Daily Trading Update April 20, 2012

Daily Trading Forecasts (April 20, 2012)

Currently, the currency markets are not acting irrationally because the bullish sentiment is strong. In a typical fluctuation of the prices, it may seem that prices are currently irrational. For instance, earlier this week currency pairs and exotic crosses pretended as if going in the direction of the last week prices, only to experience sharp reversals. There were final counter-trend moves on Tuesday – something that has continued up till now. This is not a fact to be taken for granted, even not for many typical weeks in this year. As a result of this, what you have to do to survive is to take advantage of the present major bias; while limiting your losses should the market move against you. Irrelevant biases should be checked.

Now let’s see the recent developments on some popular pairs and crosses:

EURUSD

The condition on the EURUSD is quite similar to its USDCHF rival (with which it often gets negatively correlated). The price rose up earlier this week and has been consolidating since then. It seems difficult to predict where the price will go. I do not expect the price to go up too far from this place. The price may go as far as 1.3200, and if the bullish momentum is rejected at that level, a new bearish wave would emerge. Personally, I am currently looking for an entry price to the downside.

USDCHF

It should be noted that apart from Monday, when this market experienced some bearish move, it has been moving sideways since then, with no clear victory between buyers and sellers. It is not uncommon for the price to appear as if going upwards, only to drop back; and vice versa. It is better to stay out of this market for now. There would soon be a serious breakout, and when that happens, the next step to take would be revealed.

GBPUSD

The northbound pressure has been perpetuated on this pair because bears have failed in their attempt to push the price down. On the hourly chart, most indicators are giving a ‘buy’ signal. (A remainder: this pair has moved up by over 230 pips this week since its 1.5821 weekly low on Monday). The price could have gone too far in the nearest term and I’m looking to open a short trade on Monday.

EURJPY

The bullish movement on the EURJPY is slow and steady – though the movement did not have much steam yesterday.  There are seemingly spurious movements against the trend, and this may provide opportunity for buyers to enter at a reasonable price. This near-term upward momentum may go as far as 108.00 before reversing. The market has been able to pose a threat to the bears. 

GBPJPY

The northward journey of this cross continued smoothly. It moved by roughly 80 pips yesterday. One resistance has been broken after the other. The level at 131.00 has been breached to the upside and the price level at 132.00 may be the next target. If this is not achieved, then there may be at least, a short-term and temporary reversal in the markets. But while the price stays above the level 130.00, the bullish bias is still valid.

USDJPY

Since the bearish propensity that began this week has been overruled by a bullish outbreak, the price has on this pair has been moving to the upside. It is recommended that pullbacks are bought on this pair. I am looking forward to buy around 81.50 and set my stop around 80.50 while riding the trend higher, should the market move in my favor.

Review and Outlook

We can see that the reversals that started on Tuesday, April 17, 2012 have been sustained till the time of writing this article. Painfully, the equilibrium zones in which most pairs and crosses are caught now may bait impatient speculators. It is possible that the present scenario will continue, but I am expecting some reversals in the markets next week. When the relevant trades are taken, you would be notified in due course.

By Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach