GBPUSD sitting at 2/3rds retracement of YTD Range

The GBPUSD today printed 1.5780 lows, getting very close to the 1.5750’s lows from January 2011, otherwise it has undercut the low printed in every other month so far in 2011.

·         What lies beneath? It looks like the 1.5690’s zone is a 78.6% retracement of the YTD range and also appears as a late-2010 resistance zone.

·         What lies above? Getting back up to the gap fill level at 1.6050s, from the NFP Friday in July.

When to look for a bounce? It looks as though today is headed for printing a pin bar and an up-day (i.e. blue candle in chart below, closing price > opening price), which could set the stage for a bounce back up. So far in 2011, the sell offs in GBPUSD with consecutive seller days (red bars in chart below) have often been halted and reversed after the daily chart has printed a buyer bar.

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EURUSD – Resting at Half-Way Point of YTD 2000+ Pip Range

EURUSD’s sell off into the 1.3800’s zone today saw price pull back for the first time in 2011 to a daily 50% retracement level, at 1.3906.

·         What lies beneath? – 1.3660’s is 61.8% retracement of YTD range, but before that there is a 1.3750 low from March-2011.

·         What lies above? The 1.4260’s is the gap fill level from last week, basically this is the zone near the post-NFP lows on EURUSD

When is a good time to look for a bounce? Look for an Up Day on daily time frame. Notice that when EURUSD in 2011 has been selling off or pulling back in a sequence of seller days (red bars in chart below), that once that sequence is interrupted by an up-day (blue bars in chart below) then the following days often show a pattern of bouncing upward. That pattern is called “go with the flow” J  

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EURUSD Sell Off Jacks Up Correlations – Typical “Risk-Off” Stuff

The sell off in the EURO across multiple currency pairs has shown the typical risk-off type of price behaviour as correlations have been jacked up across the various EURO pairs.

Having checked out the correlation matrix at the mataf site (www.mataf.net) for a few periods you can really see how the short term action in the EURUSD has changed a bit. I used the correlation matrix for the daily time frame set to a 30-period for recent price action and to a 90-period for a longer time window (roughly one calendar quarter) and here are some results 

Daily Correlations – EURUSD way up there with EURCHF and EURJPY Lately

  • EURUSD – EURCHF – short term correlation has been jacked up…..like…a lot!: The 30 day correlation stands at 82.7 versus 90-days at -2.2, that is a huge difference. The screenshots below also show that over much longer periods (30 and 90 weeks) the correlation is quite low.
  • EURUSD – EURJPY – short term correlation has jumped up: The 30 day correlation stands at 91 versus 67.2 for 90-days.
  • EURUSD – EURAUD – another short term correlation that has jumped up a lot:  The 90-day correlation for EURUSD/EURAUD is -14.4, so in that context the increase to a +67.8 for past 30 days looks pretty sharp. Looking at the table below you cal also see that EURUSD-EURAUD has shown a similar correlation level as EURUSD-EURCAD, another “commodity linked” pair.

The chart below shows the figures for the 30-period for Daily and Weekly

12-07-2011_11-37-48_euro_pairs_30period_correlations

The chart below shows the figures for the 90-period for Daily and Weekly

12-07-2011_11-37-48_euro_pairs_90period_correlations

What does this mean for trading the EURO Pairs in the near term?

  • EURO-related news dominating headlines = look for high probability opportunities where several Euro crosses appear to be in agreement. For example, a study of the 1H Chart on the EURJPY and EURCHF for the period from July 11th until London open on July 12th showed highly similar price pattern of decline and consolidation prior to the 8-AM London open. This type of configuration can provide that extra bit of help when looking at opening range breakouts.

 

DIBS Chart Book – Week Ended July 8th

The latest DIBS Chart book is available for the week ended July 8th. The week was quite volatile as there was a lot of “risk off” type news developments. On many occasions the DIBS signals ended up being reversal patterns instead of trend continuation breakout patterns.

This week’s chart book covers EURUSD, GBPUSD and the “risk-on / risk-off” pairs: EURCHF and EURJPY.

Good trading,

FXDIBS4PIPS

GBPUSD – what kind of volatility will see for the Services PMI?

How have ranges looked when Actual Reported Services PMI Lower Than Consensus Forecasts?

·         The screenshot below shows pip ranges during the 3 hours after the Services PMI is released (9:30 AM local UK Time).

·         So far in 2011 there have been 4 instances when the reported figure was below consensus, and it looks like 2010 featured below-consensus readings during most of the months.

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GBPUSD – The DIBS Review on a Narrow Ranging Week

GBPUSD was in a relatively tight range last week (c.200pips versus a 52-week average of >300pips of weekly range) which made for difficult conditions to catch any decent follow-through on inside bar breakouts. The chart below shows the DIBS/inside bars (red vertical line through the candles, blue horizontal line = Frankfurt open prices) during the week.

·         Monday-Tuesday was narrow range / basing type action hot on the heels of a 300-pip sell off during the latter half of the prior week. DIBS signals did not appear during the most liquid hours of the trading session, although it looks like a pre-London session inside bar on Tuesday would have gotten lucky for a downside breakout worth >1:1

·         Wednesday was the Greek vote day and GBPUSD followed a similar sequence to EURUSD, printing a DIBS before the vote and a couple of DIBS after the vote. The post-vote DIBS signals were unlucky not to be able to ride the Asia session pop on Thursday (noted on the chart).

·         Thursday-Friday were characterized by some wide ranging bars on the sell offs as GBPUSD tested its lower ranges for support, price reactions were fuelled by sloppy data releases (930 AM UK Time) on both days.

·         Friday’s late session rally was a typical inside bar reversal pattern that got going after 3PM UK time, as GBPUSD followed a strong rally in the S&P 500 to a better than expected print on the ISM.

What’s next for GBPUSD?

·         The narrow ranging week on GBPUSD might be a sign that it’s “storing up energy” in preparation for a big move up or down in the weeks to come. If that’s the case then the environment for catching some DIBS that run for 100’s of pips might be about to turn for the better on this pair.

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EURUSD – the week in review on the 1H DIBS

It may be a while for posting any DIBS Chart books this week, but here is a quick review on the 1H chart of the EURUSD’s past week of DIBS. Some of the standout signals on the DIBS were

1.       Monday June 27th printed a 1H DIBS during London-NY session that triggered within 2-hours that triggered at the 4220’s. This was one of those early week DIBS breakouts that was able to survive the whole week as price spent the rest of the week in an up-channel in the build-up to Wednesday’s Greek parliament vote on the Austerity/Budget measures required for the next tranche of IMF bailout funds.

2.       Wednesday June 29th was a notable day as DIBS signals appeared both before and after the vote. The pre-vote signal just about got to 1:1 before the wild whip-saw during the voting process. The violent shakout then saw EURUSD consolidate with a “DIBS Coil” (i.e. 3 inside bars within consolidation during the late NY session / run-up to Thursday’s Asia session).

3.       Thursday and Friday were quite whippy days as EURUSD consolidated the gains post the Greek vote.

All in all this past week was an above average week on the volatility front as the pip range was 450pips verses a 52 week average of 356pips.

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