Forex Ichimoku Trade Setups Dec. 28th
First off, its been a great trading year and we want to thank you for being along on this ride. We completely outperformed last year and are expecting the same for 2011 as we continue to improve and take things to the next level each year. We also will have some big announcements in the upcoming months as I am partnering with several groups to build some amazing products in the FX market. 2ndSkies has been great but if its goal was to build a street, then what we are doing now is working on building a city. Big things to come in 2011 so stay tuned.
So this will not be our typical article because we really do not feel to be giving trade setups from now till the new year. However, we do see some major plays setting up or in play which can be taken come the new year.
Generally all the institutional traders from all markets are out until after Jan. and depending upon how the new year starts, could be till the 2nd week of Jan. before they all get back. Due to the lack of liquidity, we do not recommend trading since its an artificial liquidity environment and thus will create strange moves which are not technically pure. Stops will have no defenses and moves my abruptly turn around so this is why we are not and have not been giving trade setups since early Dec.
Regardless, now we would like to discuss some of the major setups we see happening in the coming year. Keep in mind the markets work in cycles and since we are starting a new year, we are also likely starting some new cycles so we always recommend taking the long view to start the year, get the big picture and then see where things are at. New years and new cycles are always a time for reflection and this is why we take a step back and take a look at the long view.
GBPCHF – All Time Lows
Yep, that is correct, the GBPCHF is hitting all time lows and carving new lows for all of the month of Dec. The pair has embarked upon a brutal drop since the highs of 07′ at 2.5 and shed 10400pips from the 07′ highs. Since its peak, its only gained 17 out of 42 months or 40% of the time. Although this is only 10% less than a coin flip, the pips is what you should be paying attention to since its shedding a lot more losing than it is when it gains. What this means is if this downtrend will continue, and you can find a good month to sell, your chances of getting it right are 6 in 10 but also offer tremendous potential to gain a lot of pips in that month. Of the 25 months it sold off, it averaged over 650pips in losses. That’s a pretty decent month if you can call it right. Keep in mind that for the last two years its been only lightly trending down approaching the former all time lows at 1.5120. But now that its broken the prior all time low, its opened up the valves in volatility shedding over a 1000 pips in this month alone (See chart below).
We feel pullbacks to the 1.5000/1.5120 level should be treated as good rally levels to sell the pair again. Where would such a move head to? At least the current lows at 1.4600 but we feel after a 1.45 touch, the pair should continue further selling off and likely to the big figure at 1.4000 so there is a lot of pip potential available. Keep in mind there are no support levels which will not excite buyers to come in till they find the CHF is overbought against a host of pairs. In other words, keep selling for some time and at least to start off 2011.
All the ichimoku signs point further south on the monthly, weekly and daily charts all with falling Kumo’s, Tenkan and Kijun lines suggesting the momentum, trend and resistance will continue to put pressure on this pair.
AUDNZD – Long term Bottom in place/making new highs for the last 8 years
So not many people have 30 year data on the AUD but against the NZD it used to be valued at one point back in 1985 just around 1.77 against the kiwi. It then went on a rapid sell off where in 3 years it shed 7000 pips touching what would become a triple bottom base over the next 30 years. The pair has touched this level about 3x in the last 3 decades and all of the touches resulted in a bounce minimally up to 1.2500 and the highest making its way up to 1.45. Discounting the rapid sell off from 2008, the pair recovered well and has since been tracking the 20ema upwards taking out the previous ceiling just below 1.3000. After rejecting off of it once, the pair recovered to gain 5 out of 6months now resting comfortably above 1.3000. The pair looks set to challenge the 1.3547 base and we suspect it will clear this after a small fight. From there, the pair really has nothing except the big figure at 1.4000 and then the resistance peak from 1992 at 1.4239. Its toughest fight is really taking out the 1.35 barrier but beyond this, it should smoothly work its way up to 1.4239. The price action has shown the pair has no intention of giving up its gains as it continues to build higher lows and highs while recovering each time from its losses with renewed or solid vigor meaning the market is happy to buy the pair on dips. We feel this trend will continue so players should look to scoop up this pair on dips and take a patient ride up to 1.4239. We actually suspect the pair will make it up to 1.4700 by the end of 2011 but it if gets there in a hurry, then the pair has scope to take out 1.5000.
EURUSD – Short-Term Bearish, but Longer Structure Bullish
Although the pair is suffering as of late from the debt crisis and a lack of confidence in the euro zone’s structure, the pair really has a long term structure in place which supports further growth over the long term. Now that does not mean we would just pile in longs but we feel the Euro will likely never go below parity and that its prospects for holding above this far outweigh it staying below. With that being said, we still feel selling rallies up to 1.3500 for now are a good play and taking profits at 1.25 and 1.20 for now. The last two year structure has been one of making lower highs and lows but its relatively orderly so playing this wide channel/triangle from the chart below is recommended since they offer some great R:R opportunities. Look for price action formations around those levels to confirm your entries. What we suspect will happen for the pair is it will decline more than advance for the 1st half of the year where it could likely find some new strength/support around the 1.20/1.15 level attracting new buyers. Until then, play the wide ranges with a more bearish bias to start the year.
Sell EURCHF on pullbacks to mid 1.27′s and 1.30
Watch for base at 80 on USDJPY
Look to sell GBP against most currencies (EUR, CHF, JPY, AUD). If the pair breaks below the 2010 lows at 1.4239, we suspect the pair will head to 1.35
This is just some of the techniques and methods we use to trade the markets. If you are interested in learning about these methods further, then make sure to check out our Advanced Ichimoku and Price Action Courses for further training where you can also join a community of traders and get permanent access to our forum for continual education. For more information about our services, visit http://2ndskiesforex.com