Forex Daily Signals, Analysis and News - 21 January 2008

by Vahid | Daily Analysis and Signals | Sunday, January 20th, 2008

I am writing an article about Japanese candlesticks. Last night I created a Flash animation for it to teach you how a candlestick forms. The article is not finished yet. I will try to finish it very soon. I strongly recommend you to read it very carefully several times. Japanese candlesticks are the only real time indicators we have and they are the most important tool that I use in my analysis and trades.

The best traders are among those who have good knowledge about Japanese candlesticks and use them in their trades effectively and those who do not pay enough attention to Japanese candlesticks and their signals, make a lot of wrong trades. If you have not been using the Japanese candlesticks in your analysis or your knowledge is not enough about them, I recommend you to learn them very well. They are the biggest indicators you can ever have both in forex and stock trading. Stay tuned for my Japanese candlesticks article. Hopefully it will be published today.

Tip of the day:

You should never stop learning!

Fortunately Forex and all other kinds of internet based businesses are so dynamic and new information, techniques and tools come everyday. You will become a good forex trader after few months or a few years of studying and serious practicing but you should not stop learning when you start making profit.

Spend at least a few hours per week for finding and reading new articles and e-books. Learn how other traders trade and what systems they use. Compare your systems with theirs and make the necessary changes in your systems to improve them.

Ok! Let’s check the currency pairs:

1. Euro against US Dollar (EUR-USD):

It is still fighting with the 23.60% level as a support. Last week it could not break this level and go down. So it is trapped between the previously broken support (red thick line) and the 23.60% level. I think it will be able to break the 23.60% level and go down. Bears are stronger.

The 4hrs shows the market indecision but also shows that the Bears are trying so hard to take the price lower.

The one hour chart shows more details about the current situation. Here you can make your decision. Have an eye on it. If the price broke the support (thick purple line) go short. If not, go long but be careful because it can not be long term trade and you will have to close your position very soon. The 50% level is broken. I think the price will go lower at least down to the 61.80% level (1.4544).

2. US Dollar against Swiss Franc (USD-CHF)

Bulls tried so hard to break the resistance and take the price higher but have not been successful so far. They are still trying so hard but Bears are stronger by now.

The 4hrs shows that the price is moving around the 23.60% level. It could break this level as a resistance and went up last week but then retested it as a support, broke it and went down. This is a complete indecision and the formed symmetrical triangle admits this. It is not clear what direction it will choose. We have to wait for any of the purple lines to be broken.

The one hour shows more enthusiasm in Bears. They have been trying so hard to break the triangle support and go down but have not been successful so far. The shadows have broken the support but we have to wait for the bodies of the candlesticks to break it. So have an eye on it and take the proper position if any of the triangle support or resistance lines become broken.

3. British Pound against US Dollar (GBP-USD)

Please refer to my Jan 18 analysis and see that I warned you that the Bollinger middle band acted as a very strong resistance for three times on 29 Nov, 12 Dec and 31 Dec last year and it is possible that this time it drops the price again. It did!

I know some readers didn’t pay attention to my warning and went long. Don’t worry you will recover your loss in the next trades.

The Bollinger middle band could not be broken and the price went down strongly and now is trying to break the the 38.20% level that has been used to act as a strong support for several days. There is a big possibility that this time it becomes broken and the price goes lower.

You could go short since last Friday using the 4 hrs or one hour chart. On Jan 18 the 4hrs showed a very strong Bearish reversal signal that I mentioned clearly in my report. It also broke the support (purple arrow), tried to go up and retest it but could not even touch it and so it will go lower. Hope you took the chance to go short.

The one hour shows these events in more details. Everything is clear. Those who went long when the Bullish signals appeared on the daily chart have to be careful. If it goes down and breaks the small thin purple line, you have to close your long position otherwise you will be in trouble but if it goes up and breaks the big thick purple line, you will enjoy your long position.

4. US Dollar against Japanese Yen (USD-JPY)

It is still strongly Bearish but went up to retest the broken 107.21 resistance. It has not been successful to break the 107.21 resistance so far but it doesn’t mean that it will not try any more. The next candlestick will let us know.

The 4hrs shows a symmetrical triangle. You have to wait for any of the triangle support or resistance before you take any position. If the price keeps on staying inside the triangle then it will be harder to guess the direction.

The one hours chart shows the beginning of a small uptrend for the next few hours. It can become a big uptrend later if it breaks the triangle upper side (resistance) and goes up.

5. British Pound against Japanese Yen (GBP-JPY)

It is still retesting the broken support (thin red line) but it seems it has been unsuccessful completely and will go down.

The small double top I talked about it on Jan 18 became a head and shoulders later and worked as a reversal signal on the 4hrs chart. The price broke the head and shoulders which means it will go down. It is possible that it retests the broken neckline as a resistance and then goes down:

One hour chart shows the head and shoulders with more details and shows that it already retested the neckline once, failed and went down but it seems Bulls are still strong and want to retest again.

6. Euro against Japanese Yen (EUR-JPY)

On Friday it tried hardly to break the 38.20% Fibonacci level but failed (the green candle but a long upper shadow). It should keep on going down.

The 4hrs chart is showing something valuable. The price is almost above the 161.80% level which is one of the most important Fibonacci levels. It is highly possible that the price goes up and makes a consolidation. So go short only when the 161.80% level is broken.

7. US Dollar against Canadian Dollar (USD-CAD)

The Friday candlestick formed as a Hanging Man which means indecision. It retested the broken 1.0248 resistance but was not successful. It is going down to retest it again. I suggest you to close your long position now or at least when it broke the thick purple support.

In the 4hrs chart, it has not been able to break the thick purple line and go up. In fact it went down and retested the Bollinger middle band but was also unsuccessful. It went up a little but has made a lower high that reflects the strength of the Bears. If the broke the support (the big thick purple line) you can go short. If it broke the resistance, go long.

The one hour chart shows that it is going up to test the resistance.

8. Australian Dollar against US Dollar (AUS-USD)

The daily is testing the Bollinger middle band and also the resistance (the support that was broken last week) and has been unsuccessful so far.

The 4hrs also shows that it is testing the the Bollinger middle band and has been unsuccessful so far. It is moving inside a descending channel. Going down has the highest probability.

The one hour shows a symmetrical triangle. Take a proper position if any of the upper or lower line of the triangle breaks. I think it will break the lower line (support) and will go down.

9. New Zealand Dollar against US Dollar (NZD-USD)

I couldn’t break the support on last Friday and formed a Bullish candlestick. It seems it is trying to go down and retest the support.

The 4hrs also shows that it is going down to retest the same support. If you have a short position, just keep it by now. If not, wait for the support to be broken and then go short. If it went up, you should not rush to go long. It should break the resistance first (the slant thick purple line).

10. Euro against British Pound (EUR-GBP)

It has broken the Bollinger middle band as a support and is going down:

11. British Pound against Swiss Franc (GBP-CHF)

It is still strongly Bearish. If it breaks the resistance (the slant thick purple line) you can go long. But I think it will go down at least for a few more days.

12. Euro against Swiss Franc (EUR-CHF)

It is strongly Bearish but so close to the 161.80% level. Take the proper position when any of the purple lines is broken.

13. Euro against Canadian Dollar (EUR-CAD)

It is testing the Bollinger middle band to go down. The Bollinger middle band was also tested few days ago but could not be broken. It is trying once again. It seems it will be broken this time.

14. Euro against Australian Dollar (EUR-AUS)

It is still moving inside the channel. It could not break the 23.60% level and went down but has not tested the 38.20% level yet. It will go down to test this level too.

As you know I also check many other currency pairs but as they have a very high spread and so nobody trades them intra-daily, I just check the bigger time frames like daily and weekly and report good trading opportunities. I will not post all the related analysis here but in case I see a good trading opportunity, I will let you know. Here is the signals I found today.

British Pound against Canadian Dollar (GBP-CAD)

It shows a nice opportunity to go short.