My Trades from Forex-Nation.com

[Forexwatchman]

This week has been an unbelievably easy week to trade a ranging market. You simply wait for price action to come to you! The reason for the range is the lack of any strong economic data from the U.S. or the Euro zone to push this currency pair lower or higher, nothing but rumors and guessing going on, so it just stalls and fluctuates. I've attached another graphic to show how my support and resistance lines were perfect predictors for where to enter the market for low risk/high reward trade.

My bottom support line was carried over from the previous week's resistance line that became support for this week, and my resistance line for this week came from Monday's high. By studying up on my section regarding support/resistance lines you can grasp this simple indicator and use it to make money Forex-Nation.com. Also, and I'm getting more advanced here, my resistance line also matches up with the weekly R1 and the 61.8 fib level on the 4hr chart. This makes it a stronger resistance line and thus a safer trade.

 

[Forexwatchman]

The EUR/USD finally broke out of its range last night (8 p.m. EST) mid Tokyo morning as several big Model Funds and Investment Banks began liquidating their long positions fueled by rumors of a China's economy beginning to slow down. The sell offs are continuing to occur as I write this but I have already closed my position due to the oversold and over extended state of this currency pair combined with the upcoming Core CPI at 8:30 which might send this pair back up for a decent retracement. I don't expect this to be the rebirth of the massive sell-off that everyone is waiting for, but it could very well continue down further to the upper 1.4200's. It's a good idea to wait for the US data to come out before reassessing the situation for another short or a long if it retraces.

 

[Forexwatchman]

So it would appear like we finally found the bottom to this EUR/USD down move, although I’m staying out of the market now and I predict we will see a range form as traders wait it out and go into next week to take their cues form *next week’s economic data. Tomorrow will be a pretty dead day for news events except for the GBP Retail Sales m/m which should produce some major action on the GBP/USD and GBP/EUR pairs, but the spread’s too wide for me on those pairs so I’ll sit it out.

I will resume trading on Monday, since by then the range that I am predicting will have formed it’s high and low more concretely. Also, fundamental factors should come into play to help spur this retracement/consolodation back up to the 1.4240 and maybe as high as the mid 1.4300’s, depending on how U.S. Home Sales and Core durable Goods orders turn out. Stay tuned!

I’ve provided a snapshot of the exact fib lines I am using to predict where the recent downtrend in the EUR/USD will eventually bottom out on my website. This is exactly what I did to predict price action in Monday’s post which you can find under My Trades at my website. As far as this current downtrend is concerned, I recommend jumping back into it around the 1.4140 area which is at the 38.2 fib level on the hourly chart.

Many experts along with myself have been waiting since November for this downtrend to finally materialize, so understand that this is a move that has been in the making for many months now. I expect to see this pair fall down to the 1.3900 area before another pullback and then continue on down to finish the fibonacci pattern to the 1.3500 area. Other analysts have said we should see 1.3800 in the next 2-3 weeks, and 1.3100 in the next 2-3 months! Either way you want to slice it, dont bother buying the EUR/USD. Remeber that the trend is your friend, and that’s never been truer!

 

[Forexwatchman]

We had Home Sales in the U.S. fall 16.7% (much worse than expected) but on the other hand inventory of unsold homes fell as well to its lowest level since March 2006 (a good thing). This would explain the lack of any reaction to the announcement on the EUR/USD pair. Part of the reasoning behind the low numbers is that first-time home buyers rushed to complete deals before the $8,000 government incentive was expected to end on Nov. 30. The subsequent extension and expansion of the credit, together with the one- to two-month delay between contract signings and closings, probably means that demand will pick up again in the first half of this year.

The EUR/USD sea is a rough one today, just like the weather here in Pennsylvania, so I advise sitting on the sidelines and observing today. So for today I am looking for a range to fully form off of which I can place support and resistance lines. Also I would not expect the downtrend that we saw last week to resume again until sometime next week, so for now expect to see a ranging market. Also I will watch the development of a channel on the hourly chart which will provide further clues as to when I can jump back in on this pair. Remember that trading against the trend is rarely very profitable and almost always more frustrating and stressful to pull off, so I would advice waiting for other indicators to signal a level of resistance has been reached and then going short rather than trying to go long and thus against the overall trend. Good luck out there.

Looking at tomorrow's trading day, the publication of the German Information and Foschung (Ifo) Business Climate Index will be announced. The index determines the business sentiment and conditions in the Euro-zone. The reading is concluded from a survey of about 7,000 businesses. A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR. Analysts predict a slight rise to a reading of 95.00 versus a previous reading of 94.70. Today’s resistance is provided by the falling trend line from 1.4554 on the hourly chart, which is currently at 1.4184, while the support is provided by short term 61.8% Fibonacci at 1.4085. Look for a break of resistance to initiate a strong rise targeting 1.4302, and then 1.4367.

 

[Forexwatchman]

So as I mentioned in yesterday's post, the EUR/USD has been a hard one to read since Friday, and I chose to remain on the sidelines and setup my indicators (support/resistance, trendlines, MA's) and wait for a safe bet before I reentered. This pair has been retracing since Friday after a major downtrend that began back on Janurary 14th around 1.4554 area and bottomed out on Thurday at the 1.4029 level. Since we are in a downtrend, I have been waiting on another opportunity to sell this pair because trading against the trend is riskier and provides less pips in general than trading with the trend. I also mentioned that I don't expect to see the downtrend resume this week, so I will be looking for short-term sell positions with a T/P of 50 pips or a little more.

Last night, around the midway point of the Asian session, I noticed price action approached my major trendline drawn from the beginnings of the current downtrend at the 1.4554 level, and then sharply reversed and broke through the lower trendline that had formed my channel (see pic). A break of a trendline is a good indicator for a trade in the direction of the break, just like a breaks in support/resistance lines. I also had reassurance from my alligator which had crossed over at this point (I discuss the exact Alligator calculation I use at Forex-Nation.com). So the next step was to establish a S/L and T/P. Now according to pivot point rules, any sell off that begins at M3 will most likely end at M1, and so this is where I placed my T/P with my S/L about 10 pips above my Alligator and the broken trendline. Remember it's a good idea to use two lines of resistance between your entry and your S/L level. This trade netted me 60 pips, not bad and it was a safe bet with everything that was in agreement with the order.

Then at mid afternoon New York time price action went down and touched the lower resistance line based off of last week's low and shot back up. I entered a long and set my T/P at 30 pips and hit that target over the next hour and a half. Yet another basic indicator yielding very real profits for me!

 

[Forexwatchman]

What a day! And I don’t mean that in a good way, although I was able to scalp 14 pips during the FOMC statement release, so luckily it was still a profitable trading day.

The market is hard to read out there, ranges were not huge today but lots action went on and made it a turbulent market for the EUR/USD pair. A number of times the pair sunk down to the mid 1.4020s this morning but then options-related buying out of China ahead of 1.40 exotic triggers helped support the EUR. But growing fears in European credit markets continue to spring up: Greece, Portugal and Spain were all in the spotlight today and it was unforgiving. Spreads over benchmark German debt widened dramatically today, undermining the EUR. Rallies in EUR/USD were limited to the low 1.4060s intraday, a lot worse than I thought they would be. Honestly I thought we’d see a larger retracement today, but that’s what you get for assuming.

EUR/USD finally broke hard to the downside after the FOMC statement was released and I was able to snatch up 14 pips in 5 minutes. News trading is something I rarely do expect on the NFP announcement, but it’s been a slow week and the price action was over extended on the hourly chart so I jumped into a buy and jumped right back out once I saw profit. I could have rode the same trade up 40 pips but got spooked out due to the volatility. A modest upgrade in the Fed’s economic assessment combined with a dissenting vote from KC Fed’s Hoenig (which some see as a precursor to the Fed modifying its dovish verbiage down the line) helped spark a push lower. Prices as low as 1.3993. Rumors are that if we see 1.3980 broken we will see a sell of to 1.3900.

 

[Forexwatchman]

Fears over the ongoing Greek saga dominated the morning’s session with Germany and France denying any Greek bailout and Greece’s PM saying there are no talks with China about buying out their debt. Sounds to me like no one wants to go near this situation!

Anyway, we also had the KC Fed Manufacturing Index rise to 13 and U.S. durable goods orders rise 0.3%, weaker than expected but still good news. Based off that, the EUR/USD fell lower today. Here’s a snapshot of the trade I made 4 hours before New York’s session opened and rode out till 10 am EST. Whenever a strong downtrend is occurring I like to enter into trades around my red or blue MA’s, in this case I waited to see if it would break the blue one before I actually entered the trade after it failed to do so. Once momentum began, this currency pair only retraced once, at 7:00 am EST, then continued until it was oversold and reached the weekly S1 and 10 pips from the daily S1. That was the right time to take profits after prices sharply reversed after reaching that level.

 

[Forexwatchman]

Time to brag a little here!

I called it perfectly on January 20th when I posted: Where the EUR/USD is headed. Using Fibonacci lines, I predicted the fall would reach the 138.2 level once it continued back down after retracing to the 38.2 level. And today it did exactly that ALMOST TO THE PIP reaching 1.3862, 3 pips below where I had the 138.2 line. More reason to check back often and follow along, after all, it’s free!

 

[Forexwatchman]

Lots of profit taking occurring early this week after the last two weeks saw heavy selling pressure on the EUR/USD. We had an alligator crossover during New York's afternoon session on Monday which signaled a 120 pip rise in the currency pair. We had good news from both the Euro zone and the US, so the uptrend remained subdued but steady until today. That's when the weekly R1 was met, along with my envelopes and slower MA's all combining to signal a sell off that's lasted through the New York session, bringing this currency back down to the lower 1.3900's as I type. Not only that but my alligator has also signaled that a reversal of the uptrend has occurred. This recent change in price action can be contributed to several fundamental forces including rumors of a Spanish sovereign debt downgrade, Greek government uncovered a further EUR 40 bln in government debt, making its debt to GDP picture that much uglier, and then US ADP (a precursor to this Friday's NFP) came in much better than expected. But a word of caution, Bloomberg is reporting that: The U.S. may lose 824,000 jobs when the government releases its annual revision to employment data on Feb. 5, showing the labor market was in worse shape during the recession than known at the time.

In the meantime I am still short the EUR/USD since this morning's developments both technically and fundamentally still point this currency back in the direction of it's current main trend.

 

[Ricex]

I just noticed your pivot points are different, which calculation do you use Watchman?

For Daily I use the classic (H+L+C)/3.