Where next for currency majors as new term starts?

6A_and_CSI_dailyAs the new autumn term begins for traders, and with the Labor day holiday offering a gentle return to work after the summer recess, it’s time to revisit our four currency futures of the AUD/USD, the GBP/USD, the CAD/USD and the EUR/USD ahead of this month’s key decision for Janet and her fellow members on the board. And for the 6A, the Aussie dollar, it has been a return to business as usual over the last couple of weeks, with the breakaway from the VPOC at 0.7320 once again confirming the heavily bearish sentiment for the pair. The initial break was signalled on the 24th August with the wide spread down candle which also triggered the volatility indicator, resulting in an expected move back within the spread of the price action; a move designed to trigger stops and frighten traders into weak positions, in equal measure. Since then the candle has duly been confirmed over the last few days with a rapid move through the low volume node on the VPOC indicator at 0.6980 with the pair now trading lower once again at 0.6934 in the London session. With the weight of transacted volume now sitting overhead in the 0.7320 region and around the volume point of control, this is adding additional pressure to the move lower, which is now gaining momentum once again following Friday’s price action on high volume and confirmed with Thursday’s pivot high. The currency strength indicator to the left of the chart is also confirming this bearish picture for the pair, with the AUD moving firmly lower back towards the oversold region on the indicator, with the US dollar rising strongly and back towards the overbought region.

6B_and_csi_dailyMoving to the British pound and the 6B currency futures contract, the decline for the pair has been both rapid and dramatic and following nine straight days of losses for the pair, it has been no surprise to see Cable recover in trading this morning, as profit takers move in with the US markets closed for Labor day. The move lower has also be characterised by falling volume and suggesting this move is now running out of steam for the time being. And with a platform of now in place at 1.5160, the pair has found some much needed support at this level. Longer term the outlook remains bearish for Cable, and should this platform be breached we may see a move through the 1.5000 region in due course and back to test the 1.4600 region longer term.

6C_csi_and_daily_chartFor the 6C contract and the Canadian dollar, the longer term bearish picture for the pair has been driven particularly as a result of the decline in oil prices, and has been the primary driver for the pair. However, with oil prices potentially starting to bottom out in the $35 – $45 per barrel region with a buying climax now on the horizon, this may be the catalyst for a reversal in the CAD/USD longer term. For the time being we are trading very close to the volume point of control which is continuing to build price agreement in this region, so we can expect to see further consolidation in this area in the short term.

6E_and_csi_dailyFinally to the 6E and the euro dollar with the price action of the 24th August once again proving to be seminal and duly triggering the volatility indicator on this timeframe. This was the signal for stop hunting coupled with a trap move from the insiders, with a lack of follow through as the price action duly moved back inside the spread of the candle, and also reversing lower with speed. This was classic manipulation of the single currency on a grand scale, with the associated volume and deep upper wick to the body of the candle telling its own story. This strong reversal was as expected from the currency strength indicator, which was also signalling the euro as heavily overbought and likely to reverse. Since then we have seen the euro continue lower, and moving well away from the overbought region on the indicator, with the US dollar climbing rapidly. However, given we are now approaching the volume point of control on the daily chart, we may see a phase of price consolidation at the 1.1100 region, before the pair break away from this area in due course.

By Anna Coulling – charts from Quantum Trading and NinjaTrader

About Anna 1027 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

7 Comments on Where next for currency majors as new term starts?

    • Hi Eileen – many thanks for your very kind comments which are much appreciated and thank you for taking the time to write. Wishing you every success in your own trading – all best wishes – Anna

  1. hi anna,
    sorry if its not the place to ask for this but i want to seek advice from you..
    im a newcomer in forex market, but want to master the art of trading , no matter how much time and effort it takes..
    i’ve learnt price action trading from nial fuller, jonathan fox, dale woods, jason stapleton ..,… although im making money, yet i feel something more empowering is missing ..
    i;ve seen ur articles and bought ur volume book ( half read ) ..
    can u please advise me what in your view is the most powerful mix of predicting the next market move ( apart from volume ) .. i’ve also read ur 3 dimensional book, but it most really dont cooperate with the price action setups that i’ve been taught to trade..
    thnks a lot!

    • Hi Ahmaed – many thanks for taking the time to write and thank you also for buying my books on trading. With regard to your question, this may not be the answer that you want, but the most powerful approach to predicting market moves is in using volume price analysis. Volume and price are both leading edge indicators and when combined together provide a unique insight in to whether the insiders and market makers are buying or selling. The principles are very simple – if they are buying or selling then we join them in a valid move. If not, then we wait. Volume price analysis is the approach I have used in almost 20 years of trading, and is the one which underpins everything else. One of the many beauties of this approach is that it provides the foundation methodology on which everything else can then be built. Naturally price action is part of the approach but it is volume which then completes the picture and brings price action to life, providing a unique insight into market behaviour. I hope that answers your question and sorry if you were looking for some other answer, but this is what I use and have done all my trading life. It works for me and many other traders. As always, there is no right or wrong way, just the way that suits you. All best wishes and thanks again – Anna

  2. Hi Anna,

    Can you explain a little more in the EURUSD the first part of your sentence:

    “This was the signal for stop hunting coupled with a trap move from the insiders, …”

    There was an upward move before 24th August and stop must be in a lower level so your sentence It is not clear for me (I read now your book Forex For Beginners). What is the meaning of “stop hunting” and “trap move”?

    Thanks
    BiD

    • Hi Bid

      Stop hunting is where the insiders take out stop loss orders during volatile phases of price action. This happens particularly during news releases and items of economic data when the insides and market makers move the prices to trigger stop loss orders. A trap move occurs when the insiders and market makers move the price without joining the move themselves. This is only revealed using volume price analysis. If the market makers are joining a move then you will see this reflected in the associated volume which is why volume price analysis is such a powerful methodology. Thanks again and all best wishes – Anna

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