Monthly Archives: November 2013

Singapore the Asian Forex Hub

A recent survey conducted by the Bank of International Settlements indicates that Singapore usurped Japan as the biggest foreign exchange centre in Asia. Data from the Monetary Authority of Singapore (MAS) cites an average daily foreign exchange volume of $4.53 billion SGD, placing Singapore at the forefront of Asian FX Trading.

The fund management industry provides a financial backbone with over 500 asset managers who oversee approximately US $1.1 trillion. Financial providers are setting up to service increasing trading demand including IG.

Externally the city-state maximises its Asian geographical advantage via shipping. The PSA shipping terminals represent the busiest transhipment hub in the world, connecting to every major port in the world. Shipping forms both an economic and physical connection across the Asian space, supporting booming exports.

The current Trade Surplus of 4.53 billion SGD is supplemented by 9.5% growth in the export industry to 45.4 billion SGD. As a net exporter Singapore has ultimately become a net investor in rest of world markets, building sensitivity towards global economics.

This exposure is prevalent in the last 3 months with a 2.2% SGD drop against the US dollar. CIMB regional economist Seng Wun Song re-enforces the correlation between growth and economic events “there is growth in the Singapore economy – it’s just not in the straight line we’d hoped for and that’s partly due to worries about the impact of Fed tapering, the strength of the rebound in China and the impact of currency weakness in neighbouring Asian Countries.”

FX strategist Sim Mon Siong, Bank of Singapore further identifies the potential impact of US tapering stating that “the market has kind of re-priced the tapering expectations with the data opening the possibility that tapering could take place much sooner than the March consensus.”

In contrast increased partnership with China and the Renminbi is strengthening Singaporean infrastructure. MAS stated that the countries have agreed a 50 billion Yuan quota for Singapore financial institutions to invest in China’s domestic securities.
The recent introduction of direct currency trading between both countries will likely decrease conversion costs between SGD and RNB, supporting trading partnerships and mutual investments. Direct trading is triggering market speculation that Singapore could be a future “hub for the Yuan”.

GBPJPY 60 min

gbpjpy 60 minute chart

The chart shows a pitchfork that subscribers to the Cross Pair Analysis service have been following for some days. Initial validation was given by the three touches along the dotted Sliding Parallel in early November, as shown by the three red arrows. This was quickly followed by a move to the Lower Parallel where support was found in the red circles and price then moved up to find resistance once more in the line of the fork along the quartile (as shown by the blue circles).

The fork was well validated by this time and when price returned to the Lower Parallel a long could be taken in the area of the green circle. This would have been on 13th November at a price in the region of 158.05 and would have needed a stop of at most 20 points to be safely below prior lows. Since then price has moved strongly to the Upper Parallel of the fork topping out on 25th November at 165.30 as shown by the purple circle.

The trade of approximately 725 points could have been taken with very little risk as price moved along a path that we had been able to accurately define by using the pitchfork.

Median Line Analysis using pitchforks is a methodology that allows us to predict areas or lines of support and resistance with extreme accuracy.  It sounds simple, but the key to the analysis is correctly finding the path of price. By using the lines of the pitchfork and watching the strengthening and weakening of trend along these lines we are able to gauge the likely supports and resistances along this path of price. With tight stops and proper money management numerous significant trades may be taken as price moves along a path that often seems pre-ordained.

Find out more at: https://www.coghlancapital.com/cross-pair-forex-charts-analysis

AUD/USD

Starting with the monthly chart, AUD/USD bounced off the intersection of the bear (red) and bull (blue) channels at the 76.4% Fibonacci of the move from the low of 2010 to the high of 2011, briefly breaking above the 50% retracement which was prior support in 2011 and 2012 to reach roughly the 2008 high before passing back underneath this resistance level.

Note the divergeance between the bearish red RSI channel while price action made higher highs suggesting there may be a greater retracement towards the lows of prior years.
Though RSI bounced at the intersection of three reactive channels, the faster purple bear RSI channel must be breached before before AUD/USD can gain ground to the upside.

AUD-USD monthly chart

Moving to the weekly chart we can see why this pair is such a profitiable one to trade as it tends to move in well-defined narrow channels. Price needs to break above the 38.2% Fibonacci at 0.9510 or break below the desceding purple support line at roughly 0.94 before it can be determined if the trend will continue to the upside or reverse.
Weekly RSI is retesting bear support (red) from within a fractal bull channel (blue), a break of either should indicate which direction AUD/USD will go.

AUD-USD weekly chart

Daily AUD/USD shows a more clearly how price action is responding to the purple bear channel shown in the weekly chart. As with the weekly chart, daily RSI needs to break either bear resistance or bull support to indicate direction.

AUD-USD daily chart

The 8-hour chart shows price sitting right at the 50% Fibonacci of the move up from September to October and the purple bear median line. Though RSI has broken bear resistance (red), having been rejected from bull channel (blue) resistance, a retest of bull channel support is likely which should cause price to move to the downside.
The interesection of the bull price channel (blue) and the 61.8% retracement at 0.9425 would be a likely target and a good place for a long entry position with a stop just below.

AUD-USD 8-hour chart

The near-term shows price action finding support at the 23.6% Fibonacci of the move down last week and the green bull channel at approximately 0.9465. 2-hour RSI bounced from the green bull channel support but the former red bear channel may offer resistance.

AUD-USD 2-hour chart

by Kevin Carter

USD Index

A look at the monthly chart for the US Dollar Index shows that it has found support at bull median support (blue) after forming a double top at bull channel resistance.
With RSI support dating back to 2008 being broken (blue), a break of the median price trendline in the coming weeks could see a retest of channel support by the end of 2014.

Monthly chart:

USD index monthly chart

Last week ended with a very bullish candle right at 80.80 resistance, just breaking through the descending resistance line (red), but so far this week has failed to show continuation to the upside.

Weekly RSI broke back above prior bull support (blue) but is still below technical bull/bear pivot 50 and confined to the bear channel (red) indicating further downside should be expected as long the bear channel remains intact.

Weekly chart:

USD index weekly chart

The near-term picture on the 2-hour chart shows the US Dollar Index retesting the descending resistance-turned-support (red). As I write this the 23.6% Fibonacci and rising support (purple) has been reached.

2 hour chart:

USD index 2-hour chart

2-hour RSI broke through the bull channel (blue) and is now below 50 in a bear channel (red). As long as RSI remains within this channel the US dollar should be weak against most USD crosses.

USD index daily chart

by Kevin Carter

GBP/USD

Cable is sitting at the 50% Fibonacci of the consolidation area between 1.625 and 1.590. The 4-hour chart shows RSI at the intersection of support (blue) and resistance (red).

I would prefer to wait until either the 61.8% Fibonacci at 1.60325 or the 38.2% at 1.61180 is breached rather than take a position here, though an arguement could be made that price action is “stepping up” and use 5-minute and 1-hour RSI for confirmation of direction.

Surprise is unlikely in the British Bank rate, but US unemployment claims always cause a reaction. Also, the delayed US advance GDP and the ECB press conference at the same time (8:30 a.m. EST) is certain to cause volatility in the market so more conservative traders will want to close their short-term positions beforehand.

GBP-USD 4-hour chart

EUR/USD

The daily chart for EUR/USD shows bull channel support (blue) continues to hold. Though daily RSI remains below 50 which is technically bearish, expect this pair to continue to make gains as long as channel support holds.

EUR-USD daily chart

On the 2-hour chart, price hit resistance at the parallel (blue dashed) to the channel shown in the daily chart (blue) and fell back below the 23.6% Fibonacci of the move move down to the bottom of the channel.

Descending RSI resistance (red) has been breached and RSI has moved above 50 indicating bullish momentum.

Upside target is the 38.2% Fibonacci at 1.359. An entry could be made at support of the bull fractal channel (dotted purple) with a stop just below using 5-minute RSI for confirmation.

EUR-USD 2-hour chart

by Kevin Carter

AUDJPY 60 mins

Median Line Analysis using pitchforks is a methodology that allows us to predict areas or lines of support and resistance with extreme accuracy.  It sounds simple, but the key to the analysis is correctly finding the path of price. By using the lines of the pitchfork and watching the strengthening and weakening of trend along these lines we are able to gauge the likely supports and resistances along this path of price. With tight stops and proper money management numerous significant trades may be taken as price moves along a path that often seems pre-ordained.

The pitchfork originates from late September and uses three distinct pivots as its ABC. It is a variation known as a “Schiff” or an “unmodified Schiff” where the origin is moved 50% vertically from the A to the B.

AUDJPY 60 minutes chart

You can see that the pitchfork has indeed captured the path of price with support showing on a number of occasions at the Lower Parallel and resistance initially along the dashed Quartile. Resistance has stepped up slightly from the Quartile to the dotted Sliding Parallel and then higher once again. Having determined that we have indeed found the path of price, we are able to follow it looking for supports and resistances that become apparent and being aware of strengthening or weakening of trend, will be able to trade the vehicle appropriately.

Find out more at: https://www.coghlancapital.com/cross-pair-forex-charts-analysis