First up, the king of forex, the EURUSD. All other major currency pairs move in relation to EURUSD. Even if you are trading other pairs, you have to watch this. It is like watching Barcelona vs Real Madrid, all other games for that weekend is relegated to second place.
Watch 1.2400-40 closely. This pivot zone has been in play for a long time already. I think both the bull and bear operators are gunning for this zone. Either the bears will enforce this zone and bring EURUSD down again. Or the bulls will prevail and cause EURUSD to break above this zone.
Scenario 1
If bears win, 1.2400-40 as resistance zone will hold. Thereby forming a third point on the falling channel.
SHORT 1.2400-40
Stop loss above 1.2440
Final target profit 1.2100
Scenario 2
If bulls win and 1.2400-40 resistance zone is broken to the upside and holds, expect a possible retest of 1.2400 to confirm that the breakout is real. Remember the pivotal nature of support and resistance. Often when resistance zone is broken, it reverses its role to become support zone. If resistance is broken and become support,
LONG 1.2400-10
Stop loss below 1.2380
Final target profit 1.2700
For part 2, i am looking to go long on the aussie pair. The aussie dollar is still in a strong uptrend since 1st June. The forex market is one of the most trending markets. When a currency pairs, it can really trend for a lonnngggg time. The pair can trend on and on for weeks, months and even years.
I am waiting for AUDUSD and AUDJPY to retrace to the support zone. Do not chase the price when it has run far away. The better traders will wait for a significant retracement to a support zone before entering. This helps ensure a healthy risk to reward ratio.
AUDUSD
LONG 1.0440-70
Stop loss below 1.0400
Final target profit 1.0700
AUDJPY
LONG 82.10-40
Stop loss below 82.00
Final target profit 85.00
1.2440, the new magical number for EURUSD. The battle line is drawn between the bulls and bears. Bears will dig a hole to keep EURUSD under 1.2440. Bulls will use their horns to break above 1.2440. If the bulls succeed and 1.2440 defense is broken successfully, expect the old resistance zone to turn into support zone.
I have mentioned twice of this magical number. Click on the 2 links below for reference.
If you have followed my trading call to short EURUSD at the magic number, you would have netted 200 green pips for this week.
Trading is simple. Support and resistance do work. If you understand the crowd psychology behind S&R, you can trade it effectively. It takes practice to identify S&R. Similar to learning how to swim or ride a bicycle. The initial training is difficult, but once you get the hang of it, you get it for life. And once you reach the EUREKA moment, it is easy to spot and easy to trade with. Practice it today. Have fun!!!
Question: Why do markets have such long memories? Answer: Because the markets are traded by people, and people remember things for a long time. Do you remember where and when you meet your girlfriend or wife? I believe you do, even though it may more than 10 years ago for some of us. Now you know why long term support and resistance zones works.
Preview #1
First preview will be EURUSD. Will we see the bulls break above 1.2440 for first time this coming week?
There is a rising channel on the 4hr chart. If point 3 holds, the bulls will succeed in creating a third higher low. And if it holds, we may expect to see a re-test of 1.2440 zone again.
Preview #2
Next is USDJPY. This pair is consolidating in a tight range of 70pips since 23rd July. One thing that the Bank of Japan (BOJ) had not done is to do a massive one day intervention. Last year in 2011, BOJ had done 3 massive interventions to prevent the yen from further strengthening. If you refer to my chart below, i will show you 2 of the recent intervention. However in 2012, BOJ has not done a single one day intervention. But what they did was monetary easing via QE Japan Style. In other words, they had done massive money printing to devalue their yen.
The USDJPY is sitting at a price level where there is a high probability for BOJ to intervene again. Remember that BOJ has done it 3 times for 2011, and not even once for 2012. Will there be another intervention soon?
NZDUSD is a gentler currency pair to trade. It tends to obey long term support and resistance zones really well. NZD is a high interest yielding currency with interest rate at 2.50%. So when a trade is opened to long or buy NZD, you earn daily interest. The interest earned really builds up if you can hold the trade for weeks and months. This strategy is called the “carry trade” and is used by many professional traders.
NZDUSD is at a crossroad junction now. On one hand, it is resisted by the down trend line on the daily chart. On the other hand, it is also forming an up trend line on the 4hr chart. Here are my conditions which i want to see before i go long on this pair.
NZDUSD breaks above and stays above the down trendline on the daily chart.
NZDUSD retraces and holds at support zone of 0.8000-60.
NZDUSD forms a third point on the up trendline on the 4hr chart.
This is a dull week. EURUSD is capped in a 120pips sideway range. The big players are the ones with the $$$ to move the markets. And they are mostly on their summer holidays sunbathing on a beach. Volatility will return when they return.
On thursday i gave a live call to LONG EURUSD. See link.
Here are the results of that trade. From the 4hr chart below, EURUSD touched the 3rd point of the rising channel. It attempted to go up but only managed to rise for 100pips. It is enough for me to earn some profits on this trade.
The 10min chart shows the details of my trade. Trading is a mind game. Remember this. Take what the markets give me.
O sleeping EURUSD beauty! When are you waking up? Which direction are you going? Are you going out with Mr Bull or the Mr Bear?
This slumber of yours is causing many traders to be sleepy and not watch EURUSD attentively. At the point of maximum drowsiness, EURUSD will break out. And when it does, it may go onto a fast and furious trending mode.
So here are my 2 scenario analysis for the bulls and bears.
Scenario #1 (Mr Bull)
For the bulls to prevail, this has to happen.
Scenario #2 (Mr Bear)
For teddy bear to win, this is the possible situation.
This USDCAD trade looks promising. There may be a possible bounce from the support zone. I am willing to risk playing with a larger position size on this trade. As the risk to reward ratio is very favourable at 1 is to 5.
LONG USDCAD around 0.9800-20
Stop loss below 0.9780
Target profit 1.0000
This is part 3 of my trade previews for this week. For this trade, i am looking at GBPJPY. GBPJPY is now touching a down trendline from the daily chart. Will it break above the down trendline? Or will the trendline hold? This is my trading plan.
LONG GBPJPY around 122.80-123.20
Stop loss below 122.80
Target profit #1 125.00
Target profit #2 127.00
EURUSD 1.2500 is a important level to watch for today. Reasons are outlined below.
It is a psychological resistance round number. Humans love round numbers, such as 10, 1000 or 1.2000. The more zeros the better. Therefore 1.2500 is also another type of psychological round number
There is supposedly market talk of a double-no-touch option barrier of 1.2000-1.2500. Traders who sold the DNT option barrier will be defending the 1.2500 price level.
There could be large sell orders at 1.2500. Banks, major instituitions, hedge funds, i.e. the large players, could be looking to sell EURUSD at this price.
If the supply at 1.2500 could be overcome, i am expecting EURUSD to go to 1.2600-30 region.
