Tag Archives: EUR/USD

Daily Recap – Fibonacci Retracement levels

The EUR/USD is the most widely traded pair among all available currency pairs. It represents 50% of all currency trading volume worldwide. Traders focus on the EUR/USD even if they are trading other pairs because it influences the entire market. This pair is also known to follow technical set ups and traders can anticipate the market direction using technical analysis with a higher chance of getting it correct, as opposed to using technical analysis for trading illiquid currency pairs or pairs which are controlled by central banks for the protection of their own currency such as the Yen and the Swiss Franc, and we all saw what happened with the CHF last week when the Swiss National Bank intervened.

We discussed in a previous post how two tops formed on the EUR/USD daily chart and also looked at a descending triangle chart pattern which formed on the same chart about a week later. Both patterns showed bearish direction which took place and materialized on Friday September 9th, 2011.

Now traders are looking at the market and trying to anticipate the market direction for the EUR/USD and based on their anticipation, positions will be established. There will be traders who think that the EUR/USD has made a big move to the downside and expect it to rebound back up, and there will be other traders who will look more closely and consider the debt issue in Europe and think that it is far from over and therefore they will anticipate an even further decline for the pair.

I want to draw your attention to a widely used tool in trading forex, Fibonacci retracement levels. Usually when the market makes a big move in any direction, there is a retracement for this move. This retracement could be interpreted into different outcomes but the most popular explanation is that these levels represent profit taking levels as well as traders on the other side of the trade for whatever reason. As for the technical analysis for Fibonacci’s, simply there are different price levels which the market is expected to retrace to these levels influenced by different conditions. Traders will use the different levels to enter or exit the market based on their expectation. The most difficult part in calculating Fibonacci retracement levels is setting up the levels. Once that is done correctly, you have a much better chance of finding a profitable trade.

On the attached chart we see that the EUR/USD pair has dropped from 1.4550, which is the high of the swing high down to 1.3501. The market the retraced back up to the first Fibonacci price level of 1.3738.

To read more about Fibonacci levels, please follow the link below:

http://www.cmsfx.com/en/forex-education/technical-analysis-articles/volatility-indicators/fibonacci-levels/

To read the article for the tops and descending triangles on the EUR/USD, please follow the link below:

http://www.cmsfx.com/blog/author/mhanna/

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Long Weekend in Washington

It was a busy weekend for politicians in Washington coming into Monday as a plan was reached regarding the debt in the US and the avoidance of default on their obligations. President Obama addressed the nation and he mentioned that a “balanced approach is necessary to do the job” from both Democrats and Republicans. This did put some confidence in the equity markets as they rallied in Asia and the early session in Europe. In the US it turned into a volatile session as manufacturing data came out weaker than expected and the BOJ stated that they are going to intervene with the yen. This all caused equity markets to fall lower through most of the US session but most losses were pared the end of the day.

The EUR/USD ranged from $1.4453 to 1.4183 as risk aversion for the USD was stronger, except relative to the CHF. ISM manufacturing data came out at 50.9 vs. the 54.3 that was anticipated. The stock market indices, Dow Jones Industrials and S&P 500 closed at -10.75 and -5.43 respectively.

Commodities lost some ground due to the stronger dollar. September crude oil contracts closed lower $-.51 to settle at $95.19 a barrel and gold prices were lower to settle at $1,622.30 a troy ounce off $-8.90.

This week look out for more news out of Washington regarding details of this new package to cut debt and what is involved from both parties. Tuesday at 8:30 EST, data of Personal Income and Outlays where we can gauge if there is any improvements in the consumer sector and how they are using their managing their money will be released. Wednesday we will have the ADP Employment Report where we can see some improvement in the Private job sector, as well as ISM non-manufacturing survey data and Factory orders. For Thursday Jobless Claim data is on the slate, where we can see if they stay lower than 400k. Finally, to end the week we will have the Non-Farm Payroll number in which many traders will all have their eyes on job growth or contraction.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – EUR Portugal Woes Offset by ECB Expectations

The EUR/USD started the day in a decline, going as low as 1.4151, before rallying to a high of 1.4245. Eventually it pared its losses on the day and closed at 1.4220. The initial Euro weakness we saw was in part fueled by yet another credit rating decrease for Portugal. Today, Moody’s dropped Portugal’s rating one level from A3 to Baa1. There is some concern that Portugal, which has about 9 billion Euro’s worth of bond redemptions coming up on April 15th, and then again on June 15th, may need a bailout to make the payments. With their PM resigned and an election not set until June 5th, it is a cause for concern for the entire Eurozone.

From a technical standpoint, the 4 hour chart shows that if the decline breaks below the 1.4000 level, the next level to watch will be 1.3850. Any bearish attempt that does not break the 1.4000 level, like the move we saw today that brought the EUR/USD as low as 1.4151 remains part of a greater pattern of sideways price action, not a reversal.

All eyes are on the ECB rate decision this Thursday. The market is pricing in an increase from 1% to 1.25% which will of course bolster the EUR/USD and decrease the likelihood of a bearish break below 1.4000. Some analysts see price action in the futures market today that suggests there may be a decent chance of the ECB increasing rates by as much as 50 basis points, to 1.50% which would be a bullish boost for the EUR/USD. It is important to note that any interest rate increase is only going to add new challenges to Portugal’s plight, making it more expensive for them to borrow themselves out of their hole.

EUR/USD 30 min, 4 Hour, and Daily Chart Show an Up and Down Day

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Friday Morning Update

ISM – Institute of Supply Management releases a monthly index based on a survey of purchasing managers in the manufacturing industries overall sentiment. A reading over 50 represents growth, and below represents contraction. This month we had a projected index of 61.1 and the report came out today at 10am just barely ahead of that number at 61.2 Coupled with the better than expected Non-Farm Payroll (NFP) report showing an increase of 216,000 jobs and the unemployment rate dropping to 8.8%, the USD gained quite a bit of strength bringing the EUR/USD pair from around 1.4150 where it was trading prior to the day’s first release to a daily low of 1.4060.

EURUSD after Non-Farm Payroll and ISM

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – A Volatile Trading Day

Today’s market was a near textbook example of volatility throughout the course of a trading day. Most pairs showed volatile movements and the market lacked direction awaiting the Non-Farm Payroll (NFP) report and the unemployment rate number due out tomorrow at 8:30 AM EST. Many analysts expect the number to show an increase in job creation in the US which could give a boost to the US dollar. Speculators look for this boost to come from the pressure good job numbers will have on the Fed, pushing it in a more hawkish direction.

Today at 4:30 PM EST the unemployment claims number for the US was released, and it gave a slight boost to the US Dollar, which edged higher against most pairs. It is unlikely that the market will choose a more clear direction until we head towards the morning. Prior to today’s report the EUR/USD edged higher to the area of 1.4230, and then retraced back to the strong resistance of 1.4150 once the unemployment claims number was released.

As always, tomorrow morning should be pretty exciting.

EUR/USD 3/31/2011 at 18:24.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Reports to Start the Week

This week started off with the dollar losing strength throughout the US trading day. First, news came out in the US of Personal Spending. The consumer spending forecast was 0.6%, and the release beat expectations, coming out at 0.7%. Last month we were at 0.3%.

The Pending Home Sales report showed an increase of 2.1% in February beating the forecast of a decrease of .05%. Last month we were at 1.2%.

These two reports had a minimal impact on the US Dollar, which actually lost some ground during the US session against most other major currencies. We saw initial modest gains in the equity markets, but they we unable to hold and the market closed slightly down. Throughout the day there was a selloff in crude oil, with prices crossing below $104.

The EUR/USD hit a high of $1.4115 after some speculation that the European Central Bank may raise interest rates next month, and we have now seen the seeds of hawkish sentiments in the US, The UK, and the Eurozone for the first time in a long time.

Traders likely will look for chances to position themselves for moves this week anticipating comments coming out of the European Central Bank and the Bank of England, and the Non-Farm payroll report in the US on Friday.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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