A Structured Trading Strategy: Classic Set-ups

 Where Price Action, Trend & Proper Market Timing delivers an effective trade

The continuing market set-up that built a structured trading strategy for the EURGBP have started from the consolidation period since April 2013, towards the first week of May to the current corrective movement of the USD today the 24th of May, that provided the additional lift that can best be described as a follow-through registering a 0.8595 High.

As the USDx declined before the North American trading session to as low as 83.50 where its support level would stall its decline since its resting just above its rising secondary channel. Pullbacks such as this is very typical and healthy during the end of a Friday trading activity; but not necessarily a trend reversal that can only best described as a temporary price reversal which would very well finish at the support levels. The weekly closing and candlestick bar configuration is always critical as it would dictate the outlook for the trading week ahead. For now, the weekly bar is within the previous week's higher band signifying an intra-week bar suggesting a pause for some fresh incentives.

Watch for the opening price in the Asian trading session for a glimpse of the first 3 days of trading activity. So far the chosen currency pair for the EURGBP cross rate has delivered the necessary gains to stay within a structured trading strategy.Click to continue

Overlay Analysis: EURGBP Cross-EURO vs. USD Index

Confirms: Breakout

To identify a probable breakout is as challenging as ever due to the degree of trading difficulty from the market's reaction. Although, what drives an establish trend is weighed by the current indicators, but more specifically persitent market sentiments that reflects the true price action after the fact. However, major participants and traders with the ability to maintain consistency still has the upper hand contrary to speculative trader/investors to withstand market swings even contrary to their active positions.

In our sequence of market view analysis, we have made mentioned that the USD was one of the best trades before and after the fact. The bullish sentiments and data released favoring the USD rally has provided traders and investors the leverage of finding high probability trades thereafter. Although, going through some analysis most traders had some lingering doubts for the USD to continue its rally after a string of good economic reports trailing the market.

Price action from the earlier highs followed by a slight weakness for the USD indeed provided some market relief which is currently being made. Click here to continue

Market SRO Perspective:

USDx-EURO-CHF-GBP & EURGBP cross

Renewed confidence for bullish players after the fact, seemed to ignite the market today with some limited traction for the USD as it moves slightly higher to its current levels @82.50 high in the early trading session.

The limited trading time that occurred last Friday after the jobs report have left the USD market players in a wait and see attitude for a follow-through, while the Dow and SP500 continues to make remarkable price records inspite of the continued uncertainty where traders are still expecting a valid correction for the stocks to move lower as a healthy sign for a bullish market.

However, the psychology behind the market that this is a clear and typical example where price action is squeezed between economic indicators versus market sentiments that may limit market movements as each and every trader tries to feel through what the market would actually do. Where investors shift real money flows between markets would provide some indication for the prices directional move for the week. This now considered the real activity monitor as price action swings to where a more probable trade could be spotted. Spread betting between currency pairs with stocks would be a bit complicated for some as other traders would not to spread their wings so thinly that results to over-leveraging their trading accounts. Click here to continue.

Market Behavior ...

vs. Price Action
The ability to weigh trading analysis between economic reports and technical perspective has drawn a significant mark on price behavior in between the 3 major trading sessions. The upcoming reports on the European Consumer Price index would come earlier than the FOMC minutes that would provide a signal directly effecting the USD direction. Although, as the mid-week reports follows when the US Consumer Price Index would be compared with the German GDP report which would weigh more with the direction of the EURUSD.

Ahead of the market mid-week price action has given the USDx a daily signal of a probable pause as against a breakaway gap against all odds. Nevertheless, this should not discounted on a daily pullback and a retest of the continued strength towards the end of the week's trading will take place. Either way, Wednesday through Thursday sessions would provide a clearer picture. A Tug of War again appears to be in place

Perception vs. Trading Analysis

Technical or Fundamental:
Whenever investor's confidence gains ground in the European community; there will always be something that may spook the markets related to political uncertainty in Spain & Italy. These market conditions have provided some well timed relief for the USD recovery and a gradual slide in the Euro. Which have led equally the same uncertainty with investors and traders whether the decline in the EURUSD can lead to what others have eagerly been waiting for.
The USDx opening price levels for the daily have made some significant recovery...

Market Perspective: USDx-EURO

The unexpected GDP report showed a decline of 0.1% annual rate that may have dampened investor's sentiments. Although, some analyst have estimated a 1.1% rise the 4th qtr. contraction have fueled some investors shifting to USD shorts that prompted the USDx to decline @79.25 basis point in the North American trading sessions.
It was not totally that bad since a stronger household income after taxes and inflation numbers is at 6.8%. And the housing market have risen to a 15.3% from the 3rd qtr. period last year.
Pls. continue click here

AUDUSD-Perspective

While some economist have been inclined to state that China may experience a hard landing; the most recent net export data increasing by +14% for December equivalent to a 5.0% growth figure beating market expectations have been very good & proven otherwise.

This only shows China's resilient economy is picking up which would benefit the Aussie Dollar. As a major counter party to China's economy, the AUDUSD have gained back its losses from a previous low @1.0395/00. And is currently working at the 1.0550 higher levels as of today's writing. Although, the previous week's trading have been in a corrective tone for the AUDUSD, the increased level of market confidence from the recent data is fueling a retest of the AUDUSD above the 1.0550 first line of resistance and heading to its December 12, 2012 high @1.0585 level.

As current market sentiments have surged from the previous decline in prices @1.0344; the gradual price rally have sustained so far with a couple of rapid price action on both directions on the first two trading days entering the new month of January. The Aussie Dollar chart formation has the market potential to become a reinforced Trend depending on the final outcome for the USD directional movement in the weeks ahead.