Trade Week Analysis for 08/04/13

Choppy again!

Last week: We are in to our 3rd month now of mostly Ichimoku Cloud divergence on the Index charts, choppy markets, few TS signals yet some good 30 min chart trades during the US session.  There were only a few TS signals this week: EUR/GBP = – 50, Cable = 100 and Kiwi = 40 before reversing.

This week: The Ichimoku Index Charts are back to being divergent but I’m on the lookout for the next wave of Cloud alignment.

I’m watching the trend lines of the flag pattern on the EURX chart to see if there is a break out from the pattern that is looking rather ‘bull flag’ like. The EURX has been a proxy for ‘risk’ appetite of late and, as such, bears watching by ALL traders, not just FX traders. An upward breakout here would suggest further ‘risk on’ might be in store.  There is significant support below the EURX; a daily trend line and a monthly trend line and these seem to be holding price up for the time being. Price actually has bounced up from these support levels this week:

I don’t understand how, or why, the Euro would rally but it has had the world thrown at it over recent weeks and it is still pushing its head up and trading at 1.30! This is where it becomes important to trade what you see and not what you think! This short video was posted by a fellow trader on an FX forum that I follow. It sums this observation up. There is a bit of ‘language’ in it but it is rather funny. Thanks Alex! I don’t know what the next momentum move will be but, when the trend emerges, I’ll trade it. 

I’m also watching to see if stocks and currencies fall back into an aligned trading rhythm.

I received and email from a fellow trader expressing frustration with FX trading over the last few months. It is important to realise that Forex has been choppy and the weekly chart of the EURX (above) is both the reason for, and the answer to, this frustration! Part of my reply to him went as follows:


“…….The last few months have been very choppy for Forex so don’t be disillusioned. There is a clear reason for this and you can see this from the weekly chart of the Euro index. I’m posting this on my blog shortly and it was also posted yesterday. The EURX has been pulling back to the mean, in most choppy fashion, after testing major resistance. It looks like it might be gathering steam to have another go at this level…….This week might be quite an interesting week for ‘risk appetite’ in FX……”

I used to find choppy periods like this very frustrating and would also be disillusioned with my trading progress. I’d also start to doubt my methods. I now approach periods like this quite differently though since discovering the value of the Ichimoku Cloud Index. I have mentioned before that the Ichimoku Cloud is like my ‘weather map’ for trading. ‘Clear weather’ on the Ichimoku Cloud charts gives me the confidence to get out and about with my trading algorithm. Sadly, the weather has been stormy for a couple of months but, the difference now is, I understand this and it helps to temper most of my trading frustration. It is simply like waiting for a break in the weather to get outside…you just have to be patient as the weather will clear…eventually! There is some comfort though in one regular pattern that emerges during these periods of choppy markets and Cloud divergence. That is, the regular periods of better trend trading off 30 min charts during the US trading session. This has been a continuing pattern of late as well. The other comfort is that choppy FX trading seems also to make for good periods of Stock and Options trading. These two types of trading augment each other quite nicely!

Stocks: have had their first really bearish week in some time. I’ll be watching to see if this is the start of any more significant bearish move:


BTW: I have made just a brief update to my Stocks: April page.

Some key events to watch out for include:

  • Tuesday April 9th: Chinese CPI.
  • Wednesday April 10th : Chinese Trade Balance; USD FOMC.
  • Thursday April 11th : AUD employment change; USD Unemployment claims.
  • Friday April 12th : USD Retail Sales + PPI data


E/U: Price chopped around to start the week but got a boost on improved sentiment flowing on from the Yen easing. Price has broken out from trading within a bullish descending wedge pattern. I’m watching to see if there is a new TS signal following this breakout but there hasn’t been any sign yet. Price is still trading below the Cloud on the daily but is now above the Cloud on the 4hr Ichimoku chart which is divergent and suggesting some choppiness. The weekly candle closed as a bullish engulfing  candle though.
  • I’m watching for a new TS signal and a hold out from the descending wedge pattern.

E/J: Price chopped around to start the week but got a boost from BoJ Yen easing. Price is trading above the Cloud on the daily and 4hr time frame which is bullish. The weekly candle closed as a bullish engulfing candle.
  • I‘m watching the 127 level.

A/U: Price seems to be bouncing around in a channel between the 1.04 and 1.05 levels. It is trading above the Cloud on the daily but below the Cloud on the 4hr chart so might be choppy. The weekly candle closed below the whole number, psychological 1.04 level and as a bearish almost ‘inverted hammer’ style candle. AUD jobs data this week might help to give this pair some direction.
  • I’m watching the 1.04 level.

A/J: Price chopped around to start the week but got a boost from BoJ Yen easing. Price is trading above the Cloud on the daily and the 4hr chart which is bullish. The weekly candle closed as a large bullish candle. 
  • I’m watching the 100 level.

G/U: Price moved down from trading within a bearish ascending wedge pattern and gave a 100 pip trade this week. It has rallied back since then on some renewed optimism after the BoE held rates and further stimulus steady.  It is now trading in the Cloud on the daily but above the Cloud on the 4hr chart so might continue to be choppy. The weekly candle closed as a bullish engulfing candle. I am wary with shorting this pair though given that the March candle closed as a pin bar reversal or ‘hammer’ style candle. This suggest a reversal to the upside….just to confuse us!
NB: Go Market charts have an error for my weekly 200 EMA with the G/U. I have advised them about this.
  • I’m just watching this pair at the moment.

Kiwi: NZD/USD: Price chopped sideways again for most of the week. It is trading just below the bear trend line of the monthly chart triangle pattern. Price is now trading above the Cloud on the daily and on the 4hr charts which is bullish. The weekly candle closed as bullish candle. This might take off if ‘risk on’ returns at all!
  • I’m just watching for a new TS signal.

EUR/AUD: Price chopped around to start the week but got a boost from all the BoJ Yen easing too. It had been trading in a downward trend channel but has now broken up and out from this.  It is trading below the Cloud on the daily but above now on the 4hr time frame which is divergent and suggesting further choppiness. The weekly candle closed as a bullish engulfing candle.
  • I’m just watching this pair at the moment.

The Yen: U/J: Price chopped around to start the week but got a boost from BoJ Yen easing. Price is trading above the Cloud on the daily and on the 4hr chart which is bullish. The weekly candle closed as a large bullish candle.
  • I’m still watching the 95 level. I’m still thinking the 103 level might be a good target!

EUR/GBP: Price has been choppy this week. Price is now trading in the Cloud on the daily and on the 4hr chart which explains this choppiness. The weekly candle closed as a small bullish candle.  
  • I’m just watching this pair.

Silver: Silver has broken below the long term monthly support trend line. Price trended down all week and is trading just above major support in the $26 level. Price rallied off support on Friday though following NFP. The weekly candle closed as a bearish candle. This may be a turning point for silver.

Gold: Gold has also broken down through major monthly support that dates back to early 2008. This is a major break down for the metal. The next major support level seems to be at $1,525. Price trended down all week but rallied on Friday after NFP. The weekly candle closed as a bearish candle but with some pin bar reversal look to it. The NFP result may prove to help Gold and Silver over the coming weeks as there may not be as much chatter about reducing US monetary easing.

Oil: bounced down from the triangle trend line this week due to some over supply reports. It will be interesting to see how this moves if the USD continues to fall: