The GBP/JPY rallies more than 400 pips

The Pound versus the Yen has risen significantly and it has reached the 179.00 round number level after the Bank of Japan announced that it will more than triple its Japanese asset purchases along with the Government’s Pension Fund. The rise of economic stimulus in Japan has hurt the Yen and that is why we have seen the strong rally on the GBP/JPY. However, we know that the markets don’t rise in a straight line and the pair may find some resistance around this round number level. Non the less, if we do see a breakout of the 179.00 level, then the pair has a clear path all the way to the 180.70 level, which is its last month high.

The GBP/USD stays very volatile around the 1.6000 level

The Pound versus the Dollar has been very volatile during today’s session around the 1.6000 round number and psychological level, after the big drop that it suffered yesterday after the FOMC’s statement. We were expecting this level to be a strong support for the pair, but the price has tried to break it to the downside. However, The pair has not managed to stay below the 1.6000 level and it has even been above the level on occasions. From this point on there are no clear entries and the best thing to do is to wait to see how it reacts tomorrow and how it ends the week.

100 pip drop on the GBP/USD

The Dollar strengthens today after the FOMC Statement release, where the language used by the FED officials indicated that quantitative easing is over and that interest rates may go up sooner than expected. That is why we see the GBP/USD drop from the 1.6100 zone to the 1.6000 zone. On the one hour chart we can see that once the price broke down the 1.6100 level and the 200 EMA, the bearish momentum accelerated taking the pair close to the 1.6100 level. 

The EUR/USD above the 1.2700 level

The Euro versus the Dollar has continued with its bullish momentum for today and it is currently above the 1.2700 level. If tomorrow’s FOMC statement shows that the FED is in no rush to raise interest rates, then the Dollar may weaken and the EUR/USD could reach the 1.2800 level where we can see the second average target on the SmartPattern tool.

The EUR/JPY is struggling with the 137.00 level

The Euro versus the Yen is still consolidating around the 137.00 level, but it has not managed to give us confirmation of a breakout. A little bit above that round number level we can see the 200 period Exponential Moving Average on the 4 hour chart, which has also contributed in making this zone a strong resistance for the pair. However, we must be attentive to a possible breakout of the area, because the bullish momentum may accelerate if the breakout is confirmed. None the less, if the breakout is confirmed, the best thing to do is to wait for the pullback before attempting a long entry.

Bullish weekly continuation on the USD/CHF

It has been more than month since the USD/CHF broke the 200 period Exponential Moving Average on the weekly chart to the upside, around the 0.9403 level. Since the breakout, the pair has come back to the same moving average where it has found a good support during this week and it is about to close the week to the upside. We can clearly see that a breakout and pullback pattern has been completed around the 200 Week EMA and this could be an indication that during the following weeks the pair could continue going higher, especially if the FOMC statement for next week points out to a possible rate hike by the FED towards the middle or third quarter of next year.

The GBP/JPY at a key resistance on the Daily and 4 hour charts

The Pound versus the Yen has been strengthening for today and it has reached the so much anticipated resistance zone at the 173.52 level where the 55 period Exponential Moving Average on the Daily chart is, along with the 200 period Exponential Moving Average on the 4 hour chart. When the price reaches a moving average confluence area, especially between the Daily chart and the 4 hour chart, the zone becomes a very important resistance or support area. Therefore, we must be attentive to a possible bounce to the downside from this zone. If the price breaks above this resistance, then we could wait for confirmation of the breakout and then the pullback to the same area for a possible long entry.

The Shooting Star and the 200 EMA

The Shooting Star is a bearish reversal candlestick pattern which is formed by a candlestick with a small or non-existing real body and a long upper shadow. The longer the upper shadow; the higher the probabilities of seeing a change in direction to the downside. The 200 period Exponential Moving Average is very reliable as a support or resistance level, especially on the higher time frames like the Daily chart below of the EUR/USD. When a Shooting Star is formed around the 200 EMA, its implications as a bearish reversal pattern are even higher and there is a good probability that the price has found a strong resistance zone. Therefore, we should pay attention to the visits that price does to the 200 Day EMA and if a Shooting Star is formed around this moving average the chances of a bounce to the downside are really high.

The USD/JPY is at a key resistance on the 4 hour chart

The Dollar tried to rally versus the Yen for today, but it stays in a consolidation mode and it is undecided at the moment around the 107.00 level. A little bit above the 107.00 level we can see the 55 and 200 Exponential Moving Averages on the 4 hour chart, which have contributed to turn this zone into a good resistance area for the pair. It is probable to see a bounce to the downside from this zone and if this happens we could see a cross of the 55 EMA below the 200 EMA with longer term bearish implications for the pair. However, in order to see this scenario develop, the fundamentals would have to support the Yen and risk aversion should rise in the markets.

The EUR/USD tests its 200 EMA on the 4 hour chart

The EUR/USD rallies for today and breaks the 1.2800 to the upside to test the 200 Exponential Moving Average on the 4 hour chart around the 1.2815 level. On the same chart we can see that this moving average has been a good resistance zone in the past and it looks like the price is stalling at this area one more time. We can also see that the price has formed a Symmetrical Triangle, which is a chart pattern with implications of a breakout in any direction. Therefore, we must be attentive to a possible breakout of the formation, because volatility may rise on the pair. The next resistance would be the 1.2900 level and its next support would be the 1.2700 level followed by the 1.2600.

The GBP/JPY nears its 55 EMA on the 4 hour chart

The Pound has been rising versus the Yen for today and it is trying to visit its 55 period Exponential Moving Average (purple line) on the 4 hour chart, around the 172.15 level. That moving average is 15 pips above the 172.00 round number level; therefore that zone could become a good resistance for the pair. We must be attentive to a possible bounce to the downside; however, if the price breaks that zone to the upside, the pair could speed up its bullish momentum and try to reach the 200 Exponential Moving Average (blue line) on the same 4 hour chart, around the 173.81 level. The 173.81 zone has proven to be a good support area in the past and now that the 200 EMA is around that zone, this area could become resistance.

The EUR/JPY is testing its 55 EMA on the 4 hour chart

After the Euro dropped versus the Yen at the beginning of today’s trading session, the pair went back up rapidly and broke the 135.00 level to get to the 136.00 and break this level as well to touch the 55 period Exponential Moving Average (purple line) around the 136.41 level. The 55 EMA has proven to be a good resistance in the past, but a breakout of that zone could take the price all the way to the 200 EMA (blue line) around the 137.41.

If the price continues going higher and touches the 200 EMA, there is a good probability of prices stalling there and even try to bounce to the downside. Therefore, we must be attentive to the next moves on the EUR/JPY, because we may get some good opportunities to open new positions.

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The AUD/USD stalls its decline at the 0.8700 level

The Australian Dollar versus the US Dollar has made a 100 pip move after it touched the 0.8800 zone and plummeted to the 0.8700 level due to strengthening of the greenback. On the 4 hour chart we can see the drop on the pair and how it tries to bounce to the upside from the 0.8700 level. We may probably see a higher bounce from this area, but if the US Dollar continues to strengthen during the following days we could see a breakdown of the 0.8700. In such a case, we may see some opportunities to try going short on the pair below the 0.8700 level.

The AUD/USD rallies on China’s trade balance

China’s trade balance showed a rise on imports of 7% and exports of more than 15% year over year. This has caused the Australian Dollar to rally due to the fact that China is Australia’s main trading partner. On the Daily chart of the AUD/USD we can see how the 0.8700 area has been a good support for the pair, even though it has tried to break it to the downside recently. But the China news and weakness on the US Dollar has caused the pair to rally for today and it has come close to the 0.8800 level. A visit to the 0.8800 level could cause the AUD/USD to stall there and maybe try to bounce back down, but a breakout of that level could have the pair testing the next round number level of 0.8900.

Global growth slowdown is propelling the Dollar

The Dollar has been strengthening during the last couple of days after it tried to correct its latest bullish run. The economic slowdown in Europe, China, and Japan has helped the Dollar strengthen, mainly because of the different monetary policies that the United States is implementing versus the rest of the developed economies. The probability that the FED raises its interest rates by the middle of next year is still in place; however, it is possible that the current strength in the US Dollar will keep inflation in check in the United States for the time being. None the less, the long positions on the greenback have reached levels not seen since May of last year according to the Commodity and Futures Trading Commission.

It seems like the Dollar will keep its bullish trend; therefore, it is possible to see the EUR/USD heading back down and keep its long term downtrend, especially when the Eurozone economy is starting the feel the negative effects of the sanctions impose to Russia, which are hurting the trade between the two regions.

The EUR/USD breaks its ascending triangle and it’s showing a pullback

Yesterday we identified an ascending triangle on the EUR/USD 4 hour chart, which had a very good probability of breaking out to the upside. After the release of the FOMC minutes, the Dollar weakened and we saw how the EUR/USD broke to the upside of the ascending triangle and it even went above the 1.2700 level. At the moment the pair is showing a pullback to the same 1.2700 level and this area could become a good support. It is possible to see a bounce from this zone to the upside; therefore, we must be attentive to a possible continuation of the bullish momentum of the pair from this area. 

The US Dollar loses its attractiveness

Many of us may be wondering why the Dollar has lost its bullish momentum if the fundamentals from the US have been coming out better than expected. The reality is that even though new jobs have been created in the United States and the unemployment rate has dropped, this has failed to provide higher wages for the American workers. Therefore, inflation is not a problem for the US economy at the moment and the FED is in no rush to raise its interest rates. Today’s FOMC minutes may show that the central bank is holding on raising rates until they see prices really going up. That is why most investors are preferring to stay on the sidelines and are not raising their bets on the greenback just yet.

Stock markets fall across the globe

The main stock market indexes have fallen across the world and they have printed strong drops due to the low and anemic global economic growth. The MSCI index of global stocks has fallen 1.1% so far. The S&P 500 has fallen 1.5% and the Dow Jones minus 1.6%. Treasury bonds have risen as investors seek the shelter of sovereign debt. Even though markets across the globe have fallen, investors prefer to seek shelter in US government bonds, because according to them this is the best bet that they have at the moment. The weak economic data out of Europe keeps hurting the Eurozone with the FTSEurofirst 300 index falling 1.5% as well.

Gold is at a key support level

Gold has been falling due to strength in the US Dollar and investors are preferring Dollar backed assets. Regularly, gold is used as a safe haven instrument during periods of high risk aversion, but due to the fact that the US markets are feeling optimistic about the US economy, which is showing a steady expansion, gold has lost its attractiveness as a safe haven investment. At the moment the precious metal is at a key support level around the 1182 Dollars per ounce and if the greenback continues being supported by upbeat fundamental data from the US, we could see further drops on gold. If a breakdown of that zone is confirmed, then the bearish momentum may accelerate on the precious metal. 

The Dollar Index at four year highs

The Non-Farm Payrolls report out of the United States has come out better than expected and the unemployment rate has fallen to six year lows, making the Dollar Index, which measures the strength of the greenback versus the six main currencies around the world, reach 4 year highs. The Euro has fallen to two year lows versus the Dollar and gold falls below the 1,200 dollars per ounce for the first time this year.

The US stock markets rallied on the news and the S&P 500 rose more than 1% and the European stocks rose almost 1%. It seems like now the US Federal Reserve has a stronger case to raise its interest rates sooner than most analysts expected. There is a higher probability now that interest rates will go up by the middle of next year.

The European Central Bank disappoints the markets

Throughout the week we have been waiting for the European Central Bank’s speech scheduled for today and even though it was suspected that the central bank was not going to give a lot of information regarding its future plans to try to stop prices from falling in the Eurozone, the markets felt disappointed when Mr. Draghi did not reveal which type of assets they are going to be buying in an attempt to avoid falling into deflation. The Euro strengthens after the announcement, but the lack of commitment from the central bank to implement a full-fledged quantitative easing program has hurt European stocks.

However, in the United States the main indexes try to correct a little bit its recent falls. Now all we can do is wait and see how tomorrow’s Non-Farm Payrolls report comes out, which it is expected to show that the US economy has created 216 thousand new jobs for the month of September. If the number comes out better than expected, then we may see the Dollar regain its bullish trend versus most of its major counterparts. 

The Dow Jones falls 1.4% on weak manufacturing

The Dow has fallen 1.4% or 238.19 points to close at 16,804.71 after the ISM Manufacturing Index came out worse than expected at 56.6 when the market was anticipating a reading of 58.6. The first case of Ebola was also reported in the US and this has hurt the Dow Jones Transportation Index. On the other hand, pharmaceuticals that make Ebola drugs have risen sharply on the news. Even though we have seen a big drop on the Dow Jones, the index may get a boost on Friday if the Non-Farm Payrolls report comes out better than expected.