The Greenback is the king among currencies

Impressive strength on the US Dollar can be seen for today after disappointing data out of the Euro Zone and the United Kingdom. The Dollar Index has reached a four year high and it is not showing any signs of correction at the moment. This Friday we have the Non-Farm Payrolls report out of the US and it is expected to show that the American economy has created 216 thousand new jobs for the month of September. If the reading comes out in line or better than expected, then hold on to your seats, because the Dollar may be launched like a rocket and the losses on its major counterparts could be exacerbated.

The USD/CAD is at a decisive point

The USD/CAD has kept a constant uptrend, but it seems like the bullish momentum is losing strength after it reached its most recent high at the 1.1178 level. On the Daily chart we can see that during the rallies, the real bodies of the candlesticks are relatively long, but when the real bodies shrink or become smaller, it usually signals an exhaustion of the bullish trend. Today we can see how the daily candle has closed in a “Spinning Top” formation; which is a Japanese Candlestick pattern of exhaustion and indecision. If tomorrow’s daily candle is bearish, then this could mean that a change in direction may be near.

However, we must keep in mind that during this week we have very important fundamental data pending that could support the Dollar, especially the Non-Farm Payrolls number; which if it comes out better than expected then the pair may continue with its uptrend.

New York Stock Exchange Shares available for trading

Now you can trade in the main stock exchanges, including the New York Stock Exchange or NYSE through the CFD’s being offered by the online broker, ActivTrades. This is just a great opportunity to diversify your portfolio, hedge in other markets, or try new strategies. More detailed information can be found at http://www.activtrades.co.uk/index.aspx?page=cfds_commissions and click on NEW YORK (NYSE) for the complete information on margins and short selling; which by the way is available on all the available shares.

Code     Shares

AXP       American Express Company

BA          The Boeing Company

CAT        Caterpillar Inc.

CVX       Chevron Corporation

DD          E. I. du Pont de Nemours and Company

DIS         The Walt Disney Company

GE          General Electric Company

GS          The Goldman Sachs Group, Inc.

HD          The Home Depot, Inc.

IBM       International Business Machines Corporation

JNJ         Johnson & Johnson

JPM       JPMorgan Chase & Co.

KO          The Coca-Cola Company

MCD      McDonald's Corp.

MMM   3M Company

MRK      Merck & Co. Inc.

NKE       Nike, Inc.

PFE        Pfizer Inc.

PG          The Procter & Gamble Company

T             AT&T, Inc.

TRV        The Travelers Companies, Inc.

UNH      UnitedHealth Group Incorporated

UTX       United Technologies Corp.

V             Visa Inc.

VZ          Verizon Communications Inc.

WMT     Wal-Mart Stores Inc.

XOM     Exxon Mobil Corporation

Indicator – The Bollinger Bands

The Bollinger Bands is a volatility indicator that helps us determine how volatile a trading instrument is. The Bollinger Bands are composed of three bands or lines that shrink together when there is low volatility in the market or expand when there is high volatility in the market. The middle band is a 21 period simple moving average of the closing prices. The upper band is two standard deviations of the middle band and the lower band is minus two standard deviations of the middle band or 21 period moving average.

Usually, low periods of volatility are followed by high periods of volatility. That is why if we see the Bollinger Bands get together very close to each other; it means that the market may be getting ready to move. On the contrary, if the bands get away from each other, it means that the market has been trending, but the trend may be exhausted and a possible reversal may be near.

The AUD/USD continues falling

The Australian Dollar is being hurt by the slowdown of the Chinese economy due to the fact that China is the main trading partner of Australia. Besides this, the US Dollar keeps rallying and that is why the AUD/USD has continued with its bearish trend. The pair has so far broken below the 0.8900 level and it could be heading to the 0.8800 level.

However, we must keep in mind that the oscillators like the RSI and the Stochastic are in oversold levels and they may be indicating us that the pair may be getting ready to retrace. None the less, the fundamentals must also change in order for the Aussie to gain some traction.

Fibonacci Retracements – The 76.4% level

Fibonacci Retracements are zones of possible change of direction for the price, also known as support or resistance where the price tends to change its trajectory. The Fibonacci levels that are more reliable are the 50%, the 61.8%, and the 76.4%. Out of the three levels mentioned, the 76.4% could be the most reliable one as support or resistance. However, we must keep in mind that in order for the price to get to the 76.4%, it would have to break the 61.8% level first, which is also an important Fibo.

Therefore, we must make a decision before hand on which level are we going to take our entry. Both levels have their pros and cons. If we enter the market at the 61.8%, we must use a stop loss at the other side of the 76.4% just in case the price continues retracing all the way to that level and bounces from it.

If we wait for the price to get to the 76.4%, we could end up missing the entry, because the price could reverse direction from the 61.8% before reaching the 76.4%. None the less, an entry at the 76.4% would allow us to use a tighter stop loss and risk less on our position as if we were to enter at the 61.8%.

The EUR/JPY breaks above the 140.00 level

The Euro continues its rally for today after the European markets closed higher and the Pound strengthen after the polls suggest that the Scottish referendum will keep the UK united. The EUR/JPY has broken a key resistance level around the 140.00 and it looks like it will keep its bullish momentum. However, we must be attentive to a possible pullback to the 140.00, because the pair is clearly overbought. If the pair does pull back to this zone, the area could become support and stop the price there for a continuation of the bullish trend.

The GBP/JPY confirms breakout of the 175.00 level

The Pound is rallying versus the Yen in anticipation of the independence referendum vote in Scotland. So far, the polls are pointing to a lead of the No independence vote, that is why the Pound has been rallying, but we cannot be so sure on how the final vote will come out. Now that the GBP/JPY has confirmed the breakout of the 175.00 resistance level to the upside, if we see a pullback to this same level, then there could be an opportunity for a long entry. Since support becomes resistance and resistance becomes support, this area of the 175.00 could become support on a pullback. 

The Dollar falls before the FED’s announcement

The Dollar has been retracing for today after a report from the Wall Street Journal suggested that the FED may use the words “considerable time” when referring to a possible interest rate hike. Investors and traders have been waiting for the FED to announce that interest rates may rise sooner than expected, but with today’s speculation traders prefer to close their Dollar positions just in case the unexpected happens.

If the FED hints at a possible rate hike by next year, the Dollar may go back to its bullish trend and more losses could be seen on the EUR/USD, which has been supported, not by Euro Zone fundamentals, but by weakness on the greenback. We do not know for sure what kind of language is Yellen going to use, that is why the best thing to do is to stay on the sidelines until the statement is released.

Markets await the FED’s press conference

Asian stock markets have open to the upside as investors and traders wait for the results of the two day meeting of the FED, which starts this Tuesday. The market is going to be very attentive to the press release by the FED, searching for clues as to when will the FED raise its interest rates. The FED has said that interest rates will not probably go up until 2015, but due to the fact that the economic data from the United States has been coming out better than expected; there is a probability that rates could go up before that time.

In the meantime, the Nikkei has risen 0.4% up to now, following the higher openings for the most part of Asia. The Yen falls due to the inverse correlation with the Nikkei. That is why when the Nikkei rises, the Yen falls.

The road is clear to the upside for the USD/JPY

The USD/JPY has practically the road clear to keep rising up to the 110.66 level, which is the high of August, 2008. After the price broke the 200 Month Exponential Moving Average to the upside, around the 105.80 level; the price continues with a strong bullish momentum. Confirmation of the breakout of that 200 EMA may come in the following months.

Since this is precisely a Monthly chart, in order to see confirmation of the break out, we may have to wait 2 or 3 more months. Let’s see how the price keeps behaving around this zone and if indeed there is a continuation to the next high. Technically there is nothing in the way that may stop the price before the 110.66, except some minor retracements on the way up.

EUR/USD – Inverted Head and Shoulders – 4 Hour Chart

The EUR/USD has formed what appears to be and Inverted Head and Shoulders chart pattern. It is called “inverted”, because it is the upside version of the original Head and Shoulders pattern. The upper trend line is the neckline or confirmation line. A breakout of that line with a couple of bullish candles closing above it confirms the breakout. But after confirmation of the breakout, one should wait for the pullback to the neckline for a possible buy or long entry. If the price does break above the neckline and continues going higher, it has the road open all the way to the 1.3100 level.

The Kiwi keeps losing ground versus the Dollar

The NZD/USD has dropped to seven month lows after the Reserve Bank of New Zealand said that the current levels of the Kiwi are unjustified and unsustainable. That is why we have seen the pair gain more bearish momentum, especially after it broke below the 0.8300 level. The pair is now free to keep falling to the 200 Week Exponential Moving Average around the 0.8063. The price has already bounced from that zone; therefore another visit to the same area could give us another bounce to the upside.

The EUR/JPY is closing in on the 76.4% Fibo

The EUR/JPY has been trading in a 200 pip range between the 136.00 level as support and the 138.00 level as resistance. The last time the price tested the 136.00 level, it bounced from that zone to the upside and so far it has retraced more than 61.8%. The next Fibonacci Retracement level to watch is the 76.4%, because this Fibo level is usually a good support or resistance area. Therefore, a possible visit to the 76.4% Fibo could cause the pair to stall there or even bounce to the downside again. But a continuation all the way to the 138.00 level is not completely ruled out.

Scotland’s independence effects

The British Pound has started the week to the downside with a bearish gap versus the Dollar and versus the Yen. This has been caused by the news that the recent polls have shown that during next week’s referendum in Scotland, there is a high likelihood of independence being approved by its citizens.

This has caused many investors to believe that for now the Bank of England will refrain from raising its interest rates and that is why we are seeing weakness on the Pound. The fact that the Bank of England has said that is has no contingency plan in place in case of a Scottish independence is really scaring investors, because nobody knows for sure how that British economy will react to the news.

For now, the Scottish leaders have not said if they will keep the Pound as their currency or if they will create their own currency. This uncertainty is prone to bring more volatility to the markets, especially on the British Pound.

NFP and the US interest rates

The Non-Farm Payrolls report for today came out worse than expected. The market was waiting for a reading of 226 thousand new jobs being created in the United States for the month of August, but the number came out at 142 thousand new jobs created. However, the unemployment rate dropped a little bit to 6.1%.

The weak NFP report has made investors think that the Federal Reserve will not raise its interest rates as soon as it was expected. Many analysts believe that the FED will now take a longer time before raising its interest rates, but we must take into consideration that the US economy is still in a sustainable expansion and in the long run the FED will have to raise its interest rates eventually.

For now the Dollar retraces a little bit versus its major counterparts, but this could just be a small retracement and for next week we may see more gains on the greenback.

The USD/CHF closes in on its 200 Week EMA

The US Dollar has strengthen so much that the USD/CHF is very close to touching its 200 period Exponential Moving Average on the Weekly chart, which is the blue line around the 0.9394 level. We can clearly see on the chart that on the last occasions that the price has visited this EMA, it bounces to the downside. Therefore, another visit to that EMA could have the price stop its rally there and possibly give us a correction.

The best protection for your trading capital

The last thing we want to hear is that our trading capital has disappeared, that is why we have to make sure that we do our due diligence and search for the right broker with the right protection for your funds. According to the FSCS, Financial Service Compensation Scheme of the United Kingdom, the funds on your account should be insured up to 50 thousand British Pounds. But the Forex Broker ActivTrades has purchased an additional fund security policy that covers every ActivTrades client’s account up to 500 thousand British Pounds.

This amazing additional security for your money is unprecedented and never before offered by any other online Forex broker. The additional security comes at no cost to the clients and you can rest assured that your trading capital will be there the next day for you to trade.

If your account balance exceeds 500,000 GBP, then you may contact a representative from ActivTrades to draw a customized contract that suits your individual needs. More information at the following link: http://www.activtrades.co.uk/index.aspx?page=legal_insurance

The USD/JPY breaks above the 105.00 level

The bullish momentum increases on the USD/JPY after the ISM Manufacturing PMI out of the U.S. came out at 59.0, when the market was expecting 57.0. This is clearly a better than expected reading and that is why the Dollar gains strength. The United States economy continues showing signs of a sustainable economic recovery, which actually supports the idea that the FED may be getting ready to raise its interest rates. This implies more strength for the greenback in the near future.

Technically and fundamentally, this pair still has a lot of potential to keep heading higher. However, in the short run we may see a correction to the 104.35 zone. At the moment the 105.00 level could become support and a pullback to that level could present investors with an opportunity to add to their long positions.

Another possible scenario is that the pair does not go anywhere and it stays consolidated around the current levels, just to catch some air before continuing higher. In that case, all what we can do is patiently wait and see if the prices continues to the 106.00 level.

The EUR/JPY back at the 137.00

The Euro has gone back to the 137.00 level versus the Yen and it seems like it has found a good resistance there. On the daily chart we can see that the price has formed like a Head and Shoulders pattern with two nice tops at the 138.00. In order for the pattern to confirm, the price would have to break the 138.00 to the upside, but another visit to that level could also give us a bounce to the downside. Let’s see if the price breaks above the 137.00.