Cable plummets further, falls below 1.2700 to fresh lows since September 2020 0 (0)

Well, in terms of sentiment, not much has changed since my post last week here.I outlined why cable is struggling and the same mood is persisting as we get into the new week. The drop below the 50.0 retracement level @ 1.2830 sees sellers open up the next leg lower and that is towards the 1.2700 level now. The September 2020 low @ 1.2675 is also a key one to watch as a break below this region sets out the next push towards 1.2500 with the 61.8 retracement level sitting @ 1.2495.Month-end flows might make it a bit more tricky but given that the usual suspects will still be at play until the Fed next week, I continue to maintain the view that sterling might not see much reprieve in the meantime.

Go to Forexlive

Technical Analysis: Understanding Relative Strength Index. (RSI) 0 (0)

The Relative
Strength Index (RSI) is a technical indicator that tries to gauge the strength
or weakness of a particular instrument based on a formula that tracks past
prices during a custom period. This makes the RSI a momentum indicator because
it measures the speed of price movements compared to previous periods to
forecast possible inflection points.

 

The RSI is
measured on a scale from 0 to 100 and a default period of 14 most recent
closing prices. The RSI is also said to be in overbought or oversold territory
whether it crosses the 70 or 30 levels respectively on the scale. The idea
behind it is that the price can’t sustain the momentum at such extreme levels
and, even if it doesn’t mean a change in trend, the price may be bound to a
correction so a trader may want to wait before entering at such extreme levels or
even take a counter-trend trade.

 

 

The problem
with this idea is that the RSI can stay in overbought or oversold territory for
a long time and even if pullbacks may occur, they may be really shallow, and
the real correction may take a long time. Below you can see how the RSI stayed
in overbought territory for four months (!) before giving a real correction.

 

 

That’s why
you shouldn’t use the RSI on its own but complement it with other technical
concepts and tools to better structure your trades. For example, in the
previous image of the RSI staying in overbought territory for four months, if
you wanted to take a short you could wait for the price to first break an
upward trendline or for moving averages to cross to the downside to “confirm”
your trading idea. On the other hand, if you wanted to take long positions,
then you could wait for price pullbacks to the moving averages before entering
for a continuation to the upside.

This way you
increase the probabilities in your favour and can avoid being too early or too
late to price movements. Moreover, you should be aware of the fundamental
picture and see if it confirms the technical picture. Once you get a meaningful
catalyst that catches the market attention, you can see the price moving up fast
or down like in the previous chart.

 

This article
was written by Giuseppe Dellamotta.

Go to Forexlive

USD/JPY surge meets a pause so far on the week 0 (0)

A momentary breather for the pair? Likely so. The pause comes after some intervention talk last week among Japanese officials, and that kept buyers more guarded in pushing for a move towards 130.00.Since then, the pair has stalled somewhat although the move does reflect action in the bond market as well. 10-year Treasury yields are down 3.8 bps to 2.789% today and that is seeing USD/JPY down 0.3% to 127.75 at the moment.Looking at the near-term chart above, it is also evident that the upside momentum has met a bit of a pause. Price action has fell back below the 100-hour moving average (red line) but is staying somewhat supported above the 200-hour moving average (blue line). That hints at a more neutral near-term bias currently.It’s all about the next move and month-end flows will also factor into trading over the next few days. Equities had looked sluggish mostly but pulled off a bit of a turnaround yesterday, though it isn’t much when you weigh that against the moves throughout the month. The bond market remains key in my view but perhaps there might be more push and pull there from hereon until we get to the Fed next week.As such, that could keep USD/JPY well rested between the 125 and 130 range in the bigger picture. But in the context of price action now, there is minor support around 127.34-45 with the 200-hour moving average a key one to watch as well. As for upside levels, the 100-hour moving average is the first notable level before getting to 129.00 and then the recent highs around 129.40.

Go to Forexlive

Japan PM Kishida: Rapid FX moves are undesirable 0 (0)

Hopes BOJ continues to strive towards achieving 2% inflation targetThe jawboning continues and these remarks aren’t anything that we haven’t heard of before. Japanese officials can at least take heart that the yen slide is at least meeting a bit of a pause in the last few days after a quick push in USD/JPY headed towards 130.00. Talks of intervention have seemingly helped but it may prove to be just a speed bump if the fundamentals don’t change.

Go to Forexlive

Team @Newsquawk’s US Market Open note and podcast. 0 (0)

US Market Open: European cash markets kicked off the week lower across the boardFull noteEuropean cash markets kicked off the week lower across the board with a relatively broad-based performance seen across the majorsTwitter is reportedly re-examining Elon Musk’s bid in which a potential deal could be made as early as this week, WSJ sourcesStateside futures are lower in tandem with the broader market sentiment, whilst the NQ is slightly more cushioned by the earlier decline in yields.DXY set a new 2022 peak at 101.750 amid safety flight and a sharp slide in crude alongside other commoditiesFrench President Macron won the second round of the Presidential Election with 58.6% of the vote vs Le Pen at 41.4%.Looking ahead, highlights include a Speech from ECB’s Panetta, Earnings from Activision Blizzard, Coca-ColaEUROPEAN TRADE EQUITIES European cash markets kicked off the week lower across the board with a relatively broad-based performance seen across the majors.Sectors are lower across the board with a clear defensive tilt: Energy and Basic Resources sit at the bottom of the bunch amid hefty downside in underlying commoditiesStateside futures are lower in tandem with the broader market sentiment, whilst the NQ is slightly more cushioned by the earlier decline in yields.Twitter is reportedly re-examining Elon Musk’s bid and be more receptive to a deal with the sides meeting on Sunday to discuss the proposal. It was separately reported that Twitter is facing increasing shareholder pressure to negotiate with Elon Musk in his takeover bid and that the Co. is in talks with Elon Musk in which a potential deal could be made as early as this week, according to WSJ.Twitter (+0.7% pre-market) is reportedly re-examining Elon Musk’s bid, via WSJ.FX DXY sets new 2022 peak at 101.750 amid safety flight and sharp slide in crude alongside other commodities.Yen back in favour as risk sentiment sours irrespective of denials about joint Japanese and US intervention discussion – Usd/Jpy towards base of 128.87-127.89 range.Aussie underperforms on Anzac Day due to steep decline in copper and iron ore – Aud/Usd tests 0.7150 and Aud/Nzd cross under 1.0850 vs 1.0940 at one stage overnight.Yuan extends depreciation as Covid spreads to a district in Beijing and PBoC continues to lower Cny midpoint reference rate – Usd/Cnh just shy of 6.6000, Usd/Cny eyeing 6.5650.Euro averts 1.0700 test, narrowly, and pares more losses after surprisingly upbeat Ifo survey, on the surface – Eur/Usd rebounds to circa 1.0750, but still well below Macron victory high.Pound loses Fib support on the way through 1.2800 and sub-8400 vs Dollar and Euro respectively.FIXED INCOME Debt futures firm as risk appetite wanes, but bonds fade beyond 154.50 in Bunds, 119.00 in Gilts and 119-25 in the 10 year T-note.Core EZ bonds lose momentum after German Ifo survey beats and irrespective of less encouraging accompanying statements.French OATs off peak within 147.38-146.28 range posted on confirmation of Macron defeating Le Pen to retain Presidency.European Commission sells EUR 2.499bln (exp. EUR 2.500bln) 0.4% 2037 NGEU; b/c 2.05x (prev. 1.49x), average yield 1.626% (prev. 0.375%).COMMODITIES WTI and Brent June contacts have continued to decline since the resumption of futures trading.Spot gold has been caged to a near-USD 5/oz range since the European open as the impact of a firming Buck negated the effects of lower yields at the time.Base metals are in a sea of red as China’s lockdown woes hit the demand side of the equation – with LME aluminium and zinc the laggards at the time of writing.NOTABLE HEADLINES French President Macron won the second round of the Presidential Election with 58.6% of the vote vs Le Pen at 41.4%, while Le Pen conceded defeat after the initial projections, according to Reuters and Sky News.ECB President Lagarde commented that interest rate hikes will not lower energy prices, according to Barron’s.ECB policymakers are said to be keen to finish bond purchases as soon as possible and possibly hike rates in July but no later than August, while they are leaning towards two rate moves this year with three also a possibility, according to Reuters sources. However, an ECB spokesperson declined to comment on the timing of ending bond purchases and potential interest rate increases.The EU is said to prepare the creation of a new trade and tech council with India, according to FT sources. The new forum could be unveiled on Monday during the European Commission President’s visit to India.The EU will aggressively police online content from Big Tech platforms such as Google (GOOG) and Meta’s Facebook (FB), according to the FT

Go to Forexlive

UK CBI Business Optimism: -34 (Forecast -15, Previous -9) 0 (0)

UK CBI Data:Business Optimism: -34 (Forecast -15, Previous -9)Orders:14 (Forecast 22, Previous 26)More like Business Pessimism.. AMIRITE??Anna Leach, deputy chief economist at the CBI, said manufacturing orders and output continued to grow, albeit at slower rates and the war in Ukraine was exacerbating COVID-related supply problems.“It’s little wonder that sentiment has deteriorated sharply over the past three months and manufacturers are now scaling back their investment plans,“ Leach said.Sterling just can’t catch a break. Currently down 0.9% on the day.

Go to Forexlive

Trading Failure Swing Pattern 0 (0)

This
article is devoted to a special tech analysis pattern in Forex
and the stock market that can be found on a good half of reversals of trend and
correctional movements from M1 to MN. However, right because of this frequent
emergence, the main task of a trader is to distinguish between a Failure Swing
that will bring them a profit with more than 50% probability and a mock Failure
Swing.

Description
and examples of Failure Swing

A
bearish Failure Swing is a double top, the second peak being lower than the
first one. A bullish Failure Swing is a double bottom, the second bottom being
higher than the first one.

Here
are some simple examples:

The
idea of the pattern is that the shorter second part of the pattern demonstrates
such a low market interest to the preceding movement that market players do not
even want to test the tip of the first peak or bottom.

Nonetheless,
classically speaking, an uptrend is considered in action when its highs and
lows increase consecutively; similarly, a downtrend is considered acting when
the lows decrease one after another. However, when a bullish Failure Swing
appears with an increasing instead of decreasing high, this means that the
downtrend is at least slowing down.
And when the price break through point 2
from below, the trend is considered ascending. With a bearish Failure Swing,
the situation is the same: when the bottom point is broken through from above –
the trend is already considered descending. Of course, all this is just
hypothetical, in Forex as well as in the futures or stock markets. Any trading
signal is hypothetical. The trader’s task is to make the probability come true.

Requirements
to a highly probable Failure Swing

For
a Failure Swing to be able not only to slow down the movement in which it has
appeared but also to really push the price in the opposite direction, the
pattern needs time. Particularly – no less than 30% of the time that the
preceding uptrend or downtrend took to develop.
However, the time can work
either on generating force for a reverse movement or banal consolidation for
going in the previous direction. So, a highly potential pattern must demonstrate
changing dynamics of price
movements.

As
for a bearish Failure Swing, the price must drop as fast as possible from high
1 to low 2, while the incline from low 2 to high 3 must be as slow as possible.
And from high 3, the price must start falling again very fast and confidently,
closing the candlestick on the working TF under low 2. As soon as this happens,
a bearish Failure Swing is considered complete.

For
a bullish Failure Swing to have high potential, the price also needs to grow
from point 1 to point 2 as fast as possible, while the decline from point 2 to
point 3 must be very smooth. From point 2 to point 3, the price must grow
steeply, confidently closing the candlestick above point 2. After this, the
bullish Failure Swing is considered complete because the price movement hereafter
complies with a classic uptrend.

In
most cases, the angles of lines 1-2 and 2-3 will be equal often the trend
reverses at line 2-3. However, line 2-3 must never have a sharper angle than
line 1-2. And from point 3, the price must always go confidently in the target
direction and always at a sharper angle than line 2-3 has.

Signal
to buy

The
signal appears as soon as you notice a highly potential pattern complete. Enter
a buying position as soon as the candlestick closes above the level of point 2.
However, if the candlestick closes high above point 2, place a Buy Limit order
a bit higher than the broken top because in highly potential Failure Swings,
the price seldom drops lower. Example of a signal to buy:

Signal
to sell

It
appears as soon as the candlestick closes under the level of point 2 of the
signal pattern. If the candlestick closes deep under the level of point 2, you
can place a Sell Limit order a couple ticks under it or at the level of point
2. Example of a signal to sell:

Stop Loss and
Take Profit

Trading
by the Failure Swing, the initial Stop Loss should be placed behind point 1. If
you are selling, mind the spread. The SL can be moved after newly emerging
extremes while the price is approaching the Take Profit. While the trader
should not wait long, moving the SL to the breakeven, using each new extreme,
when they will trail the position they should always keep in mind that the
market will need time to consolidate powers for a new movement.

As
for the TP, the trader can do without it, using their position trailing skills.
However, trading in Forex or the futures market, I would recommend using a Take
Profit. I checked the EUR/USD chart over 14 months for
Failure Swings that could be used and decided that on H1 I would not have
placed any TP at all if it had to be to times larger than the SL. As for
trading Failure Swings on the same pair, M5, over 11 months, I decided that an
optimum TP should be no more than 3 sizes of the SL. Alternatively, choose the
TP size based on your experience.

However,
in the stock market, trailing positions can be more efficient than a stiff TP.

Money
management

Trading
Failure Swings, the trader can choose between risking fixed percentage of the
deposit or risking the same lot. I presume that any trading signal has the same
chances for success and failure, that is why I recommend risking fixed
percentage of the deposit. It should be no more than 2%, and when you are still
learning – no more than 1%.

Example
of trading:

I
made an in-depth study before writing this article and concluded that trading
Failure Swings can bring a profit. However, for this probability to become
real, the trader should choose a comfortable TF and be very picky, choosing
candidates for profitable signals. Thus they will minimize risks.

By Analytical Department at RoboForex.

Go to Forexlive

China’s cabinet announce more measures to promote consumption potential 0 (0)

The awesome CN Wire notes that..China’s cabinet: Will further promote release of consumption potential and sustainable recovery of consumption. Will guide financial system to supprot real economy through various measures such as lowering interest rates and reducing fees.Will steadily increase mass consumption such as automobiles. All regions shall not add new automobile purchase restriction measures.Regions that have implemented automobile purchase restrictions will gradually increase number of automobile increment quotas and relax qualification restrictions for car buyers.Will make overall use of existing financial funds to support construction of consumption-related infrastructure. Will include eligible projects in scope of local govt special bonds, so that investment can be better used to boost consumption.~ with China seemingly regressing back to lockdown mode (did it ever progress out of it??), you have to believe that govt support measures will only become more pronounced.

Go to Forexlive

US‘ Blinken and Austin to visit Kyiv, Ukraine on Sunday 0 (0)

There are plenty of updates on Russia’s war on Ukraine, just noting this one. Ukrainian President Zelensky announced the US visitors. He will meet with the two on Sunday. Further weapons provisions will be on the agenda. Zelenskyy: said he expected „not just presents or some kind of cakes, we are expecting specific things and specific weapons.” —Unrelated – join us on ForexLive on Monday morning Asia time for opening rates. EUR will be in the spotlight with the French presidential election. Polls have Macron to win reasonably comfortably. But … polls have been unreliable and two-horse races have an in-built degree of unpredictability.Background election posts:Euro sees lopsided risks ahead of French election runoffPresidential election in France this weekend is a risk event for the EUR

Go to Forexlive