Market Analysis

First we analyse the long term charts and look for the currency pairs that have the clearest market condition (clear swings and S&R levels).

Once we have a clear market condition, we look for entries
on the short term charts.

So when we say bullish condition, it means that it is more likely to continue it’s way up, and we will look for long opportunities (It DOES NOT mean to trade it right where it is).

When we say bearish condition, it only means that the market is likely to continue its way down, and we will look for short opportunities.

Once we have a clear market condition, we try to find clear S&R levels on the short term charts to define our entries.

Is it clear?

Please do let us know if you have any question, because we are going to send you our analysis everyday this week.

Sounds good?

Remember, blue levels are long term levels and the green ones are short term levels.

Ok, now lets take a look at some charts! >>

AUDCAD Analysis

As you can see in the following chart, the AUDCAD is trading in a very clear bullish condition, that means that we’ll be looking for long opportunities:

Now, since it is trading in a very clear bullish condition, we need to look for long entries on the short term charts… In order to have a plan we need to look for ST S&R levels…

Here is how the ST chart looks like:

The AUDCAD has clear ST S&R levels, it has been rejected from the top of the ST range, so my plan is to wait for the market to reach the bottom of the range, if I get a significant pattern my upward pressure I’ll go long.

We’ll see what happens tomorrow.

GBPJPY Analysis

The GBPJPY is another currency pair where we are currently looking for trade opportunities.

In this case, it is trading in a bearish condition (since it was rejected from the top of the range), and it is likely to continue moving down, until if hits the next LT support level around 161.25

Now, in this case we need to be careful because it might retrace back to the ST resistance level around 168.16, here is the chart:

And basically, that’s what I looking for. Unless we get a new range, I’ll take advantage of it and trade off there.

I’ll keep you updated.

How do you deal with NFP (Non-Farm-payrolls report)?

Do you still try to take advantage of it? Those days, where the market moved 200 pips in one direction in just a few minutes are long gone. Now it’s different. The market moves up, and down, and then again up… and most of the time it ends up where it all started. Traders that used to place two orders (a buy above the market and a sell below the market) end up with two opened trades, a buy and a sell, and both of them in a loss. So this is no longer a feasible strategy.

But still, we need to learn to live with the NFP announcement and other important ones as: interest rates, GDP, trade balance, and others. Follow these 4 ideas and you’ll be on your way to get consistent results. I can help you put these ideas to work.

Over the years it can be seen that most of the time, the market takes these announcements as an excuse to move in the direction of the market condition. That’s the reason even when sometimes we get a good number, the market still goes down. Or when the market gets a very bad figure, and still the market moves up. Well, that’s because of the market condition, or what other traders call: The Sentiment of the Market. This is why it is very important to trade only in the direction of the market condition, because the market will use these announcements and other things as an excuse to keep moving in the direction of the market condition. Now… remember I’m talking about “most of the times”, there are also times that the market moves in the opposite direction… this happens when we get a very different figure from what was expected.

So we still need to protect ourselves, for that reason, it’s advisable to close all trades when there is an important announcement. We don’t do this with every announcement though, just the important ones like: unemployment reports, interest rates, GDP, trade balance, Central Banks announcements, Central Bank President speeches.

Now lets talk about a few charts…

GBPUSD Analysis

Remember we need to be careful about trading anything, because the NFP report release due normally on every First Friday of the month.

Sometimes the market behaves in an odd way before those announcements, so we still need to be careful alright? Ok, the GBPUSD is trading near an important level. And as we discussed, every time the market trades near an important level, it will tend to consolidate (range) around the level.

So this is how that consolidation period looks like in the short term charts:

We have several options…

The first thing that we need to do is to create a trading plan.

A trading plan will help us reduce anxiety about trading, because this way you know exactly what the market needsto do to open a trade.

So we have three possible scenarios:
• When the market trades near an important S/T level, and it is consolidating in a very well defined range (clear swings and S&R levels), we can trade inside that range.

• We can take long opportunities around the bottom of the range
• And short trades around the top of the range

We need to close our trades as it approaches to the opposite extreme.

This is what makes me feel more comfortable about the strategy I’m using. I know exactly what the market needs to do in order to start looking for trade opportunities.

USDCAD Analysis

Now, I want to talk to you about the USDCAD again because it is trading in a similar way… But not quite the same…
You’ll see what I’m talking about. On tuesday I did analyze the USDCAD. It was trading near an important level (as the GBPUSD). And guess what, it is still trading near an important level.

Take a look at the ST chart:

Do you see any difference between this chart and the one we saw earlier?
Think about it…
The difference between the GBPUSD and the USDCAD chart is that on the first one (GBPUSD), the market has very clear S&R levels and swings, and when we have that, it is possible to trade inside the range.

On the USDCAD however, the resistance level has not been confirmed yet (we only have one rejection). So we don’t know yet if that is a resistance level, and for that reason we cant trade inside that range.

So the plan is a little different, in this case we only have two possible scenarios:

1. If the USDCAD confirms the upper resistance level (1.1197), and then it breaks it, then I start looking for long opportunities.
2. If the market breaks the ST support level (1.0923) I’ll start looking for short opportunities.

As you can see, the lower support level has already been confirmed, that’s the reason I’m going to look for trade opportunities once it breaks through that level.

See the difference?

Summary

We need to be careful today because of tomorrows announcements.

The market is most likely to trade with very low volume until tomorrow, so don’t expect large swings.