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EURUSD Analysis 23-04-17

Here is my analysis for the EURUSD on the 23rd of April. Hopefully anyone else on the forex path will find this useful in deciding a direction to take when implementing their trading strategies over the next week.

So let's get started and with a look at a few of the patterns playing out.

Checkout the price action here with higher highs and higher lows. With a couple of medium term moving averages crossing back and forth there is all to play for if you are with the price action trend but if you're banking on those moving average crosses then you are probably suffering. 

Looking at the near term and even shorter moving averages they are pointing up as we head into the weekend. Note the shooting star/inverted hammer giving the opposite signs pulling in the sellers as we are about to hit the weekend. 

Looking at the 200ma price is still below it but it looks like price is still heading toward it. You know that things are going to get volatile the closer we get. 

Bollinger bands had a tag off the lower band and appear to be heading to the top again. 

Support and Resistance levels , well, here's where i am expecting reactions. 

Bring on the lower trend line and if you had bet on it holding then you are probably taking a little profit off the table as we reach half way up the previous move down. 

Here is the two closest horizontal levels to keep an eye on

Ooh look a failed head and shoulders pattern with the neckline around the area we are seeing that shooting star in the last couple candles. 

Hello Triangle pattern. I see price still jammed in there. When it breaks the could be a nice target on the horizon. 

Oh the channel. If you had your eyes on this or the lower trend line as an opportunity then maybe you are looking for price to run to the top. See how price went through the 50% and hit the 38.2% fibo. 

Or then again perhaps you are waiting for a break of the lower line of the channel and will target the width of the channel once this happens for your target. 

Down to the 4 hour and the previous trading days green zone is aligning with the place price has rejected. Not really a hammer but a long tail at a place people will be taking profit. Draw a horizontal line at the bottom of the tail (2nd candle from the end) and there's a previous high. Is support about to become resistance? maybe, but the moving averages are aligned to say otherwise. Messy. I will be looking for a break above the triangle and a retrace before considering a buy and if price breaks out the bottom then the opposite. 

Just a brief round up, feel free to ask questions. 

Technical Analysis EURUSD Daily

1. Determine Speed, Direction and Momentum

Let's start by taking a look at the speed and direction of the EURUSD. We will be using the 21 and 55 Exponential Moving Averages to help us with this.

As you can see the moving averages have been "braiding" without clear direction and are currently crossing to the downside. The longer term trend shows a drop from June 2014 into a range in 2015 which we are currently testing the bottom of now after piercing it in December to January 2016.  

Let's take a look at momentum next to get an idea of the short term. For this we will be using the 5 ema and 8 sma. 

As you can see, momentum is strongly down over the past 10 days. The red (5 ema) is below the black and both are angled down. So we could say that the momentum is strongly pointing to the downside. 

2. Judge the longer term trend strength

For this we are going to use the 200 ma. 

From the end of December price pulled back to hit the 200 ma at the end of March. Price is currently below the 200 ma which is angled down telling us the downtrend is still in play. 

3. Is price vulnerable to reversal?

In contrast to the last statement regarding the downtrend we can see that price has been making higher lows and higher highs over the past 4 months and currently sitting on the trend line of those previous lows. This combined with the 21 and 55 ma's crossing suggests there is a good chance price will attempt another cross of the 200 ma if it bounces off this lower trend line. 

4. Volatility

For this we will use a set of Bollinger Bands (period 20, std dev 2)

The bands direction appears fairly flat following a squeeze around 20 days ago and price moving up to the top band and back down again. Price could easily find support now on the lower band. Volatility is increasing over the past 2 days as the upper and lower bands are starting to move in opposite directions and spread.  

5. Support, Resistance, Trendlines and Candle formations

The channel

Horizontal Support/Resistance Levels

The Triangle

The Range

Head and Shoulders, failing to find support on neckline (which would have confirmed a reversal)

6. Pivot Levels

Just taking a look at the monthly pivots here. If price continues to the downside then MS1 and MM1 look like good targets.

7. Potential Trades
If price breaks the bottom of the triangle and holds below then I will be looking at this Triangle breakout

Levels to watch

Even though my bias is to the downside, a strong reaction on the bottom channel trend line would lead me to look for opportunities trading up to the midpoint (fibo 50%)   

Anyway, that's it for now on the EURUSD. I hope you find it helpful. 

Measuring Volatility

Been looking at volatility today, specifically some indicators to measure it. Volatility in my ever so simple view is a measure of how much price is jumping up and down over the time i've set, be it days, months, hours, etc.. Depending on the scenario you're looking for, high volatility can be a good thing as price moves quickly in your favour or a bad thing if it reverses and slaps you in the face before you've had time to make a coffee. Personally i'm looking at breakout trading today, where price is about to "breakout" of a channel. This seems to involve volatility moving from a low point to a high and the indicators to watch.

So what can we use to get an idea of volatility? Here ya go.

Moving Averages
Let's chuck a 20 day simple moving average on a daily chart. As you look back over the last few weeks take note of the times price has clung to the moving average and the other times it's shot wildly above or below it. How do those swings up and down compare to the last few days? is price movement more or less volatile?



Bollinger Bands
Adding Bollinger Bands to your chart can give you a nice indicator of volatility. Look at the times when the top and bottom bands are close together. When the bands are contracted together like that price is less volatile. When the bands start to spread out, boosh! Along comes some volatility and some funky moves in price to match.




ATR (Average True Range)
Take a look at the blue line at the bottom of this chart. It's the ATR and gives us the average trading range over the time you specify. Usually the platform used will ask the period you wish to calculate the ATR over, e.g. on a daily chart and you set it to 20, then you'll get the average true range over the last 20 days.

On the example below we show the ATR over 10 days of the USDJPY pair, when the ATR is going down it's an indication that volatility is decreasing and when it goes up, well you can guess the rest.

Bollinger Bandtastic

Here's a technique i've seen today to help identify good entry points and judge price action. Ideally this appears to be best applied in a ranging market and is another tool to be used in conjunction with other indicators. If you've never seen it before, then it's worth more investigation. Found in the majority of charting platforms have a look for the Bollinger Band indicator and add it to your chart. When asked for the standard deviation, set it to 2.

Here's a simple vid from Mike at informedtrades.com that gives you an insight.





If you prefer to learn from the man who invented Bollinger Bands then I suggest you pickup a copy of his book or visit his site at bollingeronbollingerbands.com. Have added this to my reading list. Johns contribution to technical analysis is globally renowned and his book has been translated into 8 different languages. Quite tempted to pickup his DVD seminar as well, but will see how I get on with the book first.

Free market analysis videos

Having a twitter account is starting to turn up great info. Today, i found a site containing weekly market analysis videos. Now, while some may yawn at the prospect, i'm quite happy to spend 12 minutes being brought upto speed. Nice to hear an experienced traders thoughts. Gonna keep this one in my schedule for sunday nights from now on.

Todays video pointed out the monthly candles to watch as they close tomorrow and offered some words of caution in view of the heavy news week ahead. To top things off I got to see the charts with trendlines, triangles and a smattering of indicators, including opinions on important levels to watch.

Bookmarking alone wasn't enough, it's earned a blog post.

The site offering this info is www.forex-fxtrader.com and the forex analysis vids can be found here

Ask yourself is it trending or ranging?

As you look at the chart of a currency pair, do you consider if it's a trending or a ranging market yet? If not, then think of it simply as the difference between price making a steady move in one direction or bouncing up and down in a horizontal channel.

It does seem to be a pretty important tip and is echoed by many traders as I continue my learning curve. It appears that this is important criteria to bear in mind before applying a strategy, so I thought it's worth a mention.

As I zoom out into longer timeframes things get a bit more complicated but I did pickup a few tips from the video below. It shows the use of the ADX indicator to get things into perspective. Looks like it also helps give you an idea of upcoming trends and trend reversals. Pretty sweet eh? Also found some free trading courses and videos on the informedtrades.com website which I will be digging into.