For those forex traders who look to hold positions for the longer term trends, last week was an interesting one, which saw many of the currencies cluster together in the centre of the fatman indicator, as forex markets reacted to the stream of negative news, not knowing whether to react positively or negatively as each new item hit the news wires. The question now of course, is whether next week will give us any clearer trading opportunities in the longer term time-frames, and as always we start our analysis with the Hawkeyefx fatman indicator, which gives us clues and signals to those currencies which are moving to an over bought position, and those that are moving to an over sold region on the indicator.
The fatman indicator we are looking at here is set to the 720 minute timeframe, so half a day, and as we can see, the major currencies appear to be unwinding from their paralysis of last week, and starting to move towards the two extremes on the indicator, with the Japanese yen, the US dollar and the Euro all moving towards the over bought region, whilst the Canadian dollar, the New Zealand dollar and the Australian dollar are all moving to an over sold position.
These last three currencies are generally classified as ‘com dollars’ or ‘commodity dollars’, since the economies of all three countries, particularly Canada and Australia are heavily dependent on the mining and extraction of base and precious commodities, and as such these currencies will tend to have a relatively close correlation to commodity prices and oil, gold and silver in particular. Last week saw gold and silver fall sharply, with gold moving from a recent high of over $1900 per ounce to close the week at $1620 per ounce, and falling over 8% on the week, while silver tumbled, to close 24% lower. All of this turmoil was reflected in the commodity currencies last week.
So what should we look for this week? Well, in the early part of the week, we should certainly be looking at the commodity currencies to make some sort of modest recovery from the over sold region on our fatman indicator, so we could consider any of these against the over bought currencies of the Yen and the US dollar, with the Euro perhaps reaching an over bought position later in the week. So the pairs to watch for our longer term trend trading next week will certainly be based around the commodity currencies, with the NZD/JPY, the CAD/JPY and the AUD/JPY high on the list, (or alternatively agains the US dollar), whilst later in the week we may see opportunities develop in the Euro.
Finally remember that with the fatman indicator set to a 720 minute time-frame, the charts we need to be analysing for potential set up’s are on the 360 minute time frame, where the longer term ‘big money’ trades can be made, but as always you need to be patient and wait for your trading rules to be met, before you enter any new position.