises somewhere inside a whole calendar year. 2014, however, was not so exciting as compared to other years. The local bourse certainly did not give me that many trend opportunities; so much so that I had to look at some other equity markets for the first time. The USD’s languid state in the first two-thirds of the year did not present any concrete trend set-ups too. There were a few set-ups in certain markets, and those set-ups are still valid over the turn of the year.

The first flavour I have for the new year is the possible divergence between Europe and US. I first discussed this view in this post https://technicalanalysistalk.wordpress.com/2014/11/05/end-of-europes-uptrend-while-america-advances/ . It seemed difficult to envision an inversely proportional divergence between those two markets; so I concluded that it probably means general sideways movement in Europe while American equities continued the charge north. For now, the picture is the same to me: nothing has changed in the broad sense for those two markets.

The local bourse- the STI, still does not look that bullish to me even with a decent 6% showing last year. I think this is because I do not see that many bullish set-ups in the constituent counters. The banks did well for the STI last year, and they look set to hold the gains this year, though this will require analysis in the months ahead. SIA also surged suddenly late last year so I will see what is up with the national carrier. The “Jardines” jumped a little in the second half of last year but do not look to improve much from here on. The “agris” are tanking quite badly, and as a trend-follower, I will look for further downside. (Exclude Olam from this list; Olam is an example of what happens when some people interfere. Of course, I do not know what goes on behind their curtains and that of other places, but the way I see it, Olam was saved from utter embarrassment “unnaturally”.)

Funnily, most if not all of the counters in the STI with the word Singapore in the company name have bearish-looking charts. The general stance I am taking on the local equity market is a bearish one for the blue-chips. However, I think there may be better rish-reward opportunities outside the STI, therefore, I will look at the second- and third-tiers more closely. Judging from the last few months of last year, I do not have many interesting charts to share, hence what I mentioned in the first paragraph, “The local bourse certainly did not give me that many trend opportunities; so much so that I had to look at some other equity markets…”. Oil and gas and shipping sectors are looking quite horrible, and property counters do not look promising too (I would have said outright bearish if not for the performance of one or two big players).

I will continue to watch Gold quite closely. The glittery metal seems to be on the verge of a continuation of a major downtrend. Somewhere last year, I was alerted to a break of major support. Gold managed to hold on after the slight violation of support but time will tell if gold can find favour or if investors will ditch gold for other asset classes.

gold1

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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EURJPY out of an ascending triangle

Good day all,

Markets posted another solid week of gains even as the “sell in May and stay away” line keeps popping up in different places. I will come up with another post on the equities front. For today, let us look at the EUR/JPY currency pair.

As many of you in the forex market should know, the biggest trend in forex majors over the last year or so should be the USD/JPY pair. What with the BOJ’s policy for the Yen. However, I want to look at another cross – EURJPY. Priceaction is more or less the same with USDJPY. EURJPY found resistance at the 126.00 region for most of the year; then, it broke decisively at the start of April and formed an ascending triangle. The triangle takes on a nice shape, and now it is confirmed because of the breakout on Thursday. Friday’s positve showing reinforces the breakout. I am afraid JPY will be a runaway train. So, a small position now is not a bad idea. In theory, we should see a slight retracement down as profit-taking ensues, and breakout traders get taken out.

eurjpy

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Swing set-ups

Good evening one and all,

I have a short post for today. Without explanation, I will show you all two charts I am monitoring for intermediate-term swing set-ups. For those who do not know what swing trading is: swing trading is between day-trading and buy-and-hold long-term strategies in terms of holding period. With regards to market movement, my idea of a typical swing set-up is to first identify a trend, then buy on a pull-back, or buying on a correction from a breakout. (Vice versa for the short side). Of course, there are other strategies that other traders use.

GBPSGD:

gbp

Gold:

gol

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

GBPSGD broken down from major support

Hello all,

In February, GBPSGD broke through major support in the region of 1.9300 – 1.9400. To put this significant move into perspective, GBPSGD has been in a long-term downtrend because of a strengthening Singdollar. In recent years, 1.9300 – 1.9500 provided us with a strong floor. But this floor caved in, and GBPSGD fell down to the 1.8600 region in weeks.

GBPSGD’s decline slowed in the last few weeks, and a typical pattern emerged. GBPSGD made two dives to form a classic “W” pattern. The double bottom is not symmetrical, but a lopsided pattern works fine too. Right now, GBPSGD is testing the neckline of the double bottom. For a swing trader, what I see now is a simple correction from the sharp pierce of the long-term support (red line). How far and long will the correction take? It varies a lot so there is no definite answer except to wait and let the market run its course. If you use the pattern for a target, the correction should go as high as 1.9200 – where the 50-day MA is. This double bottom can also be seen as a broadening wedge pattern. Usually, such patterns come with indicators painting very bullish convergence signals. What this means is that while price makes a lower low (hence the lopsided double bottom in this case), indicators are making a higher low. This is a bullish indication.

So, I think I have a strong case for near-term buying pressure in GBPSGD. However, I am thinking of a long-term position trade on continued strength of the Singdollar against the pound. As such, I am looking at this as a window of opportunity to build a short position. Let us see how this goes.

gbpsgd

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Jumping on EURUSD?

Evening all,

Ever since my last post on EURUSD, the pair has taken off very quickly. It was so quick , and I was so busy, that I did not capture most of the move – to my utter dismay. In hindsight, the picture looks very clear – as it always does in the rearview mirror. EURUSD made a very clear-cut bottoming pattern. Not only do we have an inverted head and shoulders, we also have a straight downtrend that turned into an uptrend – a V-shaped price action. Even though it took a long time to form – flattening the “V” – it is so clear to even a person with muddied spectacles. What seemed like an “easy, ride-the-reverse-long-term-trend” play did not bode well with me. I constantly heard a voice telling me: seriously? an easy set-up in the forex market? Sometimes the better-looking a chart, the harder it is to trade! But the solution to a simple problem is just as simple: do not rely on irrational thinking driven by emotions that are not even summoned by intuition that may have been developed through experience; or, to quote trading fundamentals: keep your emotions out of trading.

In the chart below, I draw out three circles to show a conventional “3-point inverted head and shoulders”. If you have been following me for a long time, you will know that I do not identify the popular pattern by looking at 3 peaks or troughs. I look for price regions – price congestions. But the picture is so clear in EURUSD that there is almost no way anyone should be short this currency pair. At least not in the last 6 months.

eur

Enough of the hindsight analysis. So what do I see now on the EURUSD chart?

As a believer of trend-following, I obviously like the strong uptrend. There is nothing at all on the chart to tell me to turn bearish in the mid- and long-run. The recent slide in EURUSD should be seen as a healthy correction. Profits booked, and the markets waiting for some news to push it in one direction. Nearest support is at 1.34 for two reasons: one, that was a recent resistance that should act as a lightweight support for now, and the whole-number psychology. I really like the bullish picture on EURUSD. But therein lies the danger, or rather, dilemma. EURUSD obviously looks bullish to everyone except the ultra-contrarian. One risk I see for a mid-term trend trade is that the market sometimes dives down and kills those who try buying on momentum. This is the market’s way of reminding traders that there is no easy money to made. The market throws curveballs now and then so that charts do not move in one line after another. This is where money management or trade management comes in to save traders in the long-run. While I favour jumping on the bandwagon of risk-on trades like a long EURUSD, beware of the market taking a bigger correction in the days ahead.

eur3

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Gold sniffing 1700

Evening traders,

I have a chart of Gold for today. Gold has been in a downtrend ever since testing 1800 last October. I draw a downtrend channel to illustrate the move. The 50-day MA – which I use for mid-term outlook – accted as a strong resistance guide throughout the last few months. Right now, Gold is exactly there; the last two trading sessions saw Gold closing just beneath the MA. I see a straightforward case for shorting Gold at this area. Resistance coming from the 50-day MA, a support-turned-resistance line, and a downward parallel channel are reasons for my bearish posture.

However, I do see something forming on Gold’s chart that may end up being a catalyst for the upside. In the chart below I have two green boxes showing a potential double bottom pattern. Gold may two dips at 1650 and the support-turned-resistance line I drew (red) are the parameters for this potential double bottom. This means I will have to play around with entry orders and not short Gold too quickly.

gold

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Dollar Index forming the third region

Evening all,

First, I want to wish all of you a belated blessed christmas. I hope your festive season went well.

Today, I have a chart of the US Dollar index. In general, the greenback should have an inverse relationship with equities. In November and December, while equities made a somewhat surprising climb, the US Dollar fell (EURUSD at levels not seen for at least half a year). This rally happened despite whatever cliff talks/scares made headlines. Sidetrack: I read an article online and saw the word “cliff-mas”! Anyways, I was long and happy since I played certain stock CFDs on the long side. Ever since my last post on forex, I have not been active in that market.

The Dollar index was in a straightforward uptrend from 2011 to the middle of 2012. After that, the greenback got hammered and fell below 80. In the chart below, you will see 3 boxes. I box up 3 regions of price to show the popular chart formation of a head and shoulders. I like to describe such a pattern as consisting of 3 regions of price – contrast against the popular notion of 3 price peaks. Right now, the US Dollar is forming the right shoulder.

Naturally, I will be looking at this pattern as a topping one. The long-term uptrend in equities looks even better now compared with 2 months ago because of a rally out of a healthy correction. And, take note that the Dollar index is clearly below the 200-day MA. I will continue looking for long set-ups in EURUSD and see if this pattern does end up being a top.

usdd

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

USDSGD – low volatilty begets high volatility?

Good day one and all,

While most instruments on my chart platform have been showing quite abit of activity over the last few weeks, one forex pair I keep track of has not been moving much. This is the USD/SGD currency pair. In my last post, USDSGD fell 300 pips before retracing 100 pips over several weeks. Then, another drop occured but it was not so serious, and another consolidation appeared. Since then, USDSGD has been in an obvious small parallel channel.

The two pairs of bollinger bands that I use for short-term set-ups – 20 days MA with 2 standard deviation-bands and a 50-day MA with 1.5 standard deviation-bands – have closed in on price. The 20-day BB even looks like it is constricting. What the BBs tell me is that USDSGD is in a narrow, rangebound market. As John Bollinger said in his book on Bollinger Bands, “high volatility begets low and low volatility begets high.” What this means in our case is that a strong move should be coming soon. While I favour the downside because of factors such as a mid-term downtrend, and the very recent downward pressure on the greenback, I will also be ready if USDSGD rallies. However, the picture looks more bearish than bullish for USDSGD. The indicator that will affect my trading set-ups will be the Bollinger Bands. Let us see how this goes.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

EURUSD failing at 200-day MA?

Good evening traders,

I have a post on EURUSD for today. In my last post, I was leaning on the bullish side for EURUSD. I was looking at a potential breakout set-up to the long side. A convicing move did not materialise, instead the EUR/USD pair traded lower. Right now EURUSD is languishing just below the 200-day MA. Bollinger bands look like they are giving a breakout-after-a-constriction signal. Once again, a lack of conviction means I am not going to short EURUSD straightaway. A simple support level of 1.2650 can be found just below price now (in green). Indicators are giving me indication of a bullish convergence – gradual downside in price contrasted with rising values in indicators. I will be positioning myself well in the event the EURUSD takes off. If EURUSD continues to drop – which probably means Europe will be churning out bad news, and risky assets generally fall in tandem – then I am looking at nearest support around the 1.2400 region.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Dollar and equities

Evening all,

I must apologise to regular readers starved of technical analysis here for the draught of posts in the last few weeks. I have been suddenly more active in a time-consuming hobby – golf – so time for the markets and charts have been shortened. Anyways, I should be back to churning out at least 2 posts every week soon.

Ever since the drop in equities because of the US Debt downgrade last year, the market – as it should be doing so in a multi-year bull-run – defied bears by going on a good-sized 25%+ rally. At the same time, the US Dollar has been strengthening as well. On the fundamental side, with all the dire predictions aimed at the Fed for setting off the printing machines, the US Dollar has still strengthened. There are reasons out there, but I shall not discuss here.

As of now, while equities are still trudging higher, the Dollar has lost some strength in the last few months. Chart-wise, the Dollar has already started to look bearish. The death cross a few weeks ago plus the breaking of a mid-term uptrend channel are obvious bearish takeaways. Equities may turn down in the weeks ahead. With growth forecasts cut around the world, mundane-to-disappointing earnings from corporations, and a subdued-to-gloomy outlook for major economies (including China), the case for falling equities has been making some headlines in financial media. Chart-wise, I still have to keep my head up as mid-term and long-term trends are still strong. Bearing in mind that the Dollar and equities share a negative correlation in general, is it time the Dollar depreciates against other currencies and equities fly off to even greater heights? When comparing two instruments that supposedly share some kind of correlation, the basic theory is that when there is  a contrary movement, what should happen after a while is that the two instruments will go back to the correlation that they are supposed to share. In this case, I will watch and see if the greenback continues to fall while equities hold up strong.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.