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Daily Commentary on various currencies

As Expected, Friday has once again been crazy so far in many ways with all currency pairs making wild whipsaws. GU went down just below its support and threatened to fall off the cliff. But the fact that it did manage to hold on just below support showed that there was some strength in the background.

This was proved later in the day with all pairs spurting againt the dollar and GU also broke through its resistance and is now trying to break its next resistance which is yesterdays high.

EU continued its onward march and it looks like this march would continue.

The most interesting pair today and rather the whole of this week has been USDCAD. It had been loitering around one of its major support levels and i had even pointed out the same in one of my previous posts. That big support has been broken today and we should see the pair drop down to close to 1.2.

GBPJPY again showed that it has huge support right from 140.6 to 141.5 and so any visit to this region would give good risk to reward ratio for longs. But this region has been visiting a few times this week which has made this region a bit weak. So any further visits to this region could spell danger. I expect the price to go back to 144 where again it should be facing strong resistance and it would be interesting at this point to see if the ranging continues.

Daily Analysis of GJ

The Asian session seems to have a knack of reversing all the gains made during the previous day. This has been happening each day of this week and today has not been an exception. This throws off a lot of traders as they are confused about the trend. I am sure that it would be a nightmare for the swing traders. Anyway, GJ made at attempt at breaking the strong resistance at 144 and went uptil 144.5 before it was met with a wall of sellers.

Now GJ has retreated more than 200 pips and has found some decent support at 142.2. This is not a very strong support but as we go lower, we would find stronger and stronger supports at around 141.5 and then a very strong support at 140.6.

The hourly chart again shows a pin bar at the top which should have been a good indication of the down move. On the upper side, there should be resistance at 143 and then at 143.8 and yesterdays high at 144. Today, being a Friday, should be interesting.

Daily Analysis of GBPUSD

GBPUSD also made a nice run up yesterday. It went till close to 1.4750 and as it happens usually, during the late US session and then the Asian session, price started to fall. One important aspect of the run up was that GU was able to break through major resistances yesterday. One of the major resistances was at 1.4648 and now, this price is serving as the support. As can be seen from the attached hourly chart, there has been a nice pull back from this support area and we have to see whether this bullish pin bar would work. You can also see a bearish pin bar at the top which did the trick earlier.

On the upside, we have further resistances at 1.47 and 1.4770. I expect ranging to take place between the current price and 1.4770 before any kind of breakout happens. As can be seen from the attached 4H chart, there has been ranging earlier also in the same price range and i expect the same now as well.

Daily Analysis for EURUSD

EURUSD had a nice breakout yesterday and by the look of things, there seems to be no stopping it today. As can be seen from the attached hourly chart, from the round number of 1.30, the price kept on going up and up and the high for yesterday was about 1.3150 where it faced stiff resistance.

It has since dropped down a bit. From the daily chart, you can see that it is going to face strong resistance at yesterdays high of 1.3150 and then also at 1.3180. It will be interesting to see whether both these resistances are broken for today.

On the downside, we have good support at 1.3123, where we have had some nice pull back on the hourly, and then at 1.3093 and then at 1.3060.

There should be some pull back in the Euro before it starts going up again.

Price action around SR levels

Attached is a EU 5M chart with 1H MM levels on it...Lemme take this one by one.....lets go to the first circle...in that, you see that price breaks thru resistance...but it does not run away...so u can wait for the retracement and when the retracement comes u see how it goes....the retracement carries price just below support and then stops and stalls....u also see a small pin bar...so u know that some support is building and maybe u could risk a small long...as expected, after stalling, it goes up again, breaks the resistance again and then u see a long bar and again a retracement back to support...this time, the retracement does not break the support and so u can take this as confirmation that the resistance has been broken...if the retracement had taken the price below support, then the break was false...

now on to the second circle...in this, there is a long bar which breaks the resistance and then price retraces back to the resistance turned support but does not go below the support...again u see a bullish pin bar as well..a retracement after a break above resistance with retracement not going below resistance turned support and a pin bar...all classic signs to tell u that the break is genuine and then u go long...

lets move on to the third circle...at the beginning of the circle is the first attempt at breaking the resistance which fails...u can see high volume bars in the attempt to break and then the volume falls off after the failure to break...then u see a bearish pin bar as well..someone is trying to push the price down....then u see another attempt to break the resistance with normal volume...this time it breaks and maybe u go long...it would be better if u waited for the retracement....as expected, the retracement comes along which goes below resistance turned support but pulls back above the resistance turned support...so u enter long thinking that it is a good break...but then as u watch PA, u see that the high of the previous break is not broken and price starts falling down again....this is a sign that the up move is weak and is an indication for u to exit longs at BE or with minimal loss.

Why do breakouts happen and how to trade them?

There was a question posted on my thread at FF today by one of the readers. Early in the day, there was a breakout of more than 100 pips in GJ and GU for no apparent reason. Why did this happen and how do you trade this ?

In technical terms, this is called consolidation and breakout while in volume terms, it is called accumulation and the result of the accumulation which is an upmove.....in technical terms, a ranging period or a consolidation period is followed by a breakout. the size of the breakout is always directly proportional to the time of consolidation and inversely proportional to the price range during consolidation....in other words, the smaller the price range and the more time the price spends within the price range, the bigger the breakout....how do u trade this ? when the price is ranging, just draw lines between the high and low of the range and wait for the breakout....when it happens, take a trade in the direction of breakout....

why does this breakout happen when there is no news or anything special?? for this, u need to understand volume and vsa....during consolidation, the big boys keep buying the pair....as the keep buying , the price goes to top of range, then they push it down and small traders get scared and sell and the big boys buy it...they keep buying and again price goes to top of range and they again push it down to scare the small guys into selling it to them...they keep doing this till there are no more sellers and once they r happy that it is true, they start pushing the price up and start buying everything in sight...seeing this breakout, others join in...big and small and the price starts to accelerate in the direction of breakout....this is what happens....