Euro & Aussie Ichimoku

Hello Forex Traders!

Today our focus is on the Ichimoku indicator! As you might know I always use trend lines, tend channels, and moving averages for identifying the trend… But they are also great tools for providing market support and resistance levels. And sometimes entries as well. http://winnersedgetrading.com/forex-entry-methods/

Today I wanted to show you a different world! Today, we will be using the Ichimoku indicator from a practical point of view for today’s chart, specifically on the AUDUSD and EURUSD.

If you are interested in learning a bit more about Ichimoku, take a look at this article.
If you are interested in learning more about trend definition, take a look at this article.

As always, your comments and feedback is more than welcome and always appreciated.

AUDUSD

17- 9- 2013 au d

The Aussie is an example of well established trend and it really does not matter which tool a Forex trader uses, they all will confirm that down trend biased. The Ichimoku cloud (solid blue and red colors) is not different in that regard.

Ever since the collapse of the Aussie, price has been neatly trending to the downside and has remained below the cloud, the Tenkan (purple), and the Kijun (light blue) lines. The bullish day candle on the 4th of September marked the first turn of events when the Tenkan crossed the Kijun to the upside. This crossover happened below the Kumo cloud and so is considered a weak crossover.

Currently price is right at the top of the Kumo cloud and the Chinkou Span (green line) has hit the Kumo cloud the first time since the 25th of March, which indicates another likely resistance level.

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However, if we move over to the 4 hour chart, then a very thick positive (blue) Kumo cloud can be observed indicating that a retracement down would most likely find support.

If I translate that information and connect it to the Fibonacci levels on a blank chart, then basically a move down will encounter support and most likely push price up higher towards the 382 Fib, and later on maybe the 500 Fib, of the entire down move, which would be key resistance levels.

The AUDUSD was an example of a trending currency pair. The next example is of a ranging currency, such as the EURUSD

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EURUSD KUMO

On the EURUSD weekly chart, price is above the Ichimoku cloud (solid blue and red colors) and price has recently used the cloud as a support level to bounce up. In fact, price has been above the cloud for very long and has failed to break through the bottoms and cloud support several times.

17- 9- 2013 eu w

Interestingly enough when looking further into the future, we can see that the cloud has already changed its momentum bias  as at the very end the cloud color changes from blue to red. Could this be the first indication than later this year or beginning this year the EURUSD can push through the cloud and it will become resistance?

In the meantime however, the Chinkou Span (green line) has broken through the cloud, which might indicate that resistance is broken and a break of the triangle to the upside could follow.

In any case, for downside to materialize, it is obvious that a break through the cloud, plus the Tenkan (purple) cross over the Kijun (light blue) would be needed for bearishness sentiments to be confirmed.

The daily chart is showing price above the Kumo, but the Tenkan has crossed below the Kijan. This would be a weak crossover as the crossover is taking place above the Kumo Cloud. The chances of bearish follow through are therefore lower than crossovers which take place in the Kumo cloud (neutral) or with the trend (strong). In this case a re-cross of the Tenkan above the Kijun would be a strong crossover, if it were to happen.

Only time will tell whether the EURUSD will have

1)      a weak cross which will see continuation and a break of the Kumo Cloud later on

2)      a strong cross of the Tenkan above the Kijun for more upside

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What do you think of the Ichimoku? Let us know your opinion down below in the comments section! Please feel free to add your experiences and comments for analyzing the pairs. I am not an Ichimoku expert so would love to see your thoughts.

With that said, make sure to take a look at the other majors in yesterday’s article, and also take a look at Nathan’s article on reward to risk and why he thinks having a fixed risk is simply too risky.

Just in case you are having tough times with take profits, make sure to read this article.

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  • Chris Svorcik

    Thanks for that tip! 🙂 Appreciate the feedback!

  • cheshboy

    Another interesting thing you will notice is that if you see a flat top/bottom to a cloud it will often tie in with Fib numbers. It is a very powerful and easy tool to use once you get use to it.