EURUSD Monthly Chart with 5-EMA – Currently Not Extended

This post is a follow-on to the previous posts showing monthly charts with the 5-EMA. The charts for the USDCHF and GBPCHF pairs show current situations where price is extended away from the 5-EMA, and whether this is a decent clue for the risk of reversal remains to be seen. However, the yellow squares on the EURUSD chart definitely show that on many occasions when the EURUSD has been near a turning point on the monthly time frame, it has found itself extended away from the 5-EMA. The most recent example was 1 year ago with the EURUSD plunging to lows on the monthly chart in the low 1.2000’s high 1.1teens.

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USDCHF Monthly Chart Well Extended from 5-EMA

The attached monthly chart of the USDCHF has plotted a 5-EMA along with yellow squares surrounding monthly price bars that failed to touch the 5-EMA. Bear in mind that the most recent price bar is in progress with the 5-EMA currently at 8570’s (subject to change by end of July).

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GBPCHF Monthly Chart Extends Away from 5-EMA

Keeping with the theme about the monthly 5-EMA and the failure to touch it during the month, this blog post has a chart of GBPCHF.

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Currency Pairs that are far away from their Monthly 5-EMA

Having a look at some forex pairs, there are pairs that have run quite a bit, so much that price has extended away from the 5-EMA by quite a few pips. This is an interesting market condition because in general, most forex pairs will at some point during the month come into contact with the  5-EMA on the monthly time frame (I estimate about 75% of the time). Obviously when a currency pair is trending very sharply it will sustain the kind of momentum that extends price away from the 5-EMA on the monthly and does not touch it. However, this condition of not touching the 5-EMA usually struggles to persist for an reasonable amount of time.

Here are some interesting currency pairs showing this dynamic

·         USDCHF has not touched the July monthly 5-EMA (0.8571) and it did not touch the 5-EMA during June. In the last couple of years, the USDCHF has had a few instances where it went 2 months in a row without touching the 5-EMA. One of those instances preceded a sharp upward reversal: October-November of 2009 failed to touch the 5-EMA and preceded a multi-month >1500-pip rally in USDCHF.

·         GBPCHF has not touched the July monthly 5-EMA (1.3866) and it did not touch the 5-EMA during June. The monthly chart has dropped about 11,800 pips in the last 3 years…..enough said.

Does it mean that these pairs are set to reverse any time soon?

No “signal” or technical condition guarantees success 100% of the time, but if you are trying to assign odds to the situation, it’s likely that the odds of a +1000-pip bounce are edging ahead of the odds of a -1000-pip tank from where the prices currently stand. Big downtrends can reverse quite suddenly and quite violently, a look at the monthly charts of AUDUSD and NZDUSD during late 2008 show that when a monthly price bar prints without touching the 5-EMA, the coming months can get quite hairy, planting the seeds for a sharp reversal

DIBS Chart Book for Week Ended July 15th 2011

The latest chart book with DIBS set ups highlighted is available. This past week featured a volatile breakout at the beginning of the week on the “risk off” theme, which was very good to early week DIBS breakouts. As the week progressed and the risk-off sell offs retraced, the action became choppier and less favourable to DIBS signals.

Enjoy,

FXdibs4pips

 

Did you know EURUSD has done a Gap Fill on Wednesday 2x in 2011?

Just this past week, the EURUSD rallied up to complete a gap fill of the Friday-Sunday gap on a Wednesday. That’s the 2nd time that EURUSD has done the gap fill on a Wednesday.

·         July Gap Fill Details – 1.4264 is the level for the gap fill based on Friday July 8th closing price, the gap fill is completed on Wednesday July 13th late in the day (more like Thursday Asia session I suppose).

·         April Gap Fill Details – 1.4429 is the level for the gap fill based on Friday April 15th closing price, the gap fill is completed on Wednesday April 20th early in the session (Asia trading).

EURUSD – liquidity gap fill to the downside in progress?

I like this chart of EURUSD for the last week, it shows a possible weekly time frame pin bar being formed on the 1H chart, the only thing EURUSD needs to do is finish the week near the current levels, which is by no means a certainty. The chart demonstrates some of the patterns found at the www.nobrainertrades.com web site, which is a great resource for forex traders. The spike base pattern is one that I like to keep my eyes peeled out for on 1H and 15m and 5m charts because it repeats a lot (http://www.nobrainertrades.com/2009/06/spike-base-pattern.html). In this environment where EURUSD is capable of trading like a yo-yo between EU debt concerns and the laundry list of USA concerns (debt ceiling, QE speculation/anticipation etc.) the pattern becomes that much more important since liquidity gaps crop up as a result of ad-hoc news (comments on wires by central bankers, bond auction results, rating agency downgrades, etc. etc.).

If EURUSD wants to print a pin bar for weekly chart this week, maybe on Friday it will try and print a pin bar too, perhaps by tagging the 1.4090s area (Missed Daily pivot from Tuesday)….

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