EUR/USD Resistance Surrounds 1.3500 the Rest of the Week (source - dailyfx.com)
-EURUSD has broken the trend channel that defines action from the July low. My interpretation of this development is that the major trend has turned at least sideways, and maybe down (see the recent writing on false EURUSD bullish breaks in recent years). -Significant levels (the channel in the current situation) are sometimes re-tested from the opposite side of the market. The underside of the channel crosses about 1.3485 to 1.3510 the rest of this week. -The previously uncovered 9/13 close was filled on Thursday and the EURUSD made an inside day on Friday. This combination is short term bullish.
Trading Strategy: I do not have a position at the moment. Watch for resistance around 1.3500. I do remain long EURAUD. See the AUDUSD section for more. LEVELS: 1.3296 1.33171.3355 | 1.3440 1.3472 1.3521
Slow Movement Expected (based on forexminute.com article)
The market is expected to have a very low volume today so it may move in a short range, since today is the bank holiday in the U.S., Canada, and France. However, today in the Asian session, the major pairs including the GBP/USD and the EUR/USD gained a few points but are now set to fall yet again. The euro is playing at 1.3402 level in the European session where it has strong resistance level at 1.3410 and 1.3419 which actually dissects it from the bullish zone. The sellers may start entering the market now with very tight stop losses, where the euro may target to test 1.3368 and 1.3335 support level within a day or two. Moreover, the Italian industrial production didn’t satisfy the investors that is why low bullish sentiment is there in the market, where investors are considering carrying on with the bearish momentum that was caused last week as a result of interest rate cut and excellent NFP data.
Short the Pound
On the other hand, similar is the case with the British Pound that is trading just below its today’s pivot point level 1.6027 where this level also separates the pair from bearish to bullish zone. A very good chance for the sellers is there to short the pair with tight stop losses, where they can even use big lots as well. The pair would surely test the 1.5987 support area, breaking of which could take it down to Friday’s low of 1.5956, and then 1.5915.
Yellen’s Speech is Next Big thing
Gold broke its 1280 support level that was its Friday’s low, and tested 1278.7 and is currently trading at 1284.5 level where it is expected to move within this short range and may not breach 1300 psychological resistance level. Much depends on the speech of nominated Chairperson of Federal Reserve Ms. Yellen that is due on Thursday, where investors would be focusing on what notion or hint is given by her regarding the policy that would be carried on by her, and as to when the stimulus plan would be minimized.
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A bearish Dark Cloud Cover candle pattern marked a turn lower, as expected Support is at 1.5918 (23.6% Fib ret.); resistance is at 1.6169 (trend line from Jul’13) Break higher targets 1.6235 (23.6% Fib exp.), below support eyes 1.5707 (38.2% Fib ret.)
USD/HKD: The Bulletproof Range That Nobody’s Trading (source - dailyfx.com)
The Hong Kong dollar (HKD) trades in a sternly protected range against the US dollar (USD), and while the pair is off the radar for most traders, near- and long-term profit potential does exist.
An interesting feature about the Hong Kong dollar (HKD) is that in spite of being the world’s eighth-most-traded currency, it’s not especially tradable, and consequently, it is off the radar of most speculators.
In 2011, one of Bill Ackman’s “juicy” trades was built around the premise that the HKD would be de-linked from the US dollar (USD) by 2015, and would appreciate as a result. I believe this scenario is unlikely to happen, although I do believe that the HKD can deliver excellent profits at opportune moments for select, alert investors. During colonial rule, the Hong Kong dollar was pegged to the British pound (GBP), and in 1972, it was pegged to the US dollar in order to protect the currency from external shocks. The USDHKD spread now trades within a narrow band between 7.75 and 7.85, as fixed by the Hong Kong Monetary Authority (HKMA).
As one of the world’s most attractive free-market economies for foreign direct investment, the former colonial outpost is hugely dependent upon international trade and finance. Hong Kong is a well-known launching pad for international firms seeking to enter or exit the Chinese mainland, and its fortunes are increasingly related to those of China, regardless of Hong Kong’s best efforts to remain a stand-alone, laissez-faire economy.
Hong Kong's economic achievements are impressive considering its small size. The continuous stream of capital inflow has made Hong Kong’s stock exchange the sixth-largest in the world.
One of the Hong Kong Monetary Authority’s primary objectives is to ensure the stability of the currency, and it has been vigilant in doing so. On several occasions, USDHKG has moved towards the lower limit of 7.75 before the Authority intervened, purchasing tens of billions in foreign currency in order to adjust the rate accordingly. Honk Kong's exchange fund has become one of the world’s largest official reserves, totaling near $303 billion (US).
Positive Developments for Bitcoin in the U.S. in the Last Week (source - forexminute.com)
First positive news for Bitcoin came from the lawyers for the Federal Election Commission. They have recommended that the commission approve the use of Bitcoins, as in-kind contributions to federal campaign committees – this came in response to the question from the Conservative Action Fund PAC which is advocating for larger role for the digital currency.
Reportedly, the FEC has 60 days to respond to requests. In his statement Dan Backer, the Conservative Action Fund lawyer who filed the FEC request said that as Bitcoins become a bigger part of the economy, the organization sees a future in this, particularly among libertarian-minded voters. His claim definitely gets support from the fact that recently, Bitcoins’ capitalization is up at $1.6 billion in value.
Second positive development is that two U.S. Senate Committees are going to conduct hearings over the next few weeks. According to Senate aides the two committees will be discussing policy implications of virtual currencies like Bitcoin. They say that the first will be focusing on Bitcoin which has become a new form of payment; however, has been in red after Silk Road seizure.
Contrary to expectations, the prices of Bitcoins have gone up after the seizure of Silk Road that was selling drugs online in exchange of the digital currency. The Senate Committee will be discussing regulatory issues and how it can be brought to taxation.
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SP 500 in Major 3 Final Stages Using Elliott Wave Analysis (adapted from thetechnicaltraders.com article)
The SP 500 staged an improbable come back on Friday November 8th from the 1747 lows of Thursday. As it turns out, an examination of the shorter term waves can call the low at 1747 an ABC wave 4 bottom, and now wave 5 up to complete Major wave 3 seems under-way.
We had Elliott Wave targets of 1768-1829 for weeks now in that wide range. At 1829 we have symmetry with a 562 point rally from 1267 Major 2 lows, and that 562 is virtually identical to the 666-1221 wave structure off the bull market cycle lows in March 2009. That rally was 555 points, so at 1822 in fact we would have a nice neat 555 point Major 3 rally of Primary 3 to equal the initial leg up of Primary 1
Below is our updated Elliott wave analysis for the market:
Key support is 1747, the 20 day moving average, below that and we have a truncated 5th wave of Major 3 and we head lower…. So lets look at 1778 resistance again (704 point rally off the 1074 Primary 2 lows and equal to 704 point Primary 1 rally) And then 1822 as next up in line. 1778 resistance, 1747 key support, 1822 next top target.
It is started a secondary correction for AUDUSD D1 timeframe under primary bullish in the end of this week : Chinkou Span line came to be very close to historical price indicating possible breakdown in the near future; and price is crossing 0.9421...
3 Basic Ways to Exit Your Forex Trades (adapted from dailyfx.article)
Exit Strategy #3 – Volatility Based Stop & Limit
This final technique uses the ATR (Average True Range). The ATR is designed to measure market volatility. By taking the average range between High-Low prices for the last 14 candles, it tells you how erratic the market is behaving and this can be used to set your stop and your limit for each trade.
The greater the ATR is on a given pair, the wider your stop should be. This makes sense because a tight stop on a volatile pair could get stopped out too early. Also, if we set our stop too wide for a slow moving pair, we might be taking on a larger risk than we really ought to.
I recommend setting your stop loss at least 100% of ATR. In the example below, we set our stop loss at 43 pips. Following our 1:2 risk to reward ratio, we set our limit twice as far, 86 pips.
3 Basic Ways to Exit Your Forex Trades (adapted from dailyfx.com article)
Exit Strategy #2 – Moving Average Trailing Stop
It has long been known that a moving average can be an effective tool to filter what direction a currency pair has trended. The basic idea is that we only look for buying opportunities when the price is above a moving average and we only look for selling opportunities when the price is below a moving average. But some traders have found that it can be effective to use a moving average as a stop loss. The idea is that if a MA is crossed from one side to the other, then the trend is shifting. If we were trend traders, we would want to close out our positions once this shift has occurred. So this is why setting your stop loss based on a moving average could be effective.
In the example below, we are looking at a M15 chart of the USDJPY which is currently in an uptrend based on the 100 period exponential moving average. At the time when I opened this long position, I placed our stop loss directly at the 100 EMA level. This put our stop loss about 80 pips away. Wanting to stay true to our 1:2 risk to reward ratio rule, I set my limit at 160 pips.
3 Basic Ways to Exit Your Forex Trades (adapted from dailyfx.com article)
Exit Strategy #1 – Traditional Stop/Limit (Using Support & Resistance)
The goal is setting our stop and limit so that they have a positive risk to reward ratio and are set around support and resistance levels. Let's take a look at an example of a short Euro trade against the USD that occurred a couple weeks back on a daily RSI chart.
When selling a pair, we want to look back at the previous bars and look for an obvious swing high. That swing high could potentially act as a resistance level in the future, so we would like to set our stop loss several pips above that level. This way, the only way we are taken out of the trade is if the pair has enough strength to make a new high. This is fine because if a pair is showing that much strength, it's not a pair that we want to be selling anymore anyway.
Next, the limit order we place will be 100% dependent on our stop loss’ distance. Using the ruler tool on our chart, we should figure out how far our stop loss is set in pips. In this example, our stop is 100 pips from our entry price.We should set our limit twice as far as our stop. That is 200 pips in this example. This is will give us a 1:2 risk to reward ratio (and if you took the free course that I posted at the beginning of the article, you should understand the importance of this ratio).