Many interesting moves occured last week on the currencies market. In this update we are going to check this upcoming week’s news calendar, but we are also going to analyse the relativity of many the candlestick technique (Nison) with the example of NZDUSD. Indeed, a very promising trade went wrong this week, which stress the importaance of placing a judicious Stop Loss in every trade…
1 – News of the week (until Wednesday)
The news that may impact the market this week are the followings:
|GBP||Final GDP q/q||0.4%||0.3%|
The GDP’s deviation doesn’ allow us to look for a trade in “prenews”. However, if the relased number was superioir or equal to 0,3 percent, this would be possible to initiate a trade in the direction of the deviation (long for a positive number and short for a negative one) with a 40-55-Pip objective. Pair to trade: GBPUSD.
|All Day||EUR||Eurogroup Meetings|
As we can see on the graph below, the EURUSD pair was in a box range over the past few days because of the Greece issues. Investors decided to sell only on Friday:
However, prices bounced on a previous support level and since we still don’t now the decisions about Greece at present time, better wait for any strong clue or announcement to enter this market. So far, it seems to be a negative scenario for Greece…
The CAD GDP doesn’t offer any deviation to trade, but if the released number is superior or equal to 0,2 percent, this will be to shortly enter a trade with a 50-Pip objective. Pair to trade: USDCAD.
If the deviation of the released number is over 2.0, this will be possible to enter a trade with a 50-Pip objective. Pair to trade: GBPUSD.
|2:15pm||USD||ADP Non-Farm Employment Change||216K||201K
If the deviation of the released number is over 50K, this will be possible to enter a trade with a 40-Pip objective. Pairs to trade: GBPSUSD, AUDUSD, USDCAD.
|4:00pm||USD||ISM Manufacturing PMI||53.2||52.8|
If the deviation of the released number is over 2.5 percent, this will be possible to enter a trade with a 40-Pip objective. Pairs to trade: GBPSUSD, AUDUSD, USDCAD.
The rest of the news calendar will be subect to a final analysis on next Wednesday.
2- Price charting: why does it go wrong sometimes? A study case.
Last week, the NZDUSD pair showed a great opportunity for a short put trade. Let’s have a look on the 1-hour graph:
In this graph, we can see what happened at the white arrow level:
-there is a clear shooting star candle;
-the shooting star failed to cross a previous resistance line (blue line-left of the graph);
-the candle before the shooting star was a Hangman, a first bearish clue.
-the shooting star appeared after a clear bullish trend;
-the Stochastic crossed at its overbought level;
-there was a good volume exchange.
All these elements announced a strong and clear bearish reversal. However, after a short drop, price resumed its bullish course for a new high!
The answer is simple: despite our great indicators, techniques and analyses, the market does what it wants. In this case, it was very legitimate to go short (and I did, and I lost). However, it was mandatory to place a Stop Loss at the high of the shooting star. This example shows us that the news trading remains the most reliable form of trading compared to other indicators that should be used only as confirmation signal instead of decision signals.
Conclusion: cautious on EUR, focus on USD and GBP news. Next update on Wednesday.