EURO USD BIASED TO THE DOWNSIDE - forex swing trading system

EURO USD BIASED TO THE DOWNSIDE ~ forex swing trading system

EURO USD CONSOLIDATION BREAKOUT- USD GAINS AHEAD

The current indecision of this pair can be partly explained by the limited activity in the market in general, low liquidity and investigations into illicit trading practices. However, there is also an explanation based on the natural Price Action movements that can be seen throughout the currency market. The chart below shows that the currency is actually above the Resistance of a large Pennant setup on the Weekly Chart that was formed after sharp gains for the USD during the Financial Crisis of 2008. The current position, seen on the right-hand side of the chart, shows that a smaller Pennant has also been formed after a rally to this area ended in October of 2013.

WEEKLY CHART

Source: FXCM Marketscope

Consolidations such as these tend to be formed after sharp, fast movements that end trends or when a currency pair has reached its Weekly or Monthly Range. As the market moves sideways inside the Consolidation, it will form smaller Consolidations, Double Tops/Bottoms and False Breakouts that lead to reversals to the other end of the formation. In the chart below, we can see that there were two previous small Consolidations at the Resistance of the larger Pennant just before the respective downtrends took them back down to Support.

WEEKLY CHART

Source: FXCM Marketscope

The Support of this latest Pennant has also been broken, but is still above the Resistance of the larger Pennant. This presents two possible scenarios that can unfold over the next few months. The breakout short could continue and taking us back down to the Support area at 1,2280. Along the way, several important Support points would be hit that traders can use for profit taking.

WEEKLY CHART

Source: FXCM Marketscope

On the other hand, since the breakout has not yet taken us back below the major Resistance, we could have an unexpected rally that uses this Resistance as Support to start a breakout long. Several past Resistance areas would be hit as the Euro strengthens.

WEEKLY CHART

Source: FXCM Marketscope

Ultimately, the long-term direction will be determined by the respective economic policies and market expectations regarding the underlying economies. Current monetary policy has been very dovish for the respective monetary authorities but the recent cut in rates by the European Central Bank has now given the US Dollar the edge in terms of interest rate differentials. If this bias towards the Greenback continues, then the short, medium and long-run trends are likely to be on the downside. With the economy in the Eurozone continuing to struggle more than its American counterpart, short positions are likely to be the better choice of traders from this point onward.

RECENT EMAIL FROM CLIENT

____________________________________________________

SUBSCRIBE TODAY

____________________________________________________

US$120.00

Free 

 ___________________________________________

Duane Shepherd 

(M.Sc. Economics, B.Sc. Management and Economics)

Currency Analyst/Trader

Contact: shepherdduane@gmail.com

Twitter: @WorldWide876

Facebook: DRFXTRADING 

More info for EURO USD BIASED TO THE DOWNSIDE ~ forex swing trading system:

THOSE PESKY FALSE BREAKOUTS WHAT DO WE DO - forex trading system system

THOSE PESKY FALSE BREAKOUTS WHAT DO WE DO ~ forex trading system system

False breakouts are one of the necessary evils of the Forex market. Signals that appear to indicate the start of large gains for the trader often turn out to be broken promises that lead to unexpected losses. Spotting the signs that actually give a heads-up as to the potential for these reversals helps to avoid these scenarios that arise during long periods of market indecision and low liquidity.

Take the recent movements of the EURO NZD and the GBP AUD as examples. These both gave bearish signals that broke the Support of their respective Consolidations that had formed below larger Pennants setups. Given that these smaller Consolidations represented a test of the Support of these broken Pennants, gains of several hundred pips would have been expected.

EURO NZD - DAILY CHART

Source: FXCM Marketscope

DAILY CHART- GBP CAD

Source: FXCM Marketscope

Nevertheless, the candles that broke these setups were not strong enough to justify entry. Whenever this happens, you will either have a stronger candle that appears a few days later to continue the breakout, or an opposing candle that starts a False Breakout reversal. In this case, the latter was the result for both pairs.

DAILY CHART- EURO NZD

Source: FXCM Marketscope

DAILY CHART- GBP CAD

Source: FXCM Marketscope

From this point, we could have one of two scenarios unfolding in the next few days. We could see the market move sideways for awhile before providing another set of bearish signals that start their respective downtrends. On the other hand, the reversals could indicate that start of uptrends that take them back inside of their Pennants, possibly breaking out above the Resistance. But how can we know in advance that what seems like perfectly normal signals will actually lead to these types of reversals?

Practice, practice, practice. With Candlestick Patterns, one has to review several examples of breakouts to be able to quickly distinguish between the ones that lead to breakouts and those that will only cause unnecessary headaches for traders. This will allow you to confidently enter and trade those that will actually break and provide strong gains over a very short period.

DAILY CHART- CHF JPY

Source: FXCM Marketscope

DAILY CHART- USD CAD

Source: FXCM Marketscope

The concept of the average Daily Range of a currency pair is also important. Most breakout candles that lead to trends are usually the same size of the Daily Range of that pair. This range also varies among currencies such that a normal candle that is acceptable to be traded for one currency pair may not be strong enough for another. One must also be able to determine if the candle and the start of a potential breakout would also coincide with the Weekly Range of that pair. This would significantly increase the possibility of a reversal such as that which is now taking place on the EURO USD.

DAILY CHART - EURO USD

Source: FXCM Marketscope

_RECENT EMAIL FROM CLIENT

____________________________________________________

SUBSCRIBE TODAY

____________________________________________________

US$120.00

Free 

 ___________________________________________

Duane Shepherd 

(M.Sc. Economics, B.Sc. Management and Economics)

Currency Analyst/Trader

Contact: shepherdduane@gmail.com

Twitter: @WorldWide876

Facebook: DRFXTRADING 

More info for THOSE PESKY FALSE BREAKOUTS WHAT DO WE DO ~ forex trading system system: