Ichimoku Report May 10th
EURUSD – And after approximately 1 trillion dollars in aid, it still sells off
After the Vegas World Series of Poker ‘All-In’ maneuver by the EU, ECB and IMF, the euro found some good strength upon the open from tokyo to hit 1.3050 and do what? Sell-off about 275pips. This gives a somewhat mixed message to the market with the pair rallying out of the gates to open only to have one hour of buying in the London session where the natives were restless and felt the pair was overvalued pushing it back down. The pair did fill the gap from the open which was quite large so this could have been one of the reasons for the sell-off. Either way, it seems the next move will be critical and the battle lines are drawn.
Where are they?
Between last weeks low just shy of a 1.25 touchdown and 1.3050 which was today’s London high (give or take a few pips). Ultimately, whichever is to break next (and we’d really liked to see a 1.3200 break before we feel bullish), will have the reins for the next play. Did the almost 1 trillion dollar stimulus change the game? Short term yes, but are traders still going to want to be long the euro with no interest rate hikes coming soon but becoming more likely in the US? Probably not so we feel this will just slow the decline to 1.2500 where we will see where the chips will fall.
The only thing to be noted from the Ichimoku is the Tenkan and Kijun are both flat suggesting a range should play out which concurs with the price action. Traders can look for longs off the lows just above 1.25 while bears can wait for a 1.3050, 1.3130 or 1.3200 touch before shorting. In between is a relative mess.
GBPUSD – Besides the abnormal wick from last week, the relative low is still meaningful
Considering last weeks volatility was an anomaly, we have to take it with a grain of salt after the tequila shot. What is interesting to note is after some initial buying followed by moderate selling, the pair found a base exactly where it found a base for March and April – right at 1.4760-80 range. Should this low hold, 1.5000 and the flat kumo top could come into play . The Tenkan and Kijun have just turned flat which suggests the market may be sorting itself out this week while the 20ema will add to another layer of resistance beyond the gigantic cloud. Ultimately there are more ways for this to sell-off then to be bought up so the line of least resistance is down. Play the wides.
USDJPY – Regaining Composure
After taking on a brutal amount of selling from some serious risk aversion, the pair opened and literally found only higher ground from there launching 120pips for the first day of trading. The pair is only a week away from approaching the flat kumo top which holds for some time and is the 50% fib from the 2009 high to low move at 93.15. The pair could easily break the Kumo top this week which would be its 1st time closing above it in 3 years. We feel considering its durability and resilience, this scenario becomes more and more likely. It may not happen this week but next week could be very likely. Should it break and close above, the flat top could be a springboard to 95 and 100. Watch this one carefully but the picture gets more bullish as time goes on.
AUDUSD – Kumo Top Coming into Play
After getting hit with the risk plague in the markets last week, the pair got within 50 or so pips of the Kumo top and found some support launching 280pips off the lows. Although it missed by 50pips, on the weekly chart this is pretty close. Now that the expanding triangle we wrote about for so long is no longer a factor, the Kumo becomes its main support as price is below the 20ema and Tenkan which should act as short term resistance. If the pair never visits the kumo again for several weeks, then the base of support is in there and the pair will likely trudge up some more gains albeit slowly. The way this Kumo is, we feel it should provide a good base of support and if the pair regains full traction, 9400 is likely coming in the weeks ahead.
USDCAD – Back to Parity – Back to Reality?
After posting back to back strong employment numbers, the CAD looks set to continue gains against the greenback. Even after last weeks strong push up, the pair is failing to hold above the Kijun suggesting its likely headed back to parity. The CAD has been strong against everything and we feel this will continue against the USD. If the pair gives a pop back to the 20ema or Kijun, shorts can be had here with a target of parity and 9900. Ultimately, we see mostly downside for sometime with this pair.
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