Reminiscences of a FX Operator

[fxoperator]

Hi traders,

As I found no appropriate section for me to post my weekly outlook on certain currency pairs, I decided to post it under Show me the money! [Daytrading] section. Today, I will share with you my weekly outlook on EURJPY pair which I have been trading for the past 6 months. I rely primarily on Fibonacci support and resistance levels, trend lines, MACD and exponential moving average. Here goes my weekly outlook:

EURJPY Week 14 Outlook

The end of last week saw EURJPY closed with a bullish candle on the weekly chart. The pair has broken above 61.8% Fibonacci resistance level of 157.68 (retracement from 151.70 to 161.38) to reach a high of 158.33 but failed to hold on the momentum and closed below the Fibonacci level on the last day of trading. This also means that the descending downtrend line on the daily chart remains intact (see Chart 1).

Chart 1: Descending Downtrend Line Remains Intact

Also, the last trading day for the week ended with a bearish candle on the daily chart, which caused the ascending uptrend line broken (see Chart 2).

Chart 2: Uptrend Line Broken

With the 4-hour chart on EURJPY posting a bearish divergence, we should expect to see the price action to go further downwards with resistance expected at 38.2% 155.79 area (retracement from the recent swing high of 158.33) and 155.39 (retracement from 151.70 to 161.38) with a break below could see the momentum shift towards the bears. For the recent Euro rally to hold, 154.23 is the critical level that the bulls must support. Looking at the economic calendar, there are heavy economic data coming out for the Yen so we shall see if the Yen continues to strengthen. Although intra-day bias slightly with the bears but will stay sideline to see where the market moves next keeping in mind that daily already in positive zone with weekly chart read bullish divergence.

[daedalus]

Can you explain the arrows on your MACD? Are you actually taking signals off of that indicator and if so what are the entry criterion?

Kind of looks like the 4 HR MACD system off of FF... Any sucess with it?

[Pipcrawler]

Hey Fxoperator,

We currency specific threads in our forums like: http://forums.babypips.com/currency-crosses/

Check it out!

[fxoperator]

Originally Posted by Pipcrawler

Hey Fxoperator,

We currency specific threads in our forums like: http://forums.babypips.com/currency-crosses/

Check it out!

Hi Pipcrawler,

Thanks for highlighting. I thought of sharing at that section, but as I will be doing two pairs analysis; GBPUSD and EURJPY, and so I thought I should start a thread under the "Reminiscences" theme. However, please help to move this thread to more appropriate section such as blog/journal if available.

Thanks again.

Good trading!

[fxoperator]

Hi daedalus,

I will split your reply into three questions below:

Originally Posted by daedalus

Can you explain the arrows on your MACD?

The arrows on the MACD are the divergence signals according to the price action given. On the 4-hour chart, the MACD shown three bearish MACD divergence as the price action gets higher.

Originally Posted by daedalus

Are you actually taking signals off of that indicator and if so what are the entry criterion?

No I am not relying on the divergence signals alone to enter a trade, I use it as the first warning sign of a possible reversal and to close any opened positions.

Originally Posted by daedalus

Kind of looks like the 4 HR MACD system off of FF... Any sucess with it?

It is different from the 4-H MACD Strategy I believe you were referring to. I did not do much testing on that system as I don't really like to use too many moving averages on the chart.

Cheers.

[fxoperator]

For the past two weeks we saw Euro surged against the Yen from the low of 151.70 to reach a high of 161.10 last week. This also means that the price briefly touched the 61.8% retracement level of 160.93 (166.65 to 151.70) but sellers and profit-taking quickly came in and almost instantly in the space of 10 minutes as the pair dropped about 100 pips during the selling process. Failure at 160.93 also means that a possible double top chart pattern is formed on the daily chart.

The two-week rally also saw the pair broken above the 55-EMA on the weekly chart. Looking at buying momentum on the 4-hour and daily MACD weakening and the recent upward cycle looking extremely overbought, I reckon that the bias could be shifting towards the downside this week. Expect to see support around 158.88 with a break below 157.50 should confirm the selling momentum. Intra-day upside resistance seen at 160.17 with a break above 160.53 should retest the swing high at 161.10.