Hi, last Sunday I cautioned about the importance of the FOMC news and how it could impact prices.
The Fed spoke about raising interest rates next year, and possibly twice, as well as concerns about inflation & talk of tapering the money printing.
That’s all it took for a 250 pip move on the Euro/$ and all the majors dropped against the $USA.
Now the tricky thing is was this an overreaction and the majors will continue to trend versus the $, or is this a full-blown reversal?
Technically some major trendlines have broken which does support the theory that we will now see some USD strength and yet I am wary. The hardest question to answer is was this a break-out or fake out?
At the moment no one knows, yes 100’s of talking heads will give their opinion, but my plan is to wait and see. I will only look to trade the majors from daily charts.
One thing to keep your eye on this week is the $index. I explain this in the video. If it holds above 92.00 (a major support and resistance level & the daily 200ema) which it broke on Friday, then we could be heading to last years highs around 104.00.
In recent weeks I have been focusing on cross pairs (very successfully) and I will do so again, starting at the market open. With the majors I will wait and see what happens before trading them. There is also major GBP news on Thursday which may mean the Gbp diverges from the other majors (if the news is more positive than expected).
Once again you need to be very careful with correlation this week. ALL majors dropped versus the USD, therefore taking more than one trade at a time is the “same bet”
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The Forex Week Ahead
There is not too much scheduled news for the week ahead. The big event being the GBP monetary policy update on Thursday. As ever do not trade the Gbp around this time. Thursday morning it tends to go to sleep before the announcement.
Pay close attention to Correlation again. All the Yens are to some degree and a lot of this week’s cross pairs.
Understanding correlations between forex pairs is one of the keys to becoming a successful trader. Positive correlation refers to how pairs move in the same direction. For example, the Euro/$ & The Gbp/$ usually move in the same direction more than 80% of the time.
An example of negative correlation is the Euro/$ and the Chf which usually move in opposite directions. The significance for traders is that taking two such pairs at the same time increases one’s risk and therefore is best avoided or cut the risk in half.
You don’t want to take multiple trades in pairs that are heavily correlated because if you start losing on one of the trades then the likelihood of you losing on the others is very high.
€uro/$: $1.2000 broke which is a huge area. I would consider a short if it pulls back although the risk reward isn’t the best. I prefer a long at 1.1650. If it continues to drop then my thinking is if it is going to stop anywhere, that is probably the place (remember we are trading probability all the time).
Chf: No risk reward current position, some will consider a long at 0.9200. I am watching 0.9500 for a possible short.
Euro/Gbp: Fundamentally I think it should be dropping, I will short at 0.8665
Gbp/$: 1.4000 is huge. If it pulls back there I will short. If it continues to drop then 1.3500 is an area to watch. Don’t forget Thursdays big news on this pair.
$/Yen: 108.30 is still a key area to consider a long. If it breaks and closes above 111.00 on a daily then I would look to look to long at 110.00 on a pullback
Cad: Leaving it alone for now. Levels to watch for a reaction (but not forward orders: 1.2550, 1.2640 & 1.3000 (I will short if it gets all the way to here this week.
Euro/Cad same as last week 1.4950 is where I will look to short again.
Gbp/Cad: Be careful with this now. Its in an ascending wedge and might break higher. I was looking to short at 1.7200 last week- leaving for now.
GBP/NZD: I show in the video how I will split my entry in half: 1.9600 and 1.9520
GBP/AUD: Correlated with above. Another possible split entry: 1.8230 and 1.8190/1.8200
Nzd: Messy, too many emas in the way
Aud: Same as Nzd- see the video for both
Euro/Yen 128.20 possible long.
Gbp/Yen. Not one of my pairs, current position worth watching at the open, stronger area if it drops is 149.00
Cad/Yen: Current position, or more likely if it drops then 86.70
Aud/Yen: Possible short 83.00/83.30 or long at 80.00 and watch 81.00.
Nzd/Yen: 75.00 is the big area to consider a long or short at 78.00 is a standard M2 break out/pullback.
Aud/Cad: possible short at 0.9470
Gbp/Chf: Worked yet again last week: shorting at 1.2790 I will take it again if it gets back up there. Also possible long at 1.2650
Euro/Nzd: Leaving for now.
Euro/Cad: I will short once more, now at 1.4960 – If it moves higher I will look to short at 1.5200
M3 Shorter timeframes
See the (Non-members will have to join to view) new course & recent blog posts as to how I do this: I do my analysis on daily and weekly charts first and make a note of the MAJOR areas of support and resistance. Then copy them onto Pierre’s Earth and sky template. Then I make a note of the weekly & monthly pivots points and add them to the charts. You will see lots of opportunities line up during the week. The important thing then is to select a bias for the next few days and do NOT take trades if the price is too near a trend line or pivot. Ideally, you want to buy when the price is near a major support and or pivot point line and has the potential to make at least 40 pips. Vice versa for a short.
New members, please note: If I am looking to take a trade long, for example, 1.5000, I place my order 10 pips above & 10 pips below for a short. This is because price often does not quite reach a major line and you need to allow for spreads.
We are NOT a “tipping service” our aim is to teach you how to trade for yourself.
For more up to the minute, updates do not forget to drop by the forum. Ashley is back from his travels and there are other senior members who are happy to help.
Watch the video for more detailed explanations of this week’s analysis and trade plan.
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