Forex Market Deciphered: The Equilibrium Cross

Thanks Sophos ... I have a couple of shorts in it now, and am looking to add as it tanks.

EZ

EURCAD

monthly - overall downtrend for the past 2 year, but currently at month's high for Jan
weekly - overall downtrend, but nearing ema line ... some resistance
daily - near resistance TL and candlecode (CC) sell signal soon
4 hr (previous post from Sophos) - sell signal from Fisher / AO indicator
1 hr - CC divergence on 3 legs up, and CC TL break. CC TL break usually preceeds a break down.

I shorted a bit ... will add on a break, moving SL to b/e. Currently short 5 positions (overall about break even now), using 1% margin per position (at 100:1).

I think CAD overdone a bit ... it should resume its overall uptrend against other pairs I think ... also as oil rises, CAD typically runs. Oil is in an overall uptrend as well.

EZ

Regards,
EZ

What is the CPI and GDP china, able to block this QE?
let see ..

1/20/11
Fundamental analysis:

China GDP better than expected … may hike rates, which pressured AUD. Gold also hammered, pressuring AUD
EUR PPI better than expected … currently supporting EUR cross pairs
CAD leading index and wholesales better than expected. Oil hammered (larger than expected crude oil inventories in US), which is pressuring CAD. Look to buy CAD against other pairs as fund. data is good. Oil nearing support levels as well.
US Existing Home Sales better than expected, but Philly Fed Manufacturing Index worse. USD rallying as stock market falling … but look to short USD against other pairs once the buying stops. USDCAD a good short around 1.0 level.

Also in the news:
And In Japan… Japan’s Economic Minister, Kaoru Yosano said, “If we keep going with no fiscal discipline, allowing the stock of public debt to grow larger or continuing to borrow more than we receive in tax revenue, international confidence in Japan could be gradually eroded.” (negative for JPY)
The ratings agency, Fitch, issued a report on the U.S. and debt… “Record U.S. Budgets deficits due to stimulus measures and a lack of a plan to reduce debt may undermine confidence in the dollar and raise inflation concern. The U.S. fiscal metrics will be the worst of any AAA rated sovereign.” (negative for JPY)

In summary for data released today:
EUR +
JPY –
USD –
CAD +

So from the above, potential trades:
Long EURJPY (I’m currently long, but add on dips)
Long EURUSD(I’m currently long, but add on dips)
Long CADJPY (initiated new longs)
Short USDCAD (stopped out of previous positions for b/e, but established new shorts around 1.0000 level).

As a side project, I’ve been working on some statistical analysis using the past 6 years of weekly price data to gain some insight into weekly behavior. I will post more when finished with this project, but here is a sample of my findings:

For EURUSD:
Summary of range:
Min. 1st Qu. Median Mean 3rd Qu. Max.
0.00920 0.02008 0.02605 0.02871 0.03295 0.13550

So the average (mean) range is 287.1 pips … and 50% of all of the weekly ranges are between 200.9 and 329.5 pips.

If its an up week, then there is a 69.5% chance of closing within the top 30% of the range. Ex: if weekly range is 300 pips, then there is a 69.5% chance of closing within 100 pips of the high
If its an up week, then there is a 50.6% chance of closing within the top 20% of the range.
If its an up week, then there is a 26.8% chance of closing within the top 10% of the range.
So there is a better than 50/50 chance of closing within 20% of the weekly range’s high if an up week. This proves mathematically that its best to hold till the week’s close if long.
I want to expand this to other pairs, and also to define an uptrend (if price above 5 and 10 week ema, and 5 ema > 10 ema) for example … my intuition is that the probabilities will be higher of closing near the high of the week in an uptrend … but I need to test this statistically.

EZ

Thanks ez for the nice fundamentals.

Here is a chart-historian view on a possible entry yesterday, I hope many of you did catch this. A beautiful secondary confirmation setup.



I wish every trade is an artistic one!

I love statistics like these; however, I have a question. Beginning in 2008, the EURUSD weekly 14 period ATR hadn't really gone above 260 for very long. Since 2008, it has hardly gone below that level. Would this suggest that the weekly ranges have been of greater distance since then, and is it necessary to account for these larger weekly ranges in your analysis?

Hi Cosgrove,

I was thinking of doing that ... analyzing and plotting % near close vs. weekly range, and see if there is a correlation for an up week if its more probable to close near the high for a larger range week than for a smaller range week. That would be interesting to test ...

If you are interested in statistics, I assume you have heard of R (the open source statistical package). I have posted some R script here if to replicate this study if you are interested:

http://www.forexfactory.com/showthre...45149&page=274

Regards,
EZ

1/21/11

Here are my thoughs, and plans for next week:

Fundamental analysis:
AUD import prices much worse than expected … should pressure AUD (although AUDUSD off lows due to USD weakness). Also with China GDP so strong … China may hike rates later, which will pressure AUD. Gold getting hammered recently which pressures AUD. Watch for potential longs though (in AUDUSD) … also I think later AUD will bottom, and continue its general uptrend against other currencies. EURAUD is near weekly TL resis, which can possibly be a nice short ... or continue up??? For now table the AUD, but keep an eye on it.

JPY Industries Activity weaker than expected … will continue to pressure JPY.

EUR IFO and Belgium business climate both better than expected … will support EUR

GBP retail sales and Mortgage approvals worse than expected … negative for GBP, but GBPUSD close way off of the lows. Inherent strength in GBP?

CAD retail sales solid numbers

USD – no fundamental data released, but USDX closed below 79 and at low of the week. Definitely bearish for the USD. This can be the start of a major downtrend??? 78 is some sup for USDX … but it just broke a major range to the downside.

Also in the news:
Reuters is reporting this morning that: quietly, Congress is looking to allow states to file bankruptcy… “No legislation has been drafted, but congressional members are cautiously looking into rewriting U.S. law to let state governments file for bankruptcy protection. If approved, states will be able to walk away from overwhelming debt, including state-issued bonds and pension funds' obligation to pay retirees.”

Definitely bad for the USD if this passes!

In summary for data released today:
AUD -
EUR +
JPY –
USD –
CAD +

Looking at weekly charts for a rough plan for next week:
AUDNZD +; at weekly high; continue to add to longs and buy dips, moving SL up

AUDUSD close near open … can tank big < 0.983. AUD PPI out Monday. Set text alert below 0.983; small short in this now with SL 0.9925. Set alert 0.9925.

CADJPY off lows; hold longs with SL at b/e and add on dips

EURAUD at weekly highs and just above weekly TL resis. Can run big again if AUD data bad Monday am … or reverse down if AUD data good. Watch EUR data also.

EURCAD weekly highs … lots of EUR data out Monday. Watch for potential short opportunities if EUR disappoints.

EURGBP weekly wedge getting towards end … watch for big breakout either way.

EURJPY weekly close at/near high; broke TL to the upside on weekly. Lighten up on long positions before EUR fundamental news on Monday. Hold 1 long; add on dips if +. SL at b/e.

EURUSD – same plan as above for EJ

GBPAUD – weekly close at highs … watch for AUD for possible reversal, and short op in GBPAUD

GBPCAD – same as above for GA.

GBPUSD – strong weekly close … buy dips (short USD rallies). Watch GBP fundamental data …

GBPJPY – strong weekly close; broke weekly TL to the upside. ** Start to buy on dips and build a strategic long term position. ** Analyze GBP and JPY data more. This can be the start of possibly a long term uptrend.

USDCAD – up close for the week; but off of highs. In a weekly downtrend. Continue to add to shorts (SL at b/e on current shorts near 1.0) …

USDCHF – downtrend ; continue to add to shorts

EZ

Time now is 24/01/2011, 12:06pm, AEST(GMT10+)

NZD/USD



NZD/CAD



Feel free to comment on fundamentals

Hi Sophos,

Thanks for the post ... I just bought some AUDUSD long, with SL below recent lows, and also bought some NZDUSD. Good to see your signal to buy! :-)

As for the fundy's ... AUD and NZD are highly correlated.

AUD: 2:30am AUDPPI q/q 0.1%0.5%

PPI just came out worse than expected, but AUD spiked down across the board against most pairs, but now holding its own. This shows inherent strength in AUD ... hence my buy for AUDUSD.

AUD CPI out tomorrow ...
NZD no data till Wed (rate decision), but its priced in that no hike will occur.

Last week NZDUSD ran below the previous 2 week's lows to run stops, and closed off of the lows. --> weak longs now out ... they will reenter when they see price start to rise.

Regards,
EZ

Hi ez thx for the fundamentals. As for NZD rate decision, I think there is a decent chance of a raise judging from all the economic conditions indicated, even if it stays at 3% it wouldn't be a bad time to price in for a long term, it's going up sooner or later.

Morning all! I hope you all had long positions for NZD from yesterday

Here I shall present two charts about the immediate strength of EUR in the secondary confirmation view, please feel free to tell everyone what you think.

EUR/JPY:




EUR/USD:

Hi Everyone,

I'm starting to arrange fund. data in a summary table ... see attached and comments.

EZ

Thank you ez for the hard work!

Just finished this book and though I should share with everyone.

http://cdn.forexfactory.com/images/attach/pdf.gif pdf

Daily Review: 25/01/2011

http://forexmarketequilibriumreport....-25012011.html


Waiting for ez to add more analysis or anyone else.

Hi Sophos,

Here are my thoughts (see attached). Basically quiet till tomorrow FOMC ... EURUSD major resis at 1.375 .... I think it may spike to there, then reverse? If it sees near that level I'll be a shortin! ;-)

EZ

PDF says Jan 25, but I meant today (26) ...

I trade the 4H myself and would be interested in what theories you may have in regards to re-entries. I like to add onto my positions when I trade the 4H but have not had much luck picking good re-entry points. I would normally add a position when I see an uptrend forming on the 15m, but am thinking of revising it to the 30m. Does anyone else have any good ideas?

Thank you ez for the nice work!

Daily Review: 26/01/2011

http://forexmarketequilibriumreport....-26012011.html

Hi there! Adding positions is a very tricky problem, theoretically for a TA trader, once a direction is established and the original position is entered, the general procedure of adding more positions is to buy at temp dip/sell at temp rebound, but it's very hard to identify dips and rebounds in terms of whether they are temporary or definitive turning point. I have thought about this problem and my solution is to re-enter at candles that has small price range. Here is an example:

Hm...what about pull backs from trendlines or enveloppes on a lower time frame ?

The way I trade is more or less independant of the time frame used, so I would be looking for the same things on a 15 min chart as on a 1h chart etc...although, trading intraday, I rarely ever add/ scale in.


Could your technique of the Eq. crosses give you signals on lower time frames as well ?