Thread: Chart of the Day

Originally Posted by Million$Man

Good afternoon Thomas
Looking at this pair, the trend is clearly down on the daily, looking at the 1H chart, it seems to be getting very close to the high of 1.44 area. Hourlies are lookign streched but seem to be making higher lows....if the current candles closes below the high of .4395 and the hourleis roll over would a short entry be a good idea. I know your preffered entry is a breakout of the low but i was wondering of this could worth a short entry with a small rick involved.

REgards
M$M

I think that the US stock market sell off means that we should back off and let things settle down and then to take another look. This may be a day to preserve what we have rather than to take on additional risk.

Originally Posted by Thomas Long

I think that the US stock market sell off means that we should back off and let things settle down and then to take another look. This may be a day to preserve what we have rather than to take on additional risk.

Wise words and thanks for the advise

M$M

Originally Posted by Thomas Long

Keep an eye on the US stock market. When it falls, traders have been exiting profitable trades, especially in the AUD pairs.

Hi Thomas

Can you explain what is actually occuring when the US stock market sells off, that causes the AUD trades to close, I dont understand their connection.

Thanks
Jason

Originally Posted by trackjunkiem3

Hi Thomas

Can you explain what is actually occuring when the US stock market sells off, that causes the AUD trades to close, I dont understand their connection.

Thanks
Jason

It's all about risk Jason. For the last couple of years, when the US stock market was rising, traders around the world have felt more comfortable taking on risk, so they take their excess funds and invest them in some of the more riskier places in an attempt to increase their return. When the US stock market falls, those same traders close out those investments and place them in the safest place they know to keep from larger losses. Those safe havens have been in USD and JPY denominated investments. The AUD has been the strongest currency in the last year and traders may feel that this run may be ending. The AUD has also benefited from commodity exports, particularly to China. That may also be slowing. So right now we have this relationship between the US stock market and the AUD. When stocks fall, the AUD is falling. These relationships constantly change, but right now the charts are showing a clear relationship between the two. So I would stay out of the AUD long positions until the US stock market picture became clearer. If the US stock market really starts to sell off, then look for more USD and JPY strength and weakness in most other currencies. I would also add that sometimes the relationship is difficult to understand, but if it is clear on the charts, then we have to give it the proper respect.

It would appear that the GBP is now the currency of choice to sell in the FX markets. We saw hints of this last week, but trading today has confirmed this sentiment as the GBP pairs are being sold across the board. While I would not sell this pair right now, any bounce up would serve as a potential selling opportunity. This pair is at 25-year lows which means selling is preferred to buying.

With last night's rate hike by the Australian Central Bank, the AUD is once again gaining strength. We took a look at the selling pressure in the GBP/AUD yesterday and today we take a look at the strong downtrend in the EUR/AUD. These two pairs have experienced consistent selling pressure for a year now which just shows how long a trend can last in the FX markets. I would continue to look for selling opportunities in this pair as long as the market stays below the 1.53291 buy side high of February 25th.

After a strong move down, the EUR/USD seems to be taking a breather and trading within a range. The reason can be found here on an economic calendar at DailyFX. In addition to an interest rate decision by the Bank of England this Thursday morning at 0700AM Eastern, the European Central Bank follows up at 0745AM Eastern with their decision on interest rates. If that isn't enough, on Friday morning at about 0830 AM Eastern, the US Department of Labor releases the Nonfarm Payrolls. These three events are as big as it gets for news releases and traders are reacting by just letting the EUR/USD bounce between support and resistance. Some traders like trading this environment and do quite well, but there are two things to keep in mind. You have to respect the strong downtrend this pair was in before this range bound condition, which means that sells are the preferred play over buys. You also have to be aware of those news releases so you don't get caught up in a volatile move. Checking out the economic calendar at the beginning of each trading week can offer great hints on what to expect during the week and this week is a good example.

This piece has been posted before in this forum, but I like to remind traders of what is happening this Friday, March 5th at about 830AM Eastern, which is when the US Department of Labor will release the most anticipated news report of the month, the US Nonfarm Payrolls. This report can result in increased volatility and a chance to profit handsomely in a short period of time.

However, more often than not, new traders are not the one’s profiting but rather losing. The main reason is slippage, which is when your order is filled away from the price you wanted. The reason for slippage is simple, big traders stay away from these events and new traders all try to do the same thing at the same time. If the release is bullish for the EUR/USD, everybody wants to buy at the same time. However, most find that there is nobody willing to sell to them at their price. But eventually your order is filled, but at the seller’s price. Soon you find the market moving against you and you exit to keep your losses from getting too big. But what about those who were selling to you? As the market continues to fall, you start to wonder about these traders who sold to you and the fact that they are now making money. What did they do differently?

These traders were playing the reversal and taking advantage of the fact that the first move after a release is often based on emotions and wrong. Here is a 5-minute chart and an example of a reversal after the release of the Nonfarm Payrolls. We can see that just before the release, the EUR/USD was trading at 1.4892. After the release, the market started to rally up to near the 1.4940 level. The market then started to reverse and traders who were playing the reverse sold at the price the market was trading just before the release. The assumption here is that all traders who bought after the release are now in a losing trade and are selling to get out. So these new traders sell at 1.4892 to get in and use a 50 pip stop with a 100 pip limit order to take profit, which is what we recommend in our DailyFX Courses. This is our 1:2 risk:reward ratio and allows us to be profitable if only winning 40% of these setups. The market soon moved down 100 pips from the 1.4892 entry and rewarded those who were patient and reacted to the market environment rather than the emotional first response to the release. These reversal traders will also use the EUR/USD as much as possible in these situations because of the increased volume and better fills. But you don’t have to be first to get into the trade to be right, you just have to be patient and react to the market and not the news release. The EUR/USD doesn’t act like this on every release, but it does frequently enough to make this a valuable strategy.

Hi tom. Thanks for this reminder. Will be trading this tomorrow for the 4th time with no loss (yet). Lissy hope you will be on board too.

Originally Posted by afo

Hi tom. Thanks for this reminder. Will be trading this tomorrow for the 4th time with no loss (yet). Lissy hope you will be on board too.

Let's hope the markets cooperate and that our actions are decisive....good luck helps too!

Originally Posted by afo

Hi tom. Thanks for this reminder. Will be trading this tomorrow for the 4th time with no loss (yet). Lissy hope you will be on board too.

Hey Afo
Loaded and ready! lol
: )


lissy

Originally Posted by lissyking

Hey Tom
in the eur/usd forum, I noticed you posted the data for the NFP at 8:18am. Twelve minutes before it was posted on the calender website. How do you do that?

: )

lissy

Oh Oh!....my secret is out! I knew you were going to ask so I answered before you asked. Actually there appears to be a time issue with the forum that we first noticed about a week ago. I posted about 10 minutes after the release...thanks for asking though.

Originally Posted by Thomas Long

Let's hope the markets cooperate and that our actions are decisive....good luck helps too!

Hey Tom
in the eur/usd forum, I noticed you posted the data for the NFP at 8:18am. Twelve minutes before it was posted on the calender website. How do you do that?

: )

lissy

Originally Posted by lissyking

Hey Afo
Loaded and ready! lol
: )


lissy

Hello
I am a little confused here, perhaps I am just trying to make it more complicated than it is!
If i can get my head round it then maybe I may trade the NFP next month,
Now the price just before the news was 1.35719, as we can see price dropped, so if price get back up
to 1.35719, we saying that would be a buy with a SL of 50pips and target of 100?
Looking at the chart price did reach nearly .3580.

Thanks in advance

M$M

Originally Posted by Million$Man

Hello
I am a little confused here, perhaps I am just trying to make it more complicated than it is!
If i can get my head round it then maybe I may trade the NFP next month,
Now the price just before the news was 1.35719, as we can see price dropped, so if price get back up
to 1.35719, we saying that would be a buy with a SL of 50pips and target of 100?
Looking at the chart price did reach nearly .3580.

Thanks in advance

M$M

That is the idea. I prefer an initial move against the trend (which is currently down) and then to see the trend take over, but this actaivity today would be interpreted as a buy with the news reversal approach.