Asian Markets fall at the beginning of the session

The tensions between Russia and the Ukraine keep rising, this time Ukraine’s president is announcing that a full war is imminent if Russia does not stop sending troops across the border to help the Pro-Russian rebels. This has caused risk aversion to come into the markets and the Asian markets have opened to the downside. The Yen loses more ground versus the Dollar as well as the Euro. The Euro keeps falling versus the greenback and it is very close to reaching the 1.3100 level. So far, the EUR/USD is at one year lows.

The Russian and Ukrainian tensions intensify

The Ukrainian president has accused Russia of sending troops across its borders into Ukrainian territory to help the Pro-Russian Separatists, which have advanced into another very important Ukrainian city. This news has rattled the financial markets and the investors and traders have sought the shelter of haven currencies like the Japanese Yen or the Swiss Franc. On the other hand, the Euro stays steady, but it could feel the effects of this news in the coming days, due to a rise of risk aversion. The Single Currency remains vulnerable to further loses if the geopolitical issues don’t calm down or until the economic fundamentals from the Eurozone show some strength.

The Dollar pulls back on risk appetite

The Dollar weakened for today as investors and traders look for higher yielding assets. In other words, risk appetite has risen and commodity currencies like the Australian, the New Zealand, and the Canadian Dollar have gotten the best part of it. The drop on the greenback has been attributed to profit taking and a needed correction on the US Dollar, due to the fact that it has been too over-extended to the upside.

On the other hand, the Euro could continue going lower after the current consolidation if there are no new fundamentals supporting the Single Currency. Tomorrow’s inflation report out of Germany is critical, because it could provide the European Central Bank with an excuse to implement more economic stimulus.

Will the NZD/USD pullback to the 0.8400 level?

The New Zealand Dollar has been strengthening versus the US Dollar and it looks like it wants to keep its bullish momentum as shown on the daily chart of the NZD/USD. If the fundamentals out of the US show any signs of weakness, then the pair may continue going higher and it may try to reach the next round number level of 0.8400. If the price does reach that price zone, then it may try to bounce from there to the downside or at least try to stall its rise there.

The Kiwi could still visit the 0.8300 level

The New Zealand Dollar keeps dropping versus the greenback as shown on the Daily chart. The downtrend is clearly well sustained and it has been behaving very “technical” around the recent round number prices, like the 0.8500 and the 0.8400. Even though on the Daily candle the NZD/USD is trying to correct a little bit, it has not shown an exact visit to the 0.8300 level. Therefore, a drop to that level is still possible and a bounce afterwards is not off the table.

Moving averages

Moving averages are price averages during a specific timeframe. The most common moving averages take the average of the closing prices.

Simple Moving Average (SMA)

It is the average of the closing prices over a certain timeframe. Since it is a simple average, the same weight is given to all data from beginning to end.

Exponential Moving Average (EMA)

This moving average gives more weight to the latest data and less weight to the oldest data. The EMA is more commonly used due to the fact that new data is more relevant than older data.

Types of Orders

Market Order
It is an order to buy or sell a currency pair at the price that the pair is being quoted at the moment.

Stop Loss Order

    It is used to close a position that has been opened at a specific level once the market gets to that level. It is used to minimized or control your losses or to protect profits already accumulated.

Limit Order / Take Profit

    It is used to close a position once it has reached a specific level of profits. Limit orders are also used to open a new position automatically once the market has reached a specific level.

Buy Limit.

An order to program a buy below the current price.

Buy Stop.

An order to program a buy above the current price.

Sell Limit.

An order to program a sell above the current price.

Sell Stop.

An order to program a sell below the current price.

The FED minutes support the Dollar

The Dollar started the trading day pretty strong and the bullish momentum expanded even more when the Federal Open Market Committee made public its minutes from the last FED meeting. A couple of points that were mentioned made the Dollar rally, like for example, most members of the committee agreed that the FED should keep reducing its asset purchase program at a steady and predictable pace. The other point was that most probably interest rates will rise in the US before anticipated if the economy keeps showing signs of improvement, especially in the labor market.

This has caused the Dollar to reach an 11 month high versus the Euro and versus the Yen is very close to touching the 104.00 level. If the strong fundamentals persist out of the US, then there is no telling on how high the greenback may rise.

The EUR/USD is a few pips shy of touching the 1.3300 level

The Euro keeps dropping versus the Dollar and it has broken 9 month lows around the 1.3315 level. It just needs to drop a few more pips to visit the 1.3300 round number level. Due to the fact that the price has not visited that level in a long time, if we do see a visit to that level, there is a good probability of seeing a bounce to the upside. But for now investors are focused on the Jackson Hole meeting and how it may affect the greenback, because if the US fundamentals keep supporting the Dollar, then we may see the EUR/USD breaking new lows.

Possible visit of the NZD/USD to the 0.8400 level

The New Zealand Dollar versus the US Dollar has been dropping and it is getting close to the 0.8400 round number level. Let’s see if a visit to that level will make the price bounce to the upside. There are a couple of good resistance levels to the upside. We can see the other round number level of 0.8500 and the 200 Day Exponential Moving Average. Due to the current consolidation that the price is having, we can see that there is a possible Inverted Head and Shoulders chart pattern forming, but it still needs more time to complete.

Russian-Ukrainian tensions heat up again

While the markets were ending the week relatively calm due to the good-hearted intensions of Russia to allow a humanitarian convoy to cross into the Ukraine, things got hot again when the president of the Ukraine announced on its Web portal that the Ukrainian army had destroyed an armored Russian column that penetrated into Ukrainian soil.

This has caused risk aversion to come back into the markets and the Yen, as a safe haven bid, has started to gain some ground. The Euro and the Pound stay near lows one more time, mostly because of the risk-on mood in the markets together with the Russian Ruble.

The S&P 500 stays in an uptrend

The U.S. stock markets have been enjoying a good rally recently, due to the better than expected fundamentals, which have shown that the American economy is in a sustainable recovery. On the weekly chart of the S&P 500 we can clearly see how the index has kept a well-defined uptrend. We can also see something very peculiar; that is that when the weekly candle closes in a Doji formation, the following weeks tend to be bullish. Last week’s candle closed in a Doji formation and this week we have seen the price heading higher. Could this be a signal that next week will also be bullish? Let’s wait and see if we do get a breakout above the 1985.26 level for next week.

Elliott Wave Principle - Combining Elliott Wave Theory with Algos

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Basic Elliot Wave Pattern

Breakout and Pullback on the GBP/USD, 1 hour chart

The Pound has been gaining a lot of ground versus the Dollar for today and it managed to break above the 1.6800 level. On the one hour chart we can see how the price broke that level and it is currently trying to pull back to the same level. This is a very good example of how the Breakout and Pullback pattern should look. First we see confirmation of the breakout and then a nice retracement with the shape of a “dome”. This type of retracement has a higher probability of working and if we see a visit to the 1.6800, the price may try to bounce to the upside from there and continue going higher. The next resistance would be the 200 period exponential moving average around the 1.6835 level.

The EUR/USD awaits this week’s fundamentals

The Euro has been under a lot of pressure, especially by the US Dollar and last week we saw the EUR/USD touch a low of 1.33 Dollars per Euro. Could this pair drop lower? Well, everything is possible in the financial markets, but currently the pair stays dependent on the releases of this week’s economic data out of the Eurozone and the United States. The most important numbers to watch out of the Eurozone are German Zew economic sentiment for tomorrow at 5 am NYT and German GDP on Thursday at 2 am NYT. From the U.S. we should keep an eye on Retail Sales on Wednesday at 8:30 am NYT. The only thing that can keep the EUR/USD from falling further is that the fundamentals from the U.S. miss expectations and the fundamentals from the Eurozone come out better than expected. Otherwise, there are plenty of reasons to see the Euro weaken some more versus the greenback.

The USD/CAD is getting near the 61.8% Fibo again

The recent rally on the USD/CAD is really a pullback or retracement of the drop from the 1.1275 level to the 1.0620 level, just as it is shown on the chart below. At the moment, we can see that the price is getting near the 61.8% Fibonacci Retracement around the 1.1025 level. Usually, when the price retraces a 61.8% it tries to change direction, but if the price continues rising, it may visit the 76.4% Fibo, which is also a good support or resistance zone.

The MACD

The MACD is a trend indicator, which shows the direction of the trend and the strength of it. On the image below we can see a 12-26 configuration MACD, this means that the indicator is using a 12 period moving average and a 12 period moving average to determine the direction and strength of the trend by measuring the distance between these two moving averages. The blue line on the chart is the MACD line and the red-dotted line is the signal line. When the MACD line crosses below the signal line it means that the trend has changed to the downside and when the MACD line crosses above the signal line, it means that the trend has changed to the upside.

The green bars make up the histogram and the histogram tells us how strong the trend is. The larger the bars are, the stronger the trend. If the bars are pointing down, it means that the trend is bearish and vice versa. The histogram can tell us ahead of time if the trend is losing momentum.

The AUD/USD couldn’t break the 0.9300 level

The Aussie tried to break below the 0.9300 level, but as we can see on the daily chart, the pair was not able to stay below that level and has come back to the upside. A little bit below that round number level, we can also see the 200 Day Exponential Moving Average, which has also acted as a very good support level for the pair. At the moment we can see that the 55 Day Exponential Moving Average is acting as a resistance and the price may try to stall its rally around that zone. From this point on all we can do is wait and see if the price continues going higher and reaches the 0.9400 level or if it comes back to the 0.9300 level to try to break it for a third time.

The EUR/JPY is getting closer to the 137.00 level

The Euro has continued falling for today versus the Yen and we can see on the 4 hour chart that the price has come very close to touching the 137.00 level. In the past we can see that the last time the price touched the 138.00 level, it bounced from that zone to the downside and has kept on falling. If we see a visit to the 137.00, that level could act as a good support and stall the price there, maybe even bounce to the upside. Therefore, we must be attentive to a possible visit to that zone, because we may see a bullish bounce from there.

Will the Euro remain steady versus the Pound?

Last Friday we saw how the Euro rallied versus the Pound and it reached the 55 Day Exponential Moving Average, which is located just below the 0.8000 round number level. On the Daily chart below of the EUR/GBP, we can see that the pair has stayed within the range between the 0.7900 level and the 0.8000 level. During today’s session the pair tried to come back down and depending on how the upcoming fundamentals out of the Eurozone and the UK come out, we may see a continuation of the bearish trend or a higher correction. However, because the ECB and the BOE are implementing different monetary policies, the balance is tilting more towards more strength on the Pound than on the Single Currency.

The GBP/USD bounces off the 76.4% Fibo

The GBP/USD has kept a sustained drop since it last visited the 1.7200 level. On the daily chart below, we can see how the pair has reached the 76.4% Fibonacci Retracement and tries to bounce to the upside from that level. A little bit below that level, we also have the 1.6800 round number level, which could also act as a support zone. The small rally on the pair for today was caused by the worse than expected NFP reading out of the US, but if for next week the fundamentals from the US continue to come out better than expected, we may see a break below this support zone.