Forex Trade Setups and Signals July 26th, 2011

Verified Profitable Trader

EURCHF – Doesn’t Disappoint
As the EURCHF started last week with a gap down, continuing with the long-standing trend, things were looking to continue as is.  Then on Monday’s trading last week, the pair got really aggressive and climbed 4 of the next 5 days and added 400+pips which was impressive to say the least.  The question then came to mind which was ‘what would happen when price reaches the 20ema’ which for the most part has contained upside advances and often acted as a barrier to upside price action.  We actually wrote about this climb after day two last week and predicted it would go all the way back to the 20ema – and it didn’t disappoint.

What we also did was suggest to wait for price action to break it and to look for a selling opportunity off the 20ema.  This is exactly what the pair did climbing as high as 1.1889, yet closing below on the day at 1.750 or 139pips lower suggesting the market was happy to sell this pair around these levels.

What was key to watch was the combination of the fibonacci retracement, the 20ema and price action all coming together to offer a great short opportunity in the pair.  Looking at the chart below, we can see how price was advancing strongly until it ran into the 20ema and the 50% fibonacci of the 1.2344 – 1.1405 downmove, rejected right off these two, and closed below the 38.2% fib all in one day.

This offered a great short opportunity and the pair continued to sell yesterday opening at the highs, and selling off from the market open confirming who was in control from the outset dropping 233pips from high to low.  When in downtrends, look for rallies to come back to the 20ema and also see if there is a fib-combination there to help with the rejection as this usually sets up a good opportunity to short the market.

In terms of where the pair is going for now, we will watch for a break of yesterday’s low at 1.1517 to confirm the trend is still in place.  Such a move should continue to the all-time lows at 1.1405 where any buying interest will be tested.

XAGUSD – Spot Silver approaching critical level
After the massive selling from the Koch bros. failure to corner the silver market again, spot silver vs. the USD has been below the daily Kumo since the middle of may.  While its had a few upside advances, price has mostly been chopping around a $7 range between $33-40.

However, now price is approaching a critical level which is both the 50% fib of the last major downmove (see chart below) and the Kumo Flat Top.  Since breaking and closing above the 38.2% fib level just around $39, the shiny metal has been hovering above it for several days now and tested this fib level 5x while never closing below it.  Now its making an advance for the 50% fib which lines up perfectly with the Flat Kumo Top which should be magnetic for price action considering it houses both the fib but also the Senkou Span B.

The Senkou Span B is flat for a long time up until the 1st week in march so should price break and close above the Kumo Top, expect price to use it as support before starting another run which we believe is already in play.  Taking out the last fib at $43 would likely mark the last major hurdle to $45 and the all time highs at $49.78.

Any serious rejection at the Kumo Top and fib level will likely send the metal back to $39 where it will test the buyers resolve in starting the likely new uptrend.

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