Spikes both directions in eurusd when US data is released

News releases often create sharp volatility. Today was no exception. When US CPI came out eur/usd price initially spiked high above European session high and then quickly went down below yesterday’s low and quickly bounced of it too. As I wrote in my previous post, I closed my short position a few minutes before the release at 1.1040 level (20 pips of profit) in order to avoid such volatility as I have already described and as you may see from the chart below.

One thing is clear: nothing is clear. Choppy price action may also mean that “All EYES ARE ON FED”. Despite some bullish price action at the lows today you cannot really say whether price is going up or down. Tiny longs may be attempted at this level with stop losses some thirty pips below the low of the day (1.0975 level). If price spikes up after FED minutes release and forms a reversal pattern we may attempt a short with a target below today’s lows (at around even number of 1.1000). 

Although we have plenty of time till the release it is better to wait out rather than to put your head under the ax of FED. They can create even bigger volatility. 

2 spikes in eur/usd

Oil may reverse at resistance

I took a short position in US oil an hour ago. You may see from the chart below that oil broke above the highs of the 14^th and 17^th of August, hit 200 sma and ema, formed a reversal pattern and is actually reversing now. 

We do know that oil has been in a strong trend recently and the tendency may not be over yet. Selling rallies remains the best option for OIL traders, particularly when price rallies above previous day’s highs. That’s where most stops reside and smart money gets a chance to re-enter in the direction of the prevailing move. 

Again, US CPI and FED minutes may influence the price of oil, but I do expect price to reverse and visit the lows soon. Current support of US oil is at 41.50 and key support is at the round and powerful 40 level. Who knows, maybe that is the bottom and oil will turn around, but before we state that we need to see confirmation on the charts. They are not present yet. 

Despite the fact there hasn’t been much price action in these couple of hours, US session will probably bring volatility back. 

US oil 1 hour chart (resistance has been reached)

Reversal pattern in eurusd

I have already said a number of times that eurusd has been in a short term downtrend and selling rallies is the best policy under such market conditions.  Euro has been rallying into London open and right after the open at around 07:14 GMT price hit the highest point for today. It then proceeded to form a reversal pattern that can be clearly seen on both 15 and 30 minute charts. 

Furthermore, you can see that resistance coincided with 200 ema on 30 minute chart. This added extra confirmation about the strength of the sell signal. Entry point was at 1.1060 with a stop loss at 1.1075. Take profit is at yesterday’s lows: 1.1020. As you may see risk/reward ratio is good. 15 pip stop loss and 40 pip take profit. 

I will take extra caution today as we have important data coming from US. At 12:30 US CPI is to be released and 18:00 GMT FED minutes. Both may have tremendous impact on both Euro/Dollar and Pound/Dollar exchange rates. 

So, I might close my short at or before US session begins, because 30 minutes into it CPI comes out. You don’t want to carry around a position at such events, unless you are a swing or trend trader and hold your trades for weeks and possibly months. Volatility should increase as market is searching for direction and these numbers can surely give direction. Take care!

I will come with an update sometime around US session.

Reversal pattern on eur/usd 30 minute chart

Rate hike expectations are pushing Pound up

After correcting a little after a sharp rally that was cause by better than expected UK CPI data. It is obvious that expectations are high and unless proven otherwise we will probably see Pound rising versus US dollar in the meantime. 

However, two pieces of information that can rock the boat are coming today from US. US CPI (Consumer Price Index) and FED minutes are to be released during US session.

CPI is coming at 12:30 GMT and FED minutes at 18:00 GMT. These two may completely turn things around. Better than expected US CPI and bullish hawkish FED minutes will be taken as a sign that FED will start raising interest rates sooner than BOE. On the other hand, worse than expected data and dovish tone inside FED minutes will re-confirm that BOE is ahead of FED and US dollar will go down against British Pound. 

Pound is rising at the time of writing. If it turns around, there is plenty of support below. The first level is right at early European session lows: 1.5662. Key support is yesterday’s low at: 1.5644. 

I tend to think that the second level is not reached. On the other hand, resistance is right ahead at yesterday’s high: 1.5717.

Let’s wait and see what happens when US markets open and fundamental releases come out. 

Intra day support and resistance level on Pound/Dollar

Directional move downwards continues in eurusd

A directional move downwards that started last Wednesday, on the 12^th of August continues this week. There are actually no signs of reversal on hourly chart as price in eur/usd is making lower lows and lower highs. The best plan of action is surely to go with the move. In most situations you need to wait for a rally above Asian session highs and trade a reversal. You can get pretty good levels to place your stops, despite the fact that the moves in the pair are not that big, probably because of summer. 

1.0950-80 area should act as support as it was strong resistance before the pair broke upwards on the 10^th of August. This area might even be reached today, but I kind of feel it will be visited not earlier than tomorrow. What happens when it is hit? 

It all depends on the data from US. If CPI comes better than expected we might see Euro moving lower and possibly going back to key support level of 1.0800. If it is worse than anticipated Euro will probably rise against US dollar and go back to 1.1200 area or even 1.1500. It all depends on how soon FED is going to raise interest rates. 

Directional move downwards in eur/usd