FX Daily Signals, Analysis and News - 22 December 2007

Happy Trading and Merry Christmas!

Tonight I am analyzing the market when the market is already closed and so the information I am giving can be used for starting the trades on Sunday afternoon or Monday morning.

This week we didn’t have a big news release and so the market was not stormy and in fact was a little slow because of the Christmas holidays. As you know when there is lower amount of buying and selling (demand and supply), the prices becomes more stable and this is not good for the traders because they need volatility and fluctuation to trade.

This will be continued for the next week or even next two weeks because more people and so more traders will go to vacation and will stop trading. Also most of the big banks that have the highest effect on the market will be closed and we should not expect a good volatility for intraday trading.

Those who have a position as a swing trader, may also see the the price doesn’t move. Something I suggest them is moving the stop losses to the proper position in case they already have some profit in their hands because usually we will have a big move after a big and long stagnancy.

Anyway!

Here is the analysis of 16 currency pairs, predictions and some tips and information for tonight.

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Tip of the day:

There are four main currency pairs:

1. GBP-USD
2. EUR-USD
3. USD-JPY
4. USD-CHF

The first two are so similar to each other and if you check their different time frames, you will see that they move like each other and the charts have almost the same pattern. The difference is that the first one moves much faster and bigger. For example when GBP-USD goes down for 100 pips, the EUR-USD goes down for about 60 pips.

Generally, all the currency pairs that GBP and EUR are the main currency in them, have the same moving pattern. For example GBP-JPY and EUR-JPY have the same moving pattern but again the difference is in the size of the movement. When GBP-JPY goes up for 500 pips, EUR-JPY goes up for about 300 pips.

The other thing is that EUR-USD and USD-CHF are opposite of each other. When one of them goes down the other one goes up and visa versa. Again the difference is in the size of the movement. The EUR-USD has bigger movements.

This information is so important in the predictions and making the decisions. For example you see a good and strong signal in GBP-USD that tells you that the price will change the direction and go down. At the same time, you can not see any good signal in EUR-USD and so you don’t know if it will keep on going up or will go down. But as the GBP-USD has given a good signal, you can predict the direction of the EUR-USD too.

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

GBP-USD has been going down in the past few days and has been able to break a very strong support on December 19 and so it seems it keeps on going down.

The next a few candle sticks can be bullish but the price will go lower. So if you have a short position you may want to fix your profit or move your stop loss to keep more profit in case the price moves up. In long term it will go lower for few days more.

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

It has been going up for the past several days and currently is trying to break a strong resistance. If successful, it will go much higher and if not will go down. If you already have a long position, you have to be careful because as soon as you see it fails to break the resistance, you have to collect your profit. It is recommended to move your stop loss to a proper position.

3. Euro against US Dollar (EUR-USD)

EUR-USD has the same movement pattern as the GBP-USD (see tip of the day at the end of this post).

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

USD-CHF movements are opposite of the EUR-USD (see tip of the day at the end of this post). USD-CHF has been going up for the past several days and currently is testing the 61.80% Fibonacci level. This is what that it did to break the 38.20% level from 30 November to 11 December and was successful. It seems it has also been successful to break the 61.80% so far but I beleive we have to wait for a couple of more days to make sure. If it breaks the 61.80%, it will go up to 100% level or even higher but there is no guarantee for it. What I recommend is waiting for a clear reversal signal to go short.

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

Wow!

This currency pair has a beautiful pattern. It has been going down for several days due to the USD recession and right on Nov 7th it changed the direction and started going up. It easily broke all the Fibonacci levels but at the 61.80% level, it tried twice, failed and made a double top. It is going down currently.

There are two things about this currency pair right now:

#1. The last candle stick has touched the Bollinger lower band and #2. it is moving around the 50% level. So it is possible that it start going up and down at this point and then choose the right direction. When I say “the right direction” it is because the traders always say “The market is right!”. It means wherever the market goes it is right and we have to follow it, not command it to go to our favorite direction because it doesn’t listen and doesn’t obey.

So what should you do with this currency pair?

You can go short because the double top is a strong reversal signal and I think it will keep on going down but don’t forget to have a proper stop loss. The weekly chart also says “down”.

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

I prefer to show you the weekly chart first because the daily chart of this currency pair is a little choppy.

As you see the last candle stick is bullish. The previous one is a big bearish candle stick that has broken the Bollinger middle band. As you know when a resistance is broken it can act as a support and Bollinger bands work sometimes as resistance and sometimes as support. Currently the Bollinger middle band has acted as a support but as it is broken by the big bearish candle stick, now it is acting as a resistance and the last candle is testing it.

What will happen then?

The next a few candles sticks in the weekly chart will be bullish and bearish in turn but finally the price will keep on going down unless something happens that weakens the USD again. Even if this happens, it will be for a limited time and the price will keep on going down.

Now let’s take a look at the daily chart:

Can you see the beautiful head and shoulders? As you know head and shoulders are reversal signals.

Although the last candle stick is a big bullish candle, and possibly the price will go up because it has failed to break the 50% level so far, but according to the weekly chart and also the head and shoulders you see on the daily chart, it will go down finally.

So what should you do? Wait for a few days and when you see it is going down, go short.

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

The daily chart is clear. It says the price will go up. As you see there is a beautiful channel which is a good opportunity to go long and short in turn.

Lets take a look at the weekly chart to know what the price direction will be after the end of the channel you see in the daily chart.

As you see it is making a double top and the second top is lower than the first one. It means the price failed to reach and break the previous resistance. So it will break down.

8. Euro against Swiss Franc (EUR-CHF)

The daily chart shows that the Bollinger middle band that has been acting as a support is broken on December 17th and working as a resistance now. The last four candle sticks has been trying to test and break the resistance and were unsuccessful so far. So I beleive that the price will go down next week.

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

This is a dangerous currency pair because its movements are so big. Your stop loss has to be more than 200 pips sometimes and so if the price hits your stop loss, you will lose a lot. On the other hand, if you take the correct position, you will make a lot.

The last candle stick in the daily chart is a big bullish candle that has engulfed the previous candle. The previous candle has cut the Bollinger lower band nicely. So I think the price will go up at least for the next business day to reach to the Bollinger middle band. If it breaks the middle band, it will go much higher and you can make about 400 pips in a few days. Let’s see.

10. Euro against Japanese Yen (EUR-JPY)

I can only say that it is going up gently and smoothly. Bulls and Bears are both strong but Bulls are a little bit stronger by now. The weekly chart admits this. Also the GBP-JPY admits this because these two currency pairs act like each other (see tip of the day at the end of this post).

11. British Pound against Canadian Dollar (GBP-CAD)

Both the daily and weekly charts say down. It seems that it will keep on going down but it has been going down for a long time and it doesn’t seem that the Canadian Dollar is supposed to become stronger. So if I want to trade this currency pair, I prefer to wait because it is possible that it changes the direction very soon.

12. Euro against Canadian Dollar (EUR-CAD)

It exactly shows the same pattern and direction as the GBP-CAD. The weekly charts is right on the Bollinger middle band which means it is possible that it changes the direction because it usually goes up and down around the Bollinger middle band. So I think we will have a range in the daily chart for several days. Generally I prefer to wait by now.

13. Euro against British Pound (EUR-GBP)

Wow! Looks like the best currency pair to trade by now. The signals are so clear.

Just wait for a couple of days and when a good Bearish signals came, go short. Put your stop loss few pips above the resistance line and that’s it.

14. British Pound against Australian Dollar (GBP-AUS)

This is also a big currency pair to trade. Its movements are so big but usually shows very clears signals. If you can catch the good signals, you can make hundreds of pips in a few days and thousands of pips per month.

Currently both the weekly and daily charts show the down side. The weekly has broken the Bollinger middle band but it is still in its area so is possible that it goes up to test the middle band. If it wants to do that, the daily charts tells you on time and you can take a long position for a few days. Otherwise you can go short. Currently I don’t see any Bullish signal and so I think it will keep on going down. We can wait for a couple of business days and see.

15. Euro against Australian Dollar (EUR-AUS)

Like the GBP-AUS, both weekly and daily charts show the down side. The weekly is just at the beginning of a short direction and it seems that the daily is getting ready to ride the Bollinger lower band and go down. So it will go down and you can take a short position.

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

The weekly chart says that currently Bulls and Bears are both strong and although the price has a tendency to go up, it has not been able to break the Bollinger middle band. So the weekly is in indecision situation and doesn’t say anything valuable.

The daily says that the price will keep on going down:

I think we’d better to wait for for a few days.

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