Hello all. I am newbie to the forex. I have one doubt regarding the trend of the market. I am analysing the market trend. I have attached the screenshots of AUDNZD weekly chart and GBPUSD monthly chart below. I am not sure what trend the pair is currently in. So please help me with this. According to me, the trend for both the pairs is bullish one as price is at the support level.
AUDNZD Weekly
GBPUSD Monthly
Hi @rjbanna - Thanks for putting up these charts, especially AUD/NZD. I have this as mostly bearish so it was a good opportunity for me to review why I did not find it bullish.
I look at a strict set of parameters to work out trend direction.
AUD/NZD -
20EMA slope = Bearish
50EMA slope = Bearish
Swing H/L sequence = Bearish
20:50EMA positions = Bullish
Consecutive overlapping weekly bars = 8 (Caution!)
Price change last week = Bearish
Last week’s range = Bearish
Last week’s close: prior week’s range = Bearish
AUD strength: NZD strength = 6-1: 7-0 (Caution!)
The only Bullish point is that the 20EMA is above the 50. But this is a tough pair to TA as the two currencies are so closely tied together: this means that they’re usually both equally bullish or both equally bearish at the same time, which means their comparative strengths with other major currencies give no clue to this pair’s tendency. I tend to steer clear of this pair: a similar problem comes from EUR/CHF.
Same approach with GBP/USD -
20EMA slope = Bearish
50EMA slope = Bearish
Swing H/L sequence = Unclear
20:50EMA positions = Bullish
Consecutive overlapping weekly bars = 2
Price change last week = Bullish
Last week’s range = Inside
Last week’s close: prior week’s range = Inside
GBP strength: USD strength = 0-7: 1-6 (Caution!)
A really mixed picture, and high political risk to GBP.
@tommor Thanks for the detailed reply. There are some terms which I didn’t get. If you could clear that out, it would be really helpful.
20 & 50 EMA slope - How to calculate it. I added one slope indicator in tradingview but it seems bullish to me.
Price:50EMA positions - Price is above the 50. So isn’t it a bullish one?
Consecutive overlapping weekly bars - what is this? How to calculate one?
Currency strength - Which indicator did you use?
EMA slope is just by eye - sloping up after the last daily close is Bullish: sloping down is Bearish.
Price: EMA is simply whether the price is currently above or below the stated EMA - if price is higher that’s Bullish, if its lower that’s Bearish. In practice Price: 50EMA almost always gives the same answer as 50EMA slope so I have deleted it.
Overlapping weekly bars - this is just how many consecutive weekly range bars, counting backwards from the last bar completed, overlap. I limit the look-back to 3mths. The more bars that overlap, the more price is ranging, the less it is trending.
Currency strength - I look at the 50EMA slope on the 28 major currency pairs. Each of the 8 major currencies is seen in 7 pairs. If the slope is upwards that counts as as a Bullish score for the base currency and Bearish for the counter currency): if the slope is downwards that is a Bearish point for the base currency and a Bullish one for the counter. This gives a score from 7-0 for the most Bullish to 0-7 for the most Bearish: this score suggests buying the most Bullish match-up, 7-0:0-7, or selling the most Bearish, 0-7:7-0, etc.
Thank you very much @tommor for this valuable information. It is very helpful. I think overlapping weekly bars is to determine trend on weekly, so can I use the same on daily candles as overlapping daily bars? and which time frame do you use for currency strength?
Sorry, I should have said my 20 and 50EMA’s are daily, and that’s what I use for slope and currency strength.
Yes, you could look at overlapping daily bars to drill down to a tighter time-frame. Its worth trying to check the impact this change has. In addition, the EMA periods can be changed - some people might prefer 13 and 39, or 50 and 100, etc. etc.
Thanks for clarification. I’ll try that on my setup.
None of this stuff makes your bullish conclusions on these pairs wrong. It might well be that both rise in the coming week. The GBP is especially prone to a dramatic rise as its recent fall has been due to unpredicted political events in Parliament - the political situation could be reversed within hours or minutes.
Its often the case that trend-following trades are high probability but low returns, whereas reversal trades are low probability but high returns. Its important to keep a clear picture of which one you’re trading, always remembering that the best returns from a reversal trade entry come when it develops into a trend-following position.
