Today’s Forex Guide

Weekly Forex Wrap-up


Nov.21.2014

We had a bunch of hot market moving events this week that created volatility for short-term traders and possibly changed the direction of some currencies.

Brown paper package with torn section

The biggest shock came in right at the head of the week when Japan surprised the world by dropping down to recession. With the Bank of Japan’s meeting in favor of monetary easing and upcoming plan for a snap election, we could now see a pullback in the USD/JPY pair followed by more weakening in the Japanese yen (which could boost up the Japanese exports)

The UK shopper made up for their poor turnout in previous months, as October's retail sales number beat all market expectations to rise by 0.8%. More encouragingly, the number is up by 4.3% on October last year. Anyone that's been near a high street in the last few weeks will know that this number has been helped along by retailer discounts, which are no longer the preserve of twice yearly sale periods, but does bring some spending momentum into the market as we head into Christmas shopping.

The number gave a brief jump to Mr. British Pound but, as was proven with the FOMC minutes of the night before, nobody is particularly comfortable seeing the Pound return to a position of strength, as such the move up was short lived.

Over in Europe, European Central Bank President Mario Draghi threw the door wide open on Friday for more dramatic action to rescue the euro zone economy, saying "excessively low" inflation had to be raised quickly by whatever means necessary, but the tone worked against Mr. Euro as investors didn’t seem  to like super Mario’s tone. Preliminary PMI readings for November weren't so pretty either. Numbers for Europe as a whole slipped back towards the 50, breakeven level, while French manufacturing continues to provide a drag on their economy, with numbers persistently failing to break back above 50 into expansion territory

Elsewhere in Europe, Italy might have pre-empted Brussels' dissatisfaction at its budget submission by accusing the EU of "shaky" accounting methodology to establish a country's fiscal health. European countries are to hear Brussels' thoughts on whether their budgets are acceptable early next week and there was widespread speculation before they were submitted that France and Italy weren't going to make the grade. Italy now say that the way the EU are accounting for output gaps is out dated and have no doubt come up with a suggestion for how these should be calculated that makes their budget add up.

Here in the US, the Federal Reserve is to conduct a review into whether or not they are too friendly with the banks that they regulate. The announcement that they are to conduct a review comes, somewhat conveniently, a day before two key members of the Fed testify to the Senate on the subject of regulatory oversight. William Dudley, one of the Fed members to be quizzed, said that a lack of trust in banks could in itself become a risk to the stability of the financial system. As it's Friday, you may want to spare 3 minutes and watch this rather excellent rant by Channel Four's economics editor over bank behavior and trust issues.

 

Next week we will hear more from Japan and Europe which could help us with more pip-making strategies for the rest of the year.

 

Intraday Forex Technical Levels


EUR/USD 4-hour Forex Dance Floor
EUR/USD 4-hour: Failed to break above the 38% Fibonacci level.

Invest Diva positioning: Short positions below 1.2487 with targets at 1.2363 and 1.2299 in extension.

Technical reasons why: The pair failed to break above the 38% Fibonacci level at 1.2563 and continues dropping after breaking below the 23% Fibonacci level and Ichimoku's cloud. The RSI is heading to the oversold zone.

Alternative Scenario: A shoot back up above 1.2487 would alter the outlook back to bullish with targets at 1.2563 and 1.2624.

Where I'm setting my stops and limits:

Suport Levels Turning Point Resistance Lvels
1.5817 1.5656 1.5991
1.5731 1.5481


GBP/USD 4-hour Forex Dance Floor
GBP/USD 4-hour: Consolidating.

Invest Diva positioning: Short positions below 1.5656 with targets at 1.5591 and 1.5481 in extension.

Technical reasons why: The pair keeps moving sideways at the range around the turning level below the Ichimoku's cloud. The RSI is also around the neutrality area.

Alternative Scenario: Above 1.5656 look for further upside towards 1.5731 and 1.5817.

Where I'm setting my stops and limits:

Suport Levels Turning Point Resistance Lvels
1.2624 1.2487 1.2363
1.2563 1.2299


AUD/USD 4-hour Forex Dance Floor
AUD/USD 4-hour: Broke above 38% Fibonacci

Invest Diva positioning: Long positions below 0.8724 with targets at 0.8764 and 0.8814 in extension.

Technical reasons why: The pair broke above the 38% Fibonacci level which we previously set as our turning point, and briefly tested abovethe Ichimoku's cloud. The RSI is moving up from the neutrality area.

Alternative Scenario: Below 0.8684 look for further downside towards 0.8635 and 0.8555.

Where I'm setting my stops and limits:

Suport Levels Turning Point Resistance Lvels
0.8814 0.8724 0.8635
0.8764 0.8555


USD/CAD 4-hour Forex Dance Floor
USD/CAD 4-hour: Dropping

Invest Diva positioning: Short positions below 1.1226 with targets at 1.1171 and 11080 in extension.

Technical reasons why: The pair failed to break above the Ichimoku's cloud and instead dropped and broke the 50% Fibonacci level to reach our bearish target at 1.1126. The RSI reached the oversold zone.

Alternative Scenario: Above 1.1272 look for further upside towards 1.1317 and 1.1372.

Where I'm setting my stops and limits:

Suport Levels Turning Point Resistance Lvels
1.1372 1.1272 1.1226
1.1317 1.1171


USD/JPY 4-hour Forex Dance Floor
USD/JPY 4-hour: Consolidating.

Invest Diva positioning: Long positions above 117.50 with targets at 118.86 and 119.78 in extension.

Technical reasons why: The pair remains above the support level at 117.50 after pull-back above the Ichimoku's cloud. The RSI is flat above the neutrality area.

Alternative Scenario: Below 117.50 look for further downside towards 116.56 and 115.60.

Where I'm setting my stops and limits:

Suport Levels Turning Point Resistance Lvels
116.56 117.50 119.78
115.60 119.78


USD/CHF 4-hour Forex Dance Floor
USD/CHF 4-hour: Moving up.

Invest Diva positioning: Long positions above 0.9687 with targets at 0.9737 and 0.9815 in extension.

Technical reasons why: The pair broke above the Ichimoku's cloud and continues to move up as surpassing our bullish target at 0.9687. The RSI is reaching the overbought zone.

Alternative Scenario: Below 0.9687 look for further downside towards 0.9648 and 0.9592.

Where I'm setting my stops and limits:

Suport Levels Turning Point Resistance Lvels
0.9648 0.9687 0.9737
0.9592 0.9815

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