CLEAR UNDERSTANDING OF MARKET DIRECTION/MOVEMENT IN FOREX

Being that the essence of this blog site is to relate foreign exchange trading in a more easier way, I will be giving you lay man’s approach for a clearer understanding of the way market moves in the forex market.

Unlike any other financial markets, foreign exchange market is traded in pairs
It is made up of two currencies as a pair which represents the financial instrument. We have 8 major currencies which are: USD, EUR, JPY, GBP, CAD, AUD, CHF and NZD. When you bring two currencies out of this list and join them together, you will have our investment instrument.
USD + EUR = EUR/USD
USD + CHF = USD/CHF
AUD + GBP = GBP/AUD

Having two currencies as our financial security means that, there are two different economies involved in each pair. That is in USD/JPY; we have USD representing the US economy and JPY representing the Japanese economy. In EUR/USD, we have EUR from European economy and USD from US economy. Therefore the market movement of this pair “EUR/USD” is determined by what is happening in the European economy and the US economy as well. That is the economic condition of this two different economies good or bad will determine the direction of the currency. When the economic condition of US economy is bad, it means that the US dollar is weak in this sense you will be selling it and vice versa. The simple general fundamental rule is to buy the stronger currency and sell the weaker currency.

Among the two currencies making a pair, we have the counter currency and base currency. The first currency among the pair is the base currency while the second currency is the counter currency. In the pair EUR/USD for example, the EUR is the base currency while the USD is the counter currency. Also in the pair USD/CHF, USD being the first currency in the pair is the base currency while the CHF is the counter currency.

Understood? I hope so, and then let’s proceed.

When a sell order is issued to your broker to sell a currency pair, it means you are selling the base currency (i.e. the first currency in the pair) and at the same time buying the counter currency. Confused? No need to be, just know that when you place a sell order in your broker’s platform to sell Eur/Usd it means you are selling EUR and at the same time buying USD in exchange. When you place your buying order to buy EUR/USD, you are actually buying EUR being the base currency and at the same time selling USD being the counter currency in that pair.

Bringing this lesson practically, if an economic news is released in US economy signifying that the economy is really in a good shape, As a good forex trader, I will be buying the USD as a stronger currency.
This will be done by placing a sell order on EUR/USD, a buy order on USD/CHF, a buy order on USD/JPY, and sell order on GBP/USD. Understand that when I place a sell

DAILY TECHNICAL TRADE ANALYSIS

Here, technical traders will be receiving a daily technical analysis on EUR/USD, GBP/USD, USD/JPY and USD/CHF. This will be revealing the resistance and support levels from daily and weekly charts represented giving traders the trading ideas they can use for the day.
To learn more on how to trade with the support and resistance levels, check here!

SEPTEMBER 28TH. 2009 ANALYSIS

EUR/USD

The Euro versus Dollar pair was able to form a bearish technical pattern, seen in the image above, with a neckline at 1.4615. We expect the pair to decline on the intraday and short term basis, targeting 1.4360 before extending declines towards 1.4275. The stochastic indicator is showing oversold signs, which may result in a slight upside correction to retest the above mentioned neckline before continuing the expected decline, which will remain as far as 1.4765 is intact. Our opinion is selling the pair from 1.4615 to 1.4500 and stop loss above 1.4705 might be appropriate.

USD/JPY

The USD/JPY pair reached the expected downside target to hit the key support for the downside channel at 88.55, seen in the image above, where we expect the pair to incline on the short term basis towards 94.00; supported by positive signs on momentum indicators. The first resistance, which may be an obstacle for the pair is at 90.30, where a breakout of this level will open the way for today's target at 91.60. This incline remains as far as 88.50 is intact. Our opinion is buying the pair with the breach of 90.30 to 91.60 and stop loss below 89.55 might be appropriate.

USD/CHF

The Dollar versus Swissy pair continued to surge to the upside to touch the key resistance of the minor bullish channel that is taking the pair to the upside on the short term. From the image above, we see a minor resistance level is currently the neckline for a possible bullish technical pattern, which may reverse the pair to the downside in correctional movements to reach 1.0300, before rebounding to the upside and completing the pattern by breaching the 1.0365 level and open the way towards 1.0550. This incline is valid as far as 1.0365 is intact on the four hour charts.

Our opinion is buying the pair from 1.0300 to 1.0450 and stop loss below 1.0205 might be appropriate.

GBP/USD

The 23.6% correction limited further inclines for the pair, where it reversed to the downside to near the 38.2% correction for the bullish wave, seen in the image above. The short and medium term declines may face volatility near the current support at 1.5745, as momentum indicators show the possibility for a slight upside correction towards 1.5870 before reversing back to the downside towards 1.5555, as far as 1.6150 remains intact.

Our opinion is selling the pair from 1.5870 to 1.5745 and stop loss above 1.5940 might be appropriate.

DISCLAIMER

These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from a generally accessible data sources. The forecasts made are based on technical analysis. Ensure a good risk management in carrying all your trades.

...To your trading success!