Forex Blog

EUR/USD trend: sell.
GBP/USD trend: sell.
USD/JPY trend: hold.
EUR/JPY trend: hold.

You’ve probably seen the standard MetaTrader ZigZag indicator that is capable of drawing lines from one chart extremum to another. It looks good and neat but it has two disadvantages: it’s not very accurate and it also has a bad delays for detection, because it is quite linear in its nature. This new improved version of the ZigZag indicator does the same — draws the lines between the chart’s extrema, but it uses Parabolic SAR (another well-known standard indicator) to find those extrema. This makes the whole calculation a dynamic process, which manages to reduce the delay between the point of extremum and its detection point.

The resulting extrema may be used to build regression channels or the chart patterns (like triangles and wedges) as you wish. You can find more information about this indicator and also download it for free:

• ZigZagOnParabolic MT4 Indicator

EUR/USD declined past the yesterday’s open level today as the currency traders reacted on the deeper than expected drop in the U.S. nonfarm payrolls. Worsening of the employment market situation spurs speculations that the recovery from the current crisis may be quite far from now. Going into more risky currencies isn’t a good choice in this case. EUR/USD is now trading near 1.4010.

Nonfarm payrolls declined by 467k in June, following 322k drop in May. The payrolls were expected to go down by 365k according to forecasts. Overall unemployment rate increased from 9.4% to 9.5%.

Initial jobless claims were at 614k last week, down from 630k reported a week earlier. The report went out almost matching the forecast which was at 615k.

Factory orders increased by 1.2% in May, following 0.5% rise in April (revised negatively from 0.7%). The market expected a 0.9% increase.

The euro rose against the dollar today as some important economic indicators in U.S. showed a recovery from the global crisis, while only construction spending report showed a negative dynamics. EUR/USD is now trading near 1.4171 — the highest value since June 5.

ADP employment report for June showed a decrease by 473k jobs during that month, but that was considered a positive signal since it was less than 485k decline demonstrated in May (positively revised from 532k drop). According to the consensus forecast, jobs were expected to fall by 394k in June.

Construction spending fell in May by 0.9% after rising by 0.6% a month earlier. It was expected to decrease by only 0.6%.

ISM manufacturing index advanced from 42.8% to 44.8% in June — slightly higher than the forecast suggested (44%).

Pending home sales index rose for the fourth consecutive month in U.S. and gained 0.1% in May, following 3.3% gain in April.

U.S. crude oil inventories continued to fall last week and decreased by 3.7 million barrels.

Dollar was losing against the euro during the first half of the trading session today but managed to regain it’s position after some important fundamental reports were released in United States. The negative values in the reports made traders to go for the «safer» dollar. EUR/USD is now trading near 1.4042.

S&P/Case-Shiller seasonally adjusted home price index for the 20 U.S. states declined by 18.1% in April compared to the last year, following 18.7% drop in March. The average forecast for this index yearly change was at -18.63%.

Consumer confidence unexpectedly dropped at a very fast pace — to 49.3 in June from 54.8 in May. It was expected to go up to 55.3.

Chicago PMI business barometer index rose from 34.9 to 39.9 in June. It exceeded the median forecast of 39 for this indicator.

My own experience suggests that the majority of the traders usually trades on 2 or 3 preferred Forex pairs that usually include EUR/USD, GBP/USD and USD/JPY, while not many go into other major crosses with an extremely low number of traders touching something exotic like USD/BRL or NZD/CHF. In Forex different currency pairs are interconnected and there is no real diversification possible contrary to the stock markets. Some professional traders always insist on concentrating only on one pair. But I like to find opportunities in all the pairs that are supported by my broker and have sane spreads. What currency pairs do you prefer to trade? In this poll you can select multiple answers if you trade on more than one currency pair.

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Another set of chart patterns — this time for the EUR/JPY and GBP/USD Forex pairs. Only two patterns are presented this time because other interesting patterns are now in that stage when it’s already too late to enter any positions based on them. I hope that you can use the patterns shown in this post. They are not 100% profitable trades but still offer a good entry point for medium-term traders. Click the images to get the full-size screenshots of the charts.

1. GBP/USD, Daily, Ascending Triangle:

2. EUR/JPY, Daily, Rising Wedge:

EUR/USD trend: sell.
GBP/USD trend: buy.
USD/JPY trend: sell.
EUR/JPY trend: sell.

The  U. S. dollar fell against the euro today as the consumer price index report showed a positive revision of the April’s value and also a higher than expected value for May. EUR/USD is now trading near 1.3855.

CPI rose by 0.1% in May in the United States after remaining unchanged in Aprl (revised from -0.7% reported a month ago). The forecasts for May were averaged near 0.9% decline.

Current account balance deficit decreased to $101.5 billion in the first quarter of 2009 (preliminary value). Q4 2008 deficit was revised from $132.8 billion to $154.9 billion. Latest Q1 deficit is the lowest since the fourth quarter of 2001, but it’s still above the median forecast of $85 billion.

Crude oil inventories decreased by 3.9 million barrels last week after falling by 4.4 million barrels one week earlier.