News Trading & Aussie

Hello Forex Traders!

I will not beat around the bush traders…. The rest of the week will be a very rough patch for us technical traders…

Due to an avalanche of news events heading our way, Forex trading as we know it will not be the same until next week.

Are days with interest rate decisions and NFP tradeable, or is it better not to trade? What is your opinion? We are going to discuss this question, but we are curios what your answer is. Let us know in the comment section down below!

Before we start, don’t forget to take a look Nathan’s daily analysis video.

NFP & INTEREST RATES

On these days a fire work show could surely happen. Especially if you consider that there is an interest rate decision on EUR and GBP on Thursday, later on the same day ADP figures for the US and on Friday the NFP and unemployment rates for the US. In fact we spoke about the slow movement on the EURUSD in yesterday’s article, check it out here. It’s important to be able to distinguish trend from chop.

In this environment we need to be very cautious: these days have little to do with technical trading and more to do with waiting for the news release, statements, press conferences, and economic data. Every single written and spoken word of each statement and spokesman will be weighed and analyzed to interpret the meaning and its impact on the likely direction of price.

In this type of an environment you have a high chance of encountering the following reactions:

1)      Heavy price movement up and down à lots of spikes

2)      Fast reaction to data and statements

3)      Key technical levels will not be defended on this day, or at minimum I wouldn’t count on it

At the end of the day though, a daily candle will close just like any other day. And in fact, these days can still be traded but it depends what type of trader you are:

1)      Fundamental news traders – this is their best days with their prime opportunity

2)      Scalpers – might try to trade the aftershock of the news release

3)      Long-term position traders- could use the news releases to establish a long term position in their direction but use a very wide stop loss to avoid intra-day noise

4)      Intra-day traders – very hard trading environment for them as the news release will quiet down trading prior to news and quickly speed up after it

5)      Swing traders – not as hard as intra-day traders but still very tough trading environment as the stop losses can be in danger with such volatility

As always, if you do decide to trade, make sure that you don’t risk too much especially on volatile days like these.

Here is an article on NFP trading, just in case you are interested in that. 

AUDUSD

The Aussie has been moving up quite aggressively this week. Have you been trading it this week or are you waiting on the sidelines? Let us know down below! Here are my observations…

5- 9- 2013 au d

The currency was not able to break the bottom and in fact bounced off of the 886 Fibonacci retracement. With that lower high in place, the currency is now building a wedge or triangle (indicated by the green lines) and in fact price has now reached the top of that chart pattern formation. In any case, it is obvious that the AUDUSD has now reached a major trend line and top, which has the potential to halt and stop the momentum pushing the AUDUSD to the upside.

It will be extremely interesting to see whether the currency can punch through resistance, or whether it will show respect and bounce off of the trend line for more downside. Of course, the daily chart does have divergence at the moment. That is one of the reasons why Elliott Wavers among you might ponder whether a 3 wave correction to the upside could occur at this point.

Personally I will be not necessarily assuming such a break before it actually breaks. Only then would we enter into bullish territory. Anything in this wedge or below and I remain a bear, just like I have been ever since April this year before the downtrend started.

5- 9- 2013 au d2

Don’t forget these articles:

Tim’s programming article 

Japanese economic policy decisions

Thanks for reading and sharing!

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  • Chris Svorcik

    Yep agree with you on that one Bobmaninc! There could be more downside potential but price will have to confirm that. Lets see what the Aussie brings us!
    If you have a big swing trade in mind and are eyeing a key level, then that makes sense to trade it during these news time. Trading break outs though on a 15 min chart could see a lot of whipsways for example, so that wouldnt be good.
    Thanks for the comments! Appreciated! 🙂 Good Trading

  • Bobmaninc

    Well since this is my favorite pair to trade I will say right now I have a wait and see attitude. Even though the reward would be great if you are on the right side of the trade risk is just to high. I did catch a nice long on Aussie Yen earlier this week. As far as the noise coming in the form of fundis. If you have a trade you have been eyeing then stick to your plan. If the news follows suit then enjoy the ride if not well it was just another losing trade. Dont bet the farm and plan your trade and trade your plan. I am currently staying away got a little short on Dollar Yen and we will see how that goes