TRADE STRATEGY SPREAD 2 EURO VS. EURGBP

The market's reaction across the board on stocks could be seen as a technical price recovery move from the recent declines. Being at the end of the month's trading this could be attributed to liquidation and short-covering from traders looking at the coming Friday's reports on jobs.

Today's Fed commentary would be looked upon as a remake of the interest rate hike and how inflationary effects are tamed leaving the FED to continue its course towards the end of the year. This would provide a probable chance for stocks to recover within the 4th quarter period . However, the likelihood for the Dow to reach its all time high would not be done in this period alone. Thus, any price recovery may only be short-live and a temporary relief.

Meanwhile, European majors are under pressure as a disjoint trend between the Euro and Cable are running in a discourse. That is why the significant EURGBP cross rates has been more in line where we have seen quite a recovery from its previous low. This move have supported the Euro before a decline is being seen or in the making as of this writing which is currently working below the 1.1200 handle. A retest will be bound to be made given the manner of the market's extension of its consolidation and range trading.

EURUSD 9.30.15

EURGBP CROSS RATE 9.30.15

Strategy Spread: Spot CCY vs. Crosses, Stock Futures as Indicator

While taking a que of the Stocks Indices Futures market, the price recovery in Europe has somehow provided a support at the opening prices for the 3 major indices. The Globex market including futures have provided the better alternative to implement strategies that can the least be used as an arbitrary trade either to position a trade in the European session before the US market opens.

No other than a futures strategist / trader has better understanding of how futures can best serve investors especially in Asia that can have access to better liquidity and execution when applied with while awaiting for the economic data. Again volumes increases in this volatile price action where a triple digit decline and a price pull back gives day traders the flexibility to move in & out on both directions by using these 3 major markets.

The relative trade strategy of utilizing Dow/ SP500 & Nasdaq futures for an expected price pullback is an excellent approach either timing an entry position within the trend or carry a short-term corrective move over a certain period of time. The extended decline has already been confirmed with the past two consecutive quarters now has reflected a negative bias for stocks. Which somehow was cemented by the contagion market from China. This includes Asian markets to the list. However, @megatrade101, we do not discount the probability although slightly that there could still be an attempt for a price recovery within the 4th quarter trading for the year. 

Meanwhile, in Asia the JPN225 (Nikkei Average) have taken the lead of decliners by breaking the 17k benchmark previously set on its way higher and reaching the 20932 high (July 2015) and continued to decline at its current levels @17150. A well defined major correction within a major trend has transpired and there is only one quarter left for an attempt to be positive but chances are quite slim at the moment.

As of the current market condition, the Euro has been quite supported with the cross rate currency pair primary with Cable and Yen. As the USDJPY has held well in a tight range while the EURGBP have remained in a positive tone for the past few sessions. 

Investors Alert

The market place would have to brace itself in the coming week with a barrage of economic data along side the FED policy makers commentary schedule in an already volatile market condition. The  3rd quarter earnings season may only be a backdrop compared with the issue of government shutdown hanging in the air despite the recent Speaker John Boehner's resignation reducing the risk of such occurrences.

However, it maybe the effects of these issues would weigh heavy in the stock and currency markets particularly the USD. If and when the USD overcomes all these transition it may well provide as the main catalyst for the USD to move even higher from its present course. However, it maybe the effects of these issues would weigh heavy in the stock and currency markets particularly the USD.

If and when the USD overcomes all these transition it may well provide as the main catalyst for the USD to move even higher: unless Jobs data would say otherwise. As we have to see how all these fundamental issues would blend into the market technical trade setups similar to the on going market perspective we have experienced lately. Market price action and behavior will be carefully watch as it develops through the coming week. This is when time and price action can work hand in hand or any deviation from its current course could be detrimental in determining the USD direction. Therefore, strategies on both sides of the coin would have to be considered for any eventuality.

CCY Corner: USD Divergence 2

Watch for our next "Market & Price Action Analysis On How to Read & Timely Execute Trade Positions from Overlay Chart Patterns Based on the USD" as a primary market indicator.

DXY Update: As of  9.25.15

Technical Vs. Fundamental

This is just one of the tools of the trade identified from the four chart patterns overlay from our previous $DXY analysis and its correlation with the rest of the major currency pairs. The simple selling divergence resulting from the recent decline and the result of a price recovery was fundamentally supported by FED Chair J Yellen's speech for a continued rate hike for the year fueled the current rally for the USD Please refer to the patterns listed below as a fresher to identify individual signals compared with overlay patterns when a combination occurs during the course pf trading sessions.

Reference Chart Patterns

CCY Corner: USD Divergence 2

CCY Corner: The 3 Amigos In FX - CABLE / USD / EURO - Technical & Price Action Analysis

So far it has been an amazing run for Cable from the 1.5170 to its closing price @1.5520 for the week ending September 18 2015. And from our price call @1.5580/90 levels, Cable registered a high @1.5658 and retreated back lower at its current price of 1.5520; due to some profit taking and position adjustments due to the end of the week's trading.

 BULLISH GARTLEY FORMATION

The earlier chart pattern that provided the Gartley Bull formation from the low not only provided the 1st valid signal as it was supported with a "Parallel Price Divergence" alongside X of June 02, 2015. While finding the HI/LO X cross at the middle of the price consolidation was even more difficult, however we were fortunate enough to find the focal point.  Other tech chartist may have called a probable double bottom but were to cautious to call it as prices on Cable were going down while the USD was moving higher. The series of market views that we have made reflects our trade with over a 400 pip recovery was made with the help of the FED's decision.

On the other side of the coin, the lack of follow through interest measured through the financial futures "Volumes & Open Interest" on CABLE was not enough to sustain above the 1.5600 which is now considered to be a short-lived extension in comparison with the USD Index move back from a 94.05 low and closing @95.15 basis point. MegaTrade101's market call on the DXY chart on the opposite side of the trade formation (Bearish Gartley formation) which came through with flying colors as best described with our recent market analysis and video support. Please check out the link! This is how the DXY looks post FED decision.

DXY POST FED DECISION

Meanwhile, the EURO has stalled @1.1280 levels and have finally made its run with a little push from the FED that marked a high @1.1460 nearest to our price call @1.1500 handle. The bigger picture for the single currency had created a "Disjoint / Trend Angle" during the course of its run. Capitalizing on the previous chart pattern analysis the registered high @1.1712 was significant. But not as significant when it changed into a bear engulfing bar at the closing of the week. A bearish spike now has been reflected and shall be a dominat factor for technicians as the fundamental would weigh in. the near term.

EURO IN A DISJOINT / TREND ANGLE

This case analysis summarizes the week's trade volatility as we made a call for the USD to move higher towards the last trading quarter for the year 2015.

UPDATED VERSION: The 3 AMIGOS In FX 

Post FED Decision Update: Active Price Action

Investors and traders have experienced an increase in market volatility with the financial markets in Asia and the US markets. Leading the barrage of news was the FED's refrained from moving a rate increase which was somehow anticipated by most analyst.

The DOW's high reaching 16933 nearest to our target levels of 17000 have manage to pull back and have decline back down to the current 16674 where it came from. A short trading session for the weak have likewise been part of a relative good follow through and lack of volumes to create a continued rally. A similar case transpired with the USD index after making a relatively good price recovery from the 94.85 basis point and managed to pull back lower @94.05 that took a rapid price action after the FED's decision. And this led to a ripple price action effect that lifted the EURO and CABLE to their respective high levels, @1.1460 and @1.5660.

While sentiments of market price action spilled over in Asia with the JPN225 reaching a high @18644 then pulled back lower to its current levels @17840. And to top it off with Brent Oil steady @46.90-47.72 before making a rally @50.34 and with a similar reaction back to the 48.85 levels then pulling back higher to its current price @49.85. Prices will pause within these current levels after a week of price swings in both directions. as it moves forward to the closing of the 3rd quarter 2015.

With that said, prior to FED's decision, the market was poised to find itself walking to a volatile market place where our technical trade setups came through with flying colors for our constituents. As we previously called on our video support "Not Just forex: Price Action Analysis & Market Behavior Based on Correlation". Checkout the link. As these will lead towards the end of the quarter and a probable price recovery on the last quarter of the year. 

https://youtu.be/opXzWP5M1eQ

Not Just Forex: Price Action & Market Behavior Based on Correlation

Opening Market Insight GBPUSD

The issue on the UK getting out as an EU member have resulted into a reverse market psychology leading to a price recovery for CABLE from the low @1.5170 and currently trading at 1.5400 on the high. A good reference point which can be technically treated  as a support price where a probable rebound can take place. Refer to May 2015 as shown in the chart figure on CABLE.

This was a 360 degree turn compared to its decline from 2.0180 from the announcement that John Majors walked out from the ERM that led to a rapid decline in the FX market. And as for David Cameron stand on the possibility of  UK leaving the EU; this may go beyond immigration and other financial benefits that would somehow affect UK policy. The difference is that this issue came to a point where CABLE prices were at the low end of the market. Although, the corrective phase of the USD began when it registered a 92.62 low last August which came from the rapid decline of the DOW in contagion with the China market.

As of this writing,  GBPUSD strength and a mild price recovery for the EURUSD was reflected in the early European session when the USD declined @95.72 and trading towards the post holiday US trading session.

GBPUSD As of September 08, 2015

Current Market Overview: 9.4.15 US session

Whenever the Dow Jones closes @16080- 16168 range; the US Dollar Index (DXY) would likely be in the range @96.05- 96.51 basis point levels. A mix data for the NFP#'s was favorably carried by the unemployment rate that provided a positive tone for the reserve currency. Meanwhile the effects from negative sentiments and market uncertainty still prevails. Will watch where the closing prices would be at and that a trend continuation towards the 2nd trading week for the new month of September can be expected.

 

DXY Mid-day Market Overview

CCY Corner: EURO / USD

The kinds of statements ECB President Mario Draghi makes dictates the tone of the Euro as the weaker outlook for the region have again pushed the common currency back towards and below the 1.1200 levels. And this has supported the US Dollar briefly as market sentiments have found bulls a valid reason to stay positive as the US - DXY have stayed within its current levels and formation. However, the focus would be the data on Non-Farm Payrolls would take over the spotlight as data survey has been favorable and would lift the USD whenever it beats market expectations. 

CCY Corner: EURO / USD

CCY Corner Video on USD Direction

Comparing price action analysis and actual price change has been the basis of our continuing market outlook moving forward on the US Dollar as one of the main indicators where we derive the next probable direction in favor with or contrary to its current movement. Although, the formation below has been discussed the irony of the matter is that prices have retreated back to its original configuration in spite of the 92.62 low which it established last week.

The probability of a retracement will always be there. But the question as to when it would do so what we need to be able to anticipate on a technical perspective. However, market price action is dictated by market forces. Secular forces are current at work other than the fundamental data recently released by consumer confidence favoring a continuation of the USD to move higher; which we do not discount. Here are several case analysis based on Price action and on a technical angle.