EURUSD at European Open

During Asian session The Yen managed to eke out some gains against other currencies and the EURUSD moved within the range of 1.2950 and 1.2910. The Yen got a boost from a better than expected March trade report.

One hour before European open, the EURUSD went toppish with a bearish hanging man candle. There were a lot of rumours of buying orders at 1.290 level. The EURUSD weakness pull down USDJPY and EURJPY along.

At European open at 7:00 GMT or  9:00 GMT on the above chart, I started my  scalp trade.

EURJPY encountered a S/R level at round number 127.50 and the 24:00 GMT line at 127.45.

Open a sell entry at 9:21 with blue lag moved down below 85, CCI 21 cross the 30 sma with a negative BB Macd. My first target is at 200 ema but seeing CCI 89cross the zero line and blue lag and red lag went flat below 15 I moved my target at another round number at 127.00.

The pair keep falling down as EURUSD is moving toward the expected buy area of 1.290. I moved my target to 126.50 with CCI reach the extreme and a divergence of CCI and BB Macd.

EURJPY

From a website Forex Crunch, the writer list 5 currency pairs which are more predictable and least predictable.

 

The least predictable are:

1.          USD/JPY

2.          USD/CAD

3.          GBP/JPY

4.          EUR/CHF

5.          GBP/AUD

And the more predictable are:

1.          AUD/USD

2.          EUR/GBP

3.          NZD/USD

4.          EUR/USD

5.          USD/CHF

 The least predictable pairs are hard to trade. They make wild swings, false breaks, or they make drawing trend lines on them quite impossible and have  graphs that are very unhealthy. They don’t play by the rules of technical analysis.

 The more predictable currency pairs are currency pairs that “play by the rules” of technical analysis. For example, if there’s a distinct resistance line or support line, than the pair will usually bounce when getting to close. Or, if this pair crosses the line, it does it “big time”, and makes a big move.

 From www.mataf.net, I found out that for the last one  hour USDJPY was highly correlated with EURUSD,EURJPY and GBPJPY and on daily basis it was highly correlated with EURJPY and GBPJPY.

 The daily volatility in pips for the four currency pairs mentioned above is as follows:

 1. EURUSD  - 166.1 pips

 2. USDJPY-118.30 pips

 3. EURJPY-236.8 pips

 4. GBPJPY-272.30 pips.

  Based on the above information, I decided to drop my scalp trade on USDJPY and replaced by EURJPY since the pair has a high volatility and moved similarly as USDJPY and not the least predictable pair. 

 

BB Macd

BB Macd is a derivative of MACD and Bollinger Band (BB). Technically it is a MACD fitted with a band calculated similar as BB. The basic structure of  BB Macd is similar to the normal/traditional MACD indicator. 

The green dot of BB Macd signify  that the current value of  MACD is higher than the previous period, and vice versa which is shown by the red dot that showed the current value of MACD is lower than the previous period. 

The different is that BB Macd does not have the signal line but it has  two bands that lurking around the Macd value. 

This indicator is quite recent where more practices is required  to become proficient. 

From the information I have read, some of the rules or guidelines in interpreting the BB Macd  are; 

1. In an uptrend with green dots moving upward when a red dot appeared and move below the top band it is similar to the downward cross (negative cross) for traditional Macd indicator i.e. Macd  bar falls below the signal line, a bearish sign. Conversely, in a downtrend with red dots on the downward move when a green dot appear and crossover the bottom band it is an upward cross or positive cross for traditional Macd indicator i.e. Macd is above the signal line. 

2. When the green dots cross the upper band, the trend is up and vice versa when the red dots cross the lower band. 

3. If the dots is slowing and the bands are coming together, trend  is weakening.

   -In a strong move especially after consolidation, the dots are moving rapidly with little pullback.

-The distance between the bands can identify the strength of the trend. The larger the gap between the bands, the more momentum is the move. 

4. If the MACD dots move outside the bands, the market has lot of momentum. 

5. At key area such S&R, BB Macd showed a strong reaction. On the chart , the blue triangle is an area where there is a resistance level of previous high and round number 99.0. The dots cross from the top of the band to the below the opposite band. 

6.  A zero line rejection occurs when the Macd BB touch the zero line and bounce, prices is expected to act similarly. Refer to red arrow  at blue rectangle and red arrow at the BB Macd. 

7. Divergence in BB Macd is treated in similarly as in traditional Macd.   

The favourable news that have been factored

Toward the closing of Asian Session, USDJPY found its bottom at 98.15 and posted a reversal piercing candle. By the time London open, USDJPY had recovered its losses  suffered during the Asian session. Prices then moved sideways between a triangle for the next two hours. At  10:40 GMT, the top of the triangle was penetrated but I waited to make a buy entry at 11:00 GMT when prices break the previous top. 

As there will be lots of economic indicators coming during early US sesion, with TIC Long-Term Purchases and Core CPI being at the center I stopped trading 15 minutes before the reports were to be announced. 

Overall, the reports were positive but USDJPY  was  not responsive. It went toppish with a doji evening star at 13:05 GMT. The Euro make a reversal upward about 10 minutes later. This clearly indicated the reports have been factored about 3 hours earlier. 

Early morning during today Asian session, market was quite and traders expected a bit of volatility in USDJPY. Nikkei is expected to rise as Wall Street recorded a late surge of buying interest accompanied by a spike in trading volume. 

Before the Asian open and 24:00 GMT, USDJPY  was moving between prices channel of  99.35 and 99.22. 

My first entry was a buy at 3:06 (0:06 GMT) with Double CCI crossed over the zero line, MACD positive cross and moving over the zero line. After the entry, USDJPY moved pass the 200 ema and the red lag moved over the 15 level. 

At this point the resistance level is at round number 99.50 and the previous high at 99.49. Exited the position at 99.45 for a 15 pips profit. 

My second entry is a short after the rejection of CCI 21 from the 30 sma and negative cross of MACD at 3:33. The blue lag is approaching the 85 level from above. Exited the position when prices touched the 60 ema and MACD went flat at the zero line. 3 pips profit. 

The third entry is a buy at 3:50 with a positive MACD,CCI 21 cross the 30 sma and CCI89 bounced of the 30 sma with the blue lag moving above 15. Target at round number 99.50. Gained 8 pips. 

The final entry is at 4:03 with blue lag cross 85, CCI21 cross the 30 sma and a negative cross of MACD. Target at 200 ema for 8 pips.

Poor Retail Sales Report with USDJPY moved passed 99.00

Retail sales, which have taken a beating during the recession, is expected to post a small gain in March.

Wall Street analysts surveyed by Thomson Reuters expect retail sales increased 0.3 percent last month after dipping 0.1 percent in February. Economists expect a slight bump in auto sales in March contributed to the overall rebound.

According to retailers' reports, sales showed some encouraging signs of stabilizing last month. Consumer spending is closely watched by economists because it accounts for about 70 percent of total economic activity.

Therefore, retails sales report at 12:30 GMTwill set the tone in the forex and stock market.

The retail sales report came uo with a surprise, a tumbled of 1.1 % instead of an improvement of 0.3%.

After the announcement USDJPY fall from 99.95 to 99.15 within 30 minutes. There was a rebound to 38.2% retracement i.e at 99.50. I took my short sales at that level i.e at 16:23 and 35 minutes later I exited the position and enter a long position.

This morning, I expected  risk aversion a main theme in the forex market with Yen cross strengthening.

USDJPY S/R Level:

1. 24:00 GMT- round number 99.00.

2. Spud fibo 61.8%-99.14 and 50%-99.06

3. Daily pivot-99.03

USDJPY did recovered during the early morning Australian/Asian session but it was more like a dead cat bounce. It moved passed the 99.00, the daily pivot and the spud fibo 50% level. On the 5 MTF chart at 3:20 a bearish evening star is formed.

Made my short entry at 3:24 with CCI 21 crossing 30 sma, The blue lag moving below 85 and MACD with negative cross.

My first target is at 200 ema (the red line) but with Nikkei sliding under negative territory and USDJPY cross the 200 ema, than pullback but bounce of the 200 ema my next target is the low of yesterday at 98.73 or the S1 level-98,67

 

 

Testing the 100

"The market is cheering, not so much that the banks are on the mend, but that they are not going to die," - Les Satlow, portfolio manager of Cabot Money Management.

Overnite during US session, improved risk appetite  put pressured on the Dollar and Yen.

U.S. stocks ended mixed optimism about bank earnings offset by falling oil prices, a profit warning by Boeing Co and worries about GM; Dow Jones industrial average .DJI ends down

25.57 points, or 0.32 percent, to 8,057.81. Nasdaq Composite Index inches up just 0.77 point to 1,653.31, while S&P 500 adds 2.16 points, or 0.25 percent, to 858.73.

Goldman Sachs posts higher-than-expected first-quarter earnings after the close while it was reported in The New York Times that U.S. Treasury tells General Motors to prepare for

bankruptcy filing by June 1.

Nikkei future at SGX open higher but it is expected that Nikkei to moved lower as it is at overbought position.

From the opening asian session at 23:00 GMT, USDJPY moved upward passed the daily pivot.

I am expecting by 24:00 GMT (Tokyo stock market open), USDJPY will meet resistance.

S/R Level:

1. Previous day 24:00 GMT line-100.42

2. Weekly pivot-100.34

3. Spud fibo 61.8% retracement-100.38

My entry:

1. Sell at 3:23 (0:25 GMT)-MACD divergence, Blue lag cross 85, CCI 21 cross 30 sma. 

Target price: The red lag moving below 85, with expectation support at 200 ema and daily pivot at 10.21

2. Sell at 3:54 with blue lag moving below 85 and extreme hook of CCI 21.

Target price at spud fibo 38.2%-100.16 and 23.6%-100.95

With two trades I achieved my target of 30 pips per session.

 

My Entry Filter: The Sidewinder

The entry filter is kind of traffic light that is used during entry for long and short.

Green is a "Go"

Yellow  it's risky

Red is "Stay out"

The filter  help me to stay out of choppy  zones and sideway market trend.

Look at the chart.

3:23 buy signal and 3:28 are ignored because the sidewinder is red.

3:33 buy signal has a yellow sidewinder which is risky. We could entered the position but expected a small profit.

3:41 sell signal is ignored due to red sidewinder while 3:48 signal is a bit risky.

Quantitative Easing by ECB?

Forex market which has been on continuation of Risk Appetite as stock market was geared toward recovery, saw a week of consolidation and ranged trading due to holiday shortened week. Stocks was fueled by optimism after Wells Fargo offered a Q1 earnings forecast that was double the consensus estimates and a revenue number $1B higher than expected. This week all eyes will turn to the earning reports of Golman Sachs on Tuesday, JP Morgan on Thursday and Citigroup on Thursday.

The economic calendar is jam packed with US data including PPI, CPI , retail sales, business inventories, TIC capital flow, NAHB housing market index and new residential construction, Philly Fed survey and U of Michigan consumer sentiment. Other data include Eurozone HICP final, industrial orders, trade balance, Japan Domestic CGPI, industrial production and Tertiary industry index consumer confidence.

Euro  was broadly lower against the majors as anticipation of further rate cuts and the start of quantitative easing by ECB last week.

The Yen ended the week at a modest gain against USD and Euro despite of risk appetite sentiment and gains in the Equity Market. 

Early in Asian session today, USDJPY was listless moving sideways within 5 pips.

Nikkei was expected to be lower today.

USDJPY S&R level

1. 100.35-opening price asian session

2. Spud fibo; 38.2%-100.40, 23.6%-100.33, Previous day low-100.21

3. 100.34- Weekly pivot point

4. 100.20- daily pivot point. 

At 2:59, the both CCI is at extreme and possibility of a CCI 29 hook. At 3:00 price gap up with a bearish black candle and one bar later a doji was formed. Possibility of an evening star follow by doji star if price in the next candle has a long black candle body.

Enter short at 3:01 closing price. Confirmed prices downward pressure when it breached the 100.35/34, the blue lag cross 85, CCI 29 negative cross, MACD with red dots moving pass the lower band and zero level. Target at 100.20 (daily pivot).

Exit at 3:15 and reversed with a buy. Double CCI at extreme with blue lag inching uoward and divergence in RSI. Exit at Asian open level and 200 ema (3:19). Managed to gain 33 pips for the two trades

The Significance of Market Opens

Forex  moves when the people or traders  of that country or countries starting their working day. This is one of the key points to understand when trading forex since prices tend to break around one of the market opens. The reason for this is the immediate influx of traders entering the market at the same time which cause price movement, liquidity, and pure price action. These traders go to the office, take a look at how prices traded overnight and what data was released and then adjust their portfolio accordingly.

In  forex that operate around the clock 24 hours, there are numerous market open;  21:00 GMT is Sydney(Australian) open, 23:00 GMT is Asian/Tokyo open, 7:00 GMT is European open, 8:00GMT  is London open and 12:00 GMT is New York open.

As my reference, I prefer to used 24:00 GMT as Asian open (i.e Tokyo Stock market open) and considered it as the daily opening price.

 In the chart, I have -1. the dotted blue line-Asian open, 2. the orange line-Toyo stock Market open or 24:00 GMT, 3. the dotted black line-London open, 4. the red line-New  York open, 5. magenta line-the daily pivot point and 6. the dotted red line-daily R1.

The chart showed that all the above line played significant  roles as support and resistance for USDJPY during the 24 hours period.

1. Early in Asian session, pivot point act as resistance with Tokyo open act as support. After lunch USDJPY bounce off the Tokyo open, cross over the 24:00 GMT line and daily pivot.

2.  During London session, USDJPY is capped by the London Open but supported  by the 24:00 GMT line and the daily pivot.

3. The last session for the day i.e. New York session , USDJPY continued the upward moved and than pullback at support of New York open. Prices than rebounded toward the daily R1.  

Wel Fargo expected quarterly profit

At the current economic malaise, Investors could hardly believe their eyes when they spotted it: a profitable bank.

U.S. stocks surged on the last session of a holiday-shortened week, and the major indexes completed their first five-week winning streak since October 2007 as Wells Fargo raised the novel prospect of quarterly net income. It expects  about $3 billion in first-quarter profit, helped by its Wachovia purchase and demand for mortgage refinancing amid lower rates.

The Dow Jones Industrial Average rose 246.27 points, or 3.14%, to 8083.38, its biggest gain since March 23 and its highest close since Feb. 9.

The broad Standard & Poor's 500 index rose 31.4, or 3.81%, to 856.56, also posting its highest close since Feb. 9 while paring its losses for 2009 to 5.2%.

 Both completed their first five-week winning streak since the week ended Oct. 12, 2007, around     the peak of the last bull market. 

USD/JPY held up well, as one would expect given the news flow but was unable to extend the topside very much. Word that Fitch may downgrade three big Japanese banks sent the pair to 100.55/58 but US selling capped it there. 

In the early session, USDJPY showed strength that by Asian session open, prices has overcome yesterday high on expectation of  Tokyo stocks bullish mood. Nikkei target to passed the 9000 mark.  The Tokyo session may see some early interest but it is also expected to quieted down after lunch with many financial centres closed for the long Easter weekend a quiet day is anticipated across all markets.

 

Nikkei did open higher with USDJPY moving along, but technical indicators on 5 MTF USDJPY chart (lag indicators above 85, BB Macd moving flat and CCI 29 testing to cross the 30 sma and zero line) showed a oversold position with an expectation on prices pullback. 

Started scanning USDJPY 1 MTF chart at 2:30 (23:30 GMT). Above there is three resistance levels-1. Daily R1-100.77 ,  2. spud fibo 123.6 at 100.76 and 3. Last swing 200% retracement at 100.71. 

USDJPY is expected to be weaker despite stronger Nikkei as there is a divergence in MACD and RSI(8) and the red lag is oscillating around the 85 level. At 3:02 a dark cloud cover candle is formed with a extreme level hook in CCI 21. Enter a sell position at 3:03 with target  first at 60 ema and than at 200 ema. 

At 3:35 enter a buy position on a extreme hook of CCI with blue lag approaching 15 and red lag going down below 15. With the two entries I achieved my 30 pips profit target for a session.

Double CCI

Double CCI or more widely known as double woodies CC1 use two  overlapping CCI indicators. CCI known as Commodity Channel Index measures the deviation of the commodity price from the average statistical price. High values of the Index point out that the price is unusually high being compared with the average one, and low values show the price is too low. In spite of its name, the CCI can be applied for any financial instrument.

The original  settings for the Double  CCI  as set by Ken Wood was CCI 6 and CCI 14. Modification of the system By Canadian Dude as disclosed at Forex factory Forum used 34/170 seting. Included in the  system were the HAS candles and an RSI setting of 14. A valid trade required the CCI 170 to cross zero line before the CCI 34 on the 1 min chart, with the CCI 170 in both the 1min and 5min chart either above or below zero. Once the CCI 34 crossed in the direction of the CCI 170, you also need and RSI above 55 or below 45.

Contributors at The Forex Factory Forum modified the system that finally it become two moving average cross over with a filter incorporating double CCI and RSI.

Later contributors like F4mnect, Canuck CT,  Kinonen, John Edwards,fxtrading24  changes the setting further  from  34/170 to 21/89 plus 30 period sma. My preferance after one month testing is using duble CCI with 21/89 setting with a 30 period sma overlay on the double CCI. I adopted a simple approached with the main criteria of crossover of CCI 21 over 30 sma. A positive cross i.e buy signal is referred to the crossover of  sma 30 by CCI from below while a crossover of 30 sma from above by CCI 21 is reffered to as negative cross. CCI 89 confirm  the trend, above zero is uptrend below zero is downtrend. Loosely I will refer to  the trade rules for Double CCI as laid down by Ken Wood. I don't prescribe of all his rules or methods.

Let run through the simple trade rule based on the chart below:

At 6:34, CCI 29(the orange color line) cross the 30 sma(black color line) from below, a positive Double CCI  cross or a buy signal

At 6:59 CCI 29 cross the 30 sma from above, a negative Double CCI cross or a sell signal.

My system adjustment

Since December, I have tested and traded my system in 1 MTF with some good results. But the trade were not as smoothly as I expected and I have been tinkering for some adjustment in my system. I decided to drop the Stealth B&S and LCD and the FxPrime indicator. The basic ideas of using the laguerre (the lag) indicators as fully explained by Imran Sait and the Double CCI that was advocated by Ken Wood( Woodie) in his website www.WoodiesCCIclub.com and forwarded by Canadian Dude at Forex Factory Forum will be maintained.

For support and resistance (S&R), the fibo retracements and extensions as explained in my previous post and the pivot point system are used. Bollinger Bands (BB) and RSI(8) is to gauge the trend and  the overbought and oversold position is similarly applied as before.

Moving averages as been previously explained  are utilised. The moving averages are; long term moving averages, 60 period ema(the blue color) and 200 period ema (red color), medium term 20 period sma(the middle band of BB) and short term 13 period ema (magenta color)  and 5 period linear weighted ma (black color).

My 1 minute scalp trade will have a stop loss of  10 pips at entry with target price at 20 pips or more if it is a  trend trade. For counter trend I take what the market give...sometime as low as 5 pips. Normally my mental stop loss will be 5  pips for buy and 8 pips for sell. I will trade only USDJPY during Asian and US  session with my target of earning 30 pips per  session.

There are four main indicators that I refer for my entry.

1. The lag indicators i.e crossing over the 15 and 85 level

2. The cross-over of 5  period ma and 13 period ma. If  the 5 ma cross-over 13 ma from below I refer as positive cross (blue arrow) and 5 ma cross-over 13 ma from above which I refer as negative cross(red arrow)

3. Double CCI with SMA- two CCI cross-over with simple moving average.

4. BB- MACD- a derivative of  MACD and Bollinger Bands.

The first two have been fully explained in my previous posts and the last two will be fully described in my coming post. 

USDJPY above 100

On Friday, April 3rd, USDJPY breached the 100 after the Non-Farm report.  It was a significant push forward and long awaited.  Although the pair continued to flirt with the 100 line, it finally finished the forex week well above 100.

 

USD/JPY began this week with a blast, rising above 101 and forgetting about 100. Now that there’s another digit - what’s next? 

This morning, Tokyo stocks are expected to fall for the first time in five trading days., after the Nikkei approached the psychologically important level of 9,000 and then lost momentum on Monday. The benchmark index will likely follow an overnight fall on Wall Street, which was also the first decline in five trading days. 

The Nikkei  opened 0.2% lower at 8,838.66 (24:00 GMT). 

My scalp trades as depicted in the chart above are as follows; 

1.        SELL at  2:53 (23:53 GMT)-Expected USDJPY to weaken as Nikkei .

                                                        - At the swing high of  100.67  is the 38.2 % retracement  of   early morning swing high of  101.09 and swing low of  100.40 . That level was thrice tested but failed to be penetrated.

                                                  - On 5 MTF chart, a bearish harami cross ( a bullish candle follow by a doji) has formed in the previous two candles.

                                                       -Sell signals of blue lag crossed 85 from above, a Double CCI cross over from above, and MACD bearish sign. 

Target at  S1 or  161.8% retracement. Exited at  3:03 (0:03 GMT)

 

USDJPY did not mimic the Nikkei as usual. It did opened lowered but  prices than inched upward with the opening price act as support.

2.    BUY at  3:14 (0:14 GMT)-USDJPY bounced off the  opening price 

                                             -Double CCI cross over from below,

                                             -MACD steadily bullish sign

                                                -the blue lag approaching the 85 level with the red lag ready to cross over the 15 .

 Target at spud fibo of  38.2 (100.63). Exited at 3:21 . 

Yen Weakened

The Yen fall across all major currencies this morning as equities in Asia rally with global optimism buoyed by positive comments from U.S. Uncle Ben increased investors' risk appetite. The Japanese currency tumbled to new multi-month lows against its major counterparts. Last week  the yen slid to a five- month low against the dollar and the euro.

Last week  MSCI Index of regional shares advanced 1.6 percent and the Nikkei rose 2.3 percent. The VIX Index, a measure of market volatility known as Wall Street’s “fear gauge,” closed below 40 on April 3, the first time since January, indicating traders are becoming more confident about stock market advances. A  receding worries about risk-aversion and emerging euphoria, drive  people sentiment toward buying back shares and higher-yielding currencies.

Uncle Ben said last week that he will use all tools available to him to stabilise financial markets and remarked that programs enacted by the Federal Reserve to unfreeze the credit markets are working.  The positive comments from Bernanke eclipsed the negative data from the U.S. on Friday, with a greater-than-expected fall in non-farm payrolls in March took unemployment rate to a 25-year high of 8.5%.

The US Department of Labor said on Friday that non-farm payroll employment fell by 663,000 jobs in March following an unrevised decrease of 651,000 jobs in February. The drop in jobs came roughly in line with economists' expectations of a decrease of 658,000 levels. With the continued decrease in jobs, the unemployment rate rose to 8.5 percent in March from 8.1 percent in the previous month, in line with expectations. More than 5 million American have lost their jobs since the U.S. economy slipped into recession in December 2007.

Separately, the Institute for Supply Management released its report on activity in the service sector for March, showing that its index of activity in the sector unexpectedly fell to 40.8 in March from 41.6 in February, with a reading below 50 indicating a contraction in the sector.

This morning, the Nikkei opened higher and is trading in positive territory, led by automakers. It opened strongly at 8,857 compared to its previous close of 8,750.

 

Technically, USDJPY based on 5 MTF chart is expected to be bullish. since the Australian opened, USD has been above the daily R1 and has been tagging the upper BB with the middle BB acted as support. I am expecting prices to reach R2 during the Asian session.

At 3:15 (0:15 GMT), 15 minutes after Tokyo stock Market opened, USDJPY touched the upper BB with a doji and a possibility of evening doji star. A short position was taken with a target to the opening price( the orange line).

 

My second scalp entry is long after prices touched the opening price and the middle BB(20 period ma) with a hemmer candle that occurred at 3:35(0:35 GMT). My traget is the upper BB and the daily R2.