Technical Report : 04-MAY-2012  


The price action over the past three weeks has not been good for trading. The H4 chart below shows the 6 months price action in which we can clearly see the EURUSD's trading range narrow down and shows lack for any direction.

H4 chart

PhiBase has handled the ranged-side ways price action seen since February very well gaining over 1000 pips during this period.

Since PhiBase trades based on patterns, trading the EURUSD pair was not very suitable during the past 3 weeks producing very few trade triggers.

D1 Chart

The last major trade a Short entry @ 1.31500 was based on possible double top formation in D1 time frame. The trade was taken since the EURUSD was in long term downtrend and a very strong resistance at 1.3280 provided the EA with suitable risk reward ratio. The price reversed, but the EA held on to the trade as the pair tested the resistance at 1.3280 and reversed back to the short's entry level. The EA closed this trade at break even since the pair found soft support at H1 time frame.

EURUSD has very strong resistance at 1.3280 (Top side of wedge on D1 time frame) and strong support at 1.2980 (Bottom side of wedge on D1 time frame). The price is exactly in the middle of this range and lacks direction as we enter the NFP data release.

H1 Chart 

A LONG EURUSD trade was taken on 2nd May based on a new downward sloping wedge on the H1 time frame. But the trade was closed out soon as the indicators were not supportive.

The Short which was entered on a fresh trigger, again based on H1 time frame - But since the range of top-bottom of the wedge was very narrow (30 pips), the EA closed out the trade in order to maintain the risk reward ratio at the specified minimum of 1:1.

The price moved out of the Wedge pattern but indicators were not supportive so the EA did not take any further trades. The break out from the wedge reversed and the price is completely flat again.

At the time of writing this report, there are no EURUSD trades. A Long USDCHF trade is in place (can be considered to be short EURUSD). We can consider the EA's bias as being bearish on EURUSD based on the D1 time frame. There are no valid patterns/triggers in H1 and H4 due to the sideways drifting price action.

New trades may be entered only on further action or improvement in trading range of the pair. The NFP data release could bring to better tradable levels. Normally, the EA will not enter trades immediately on break out/Fall out - it may do so only if the array of indicators show good support. When the price is near the long term trend lines (orange lines) the EA is expected to find good trade entries with more supportive risk:reward ratios.

NFP 4th May 2012 - Event Risk

The market is expecting to see a faster rate of job growth. If the data is in line or beats expectations, U.S. dollar would gain since it will dampen speculation for more easing.

On the other hand, the ongoing weakness in the real economy may continue to drag on hiring, and a dismal job print could spark a sharp selloff in the exchange rate as it raises the scope for additional monetary support. As a result, if the release falls short of market expectations, euro may gain against the dollar.

The price action may be very choppy during the release.

PhiBase can handle most news based action reasonably well. It would be recommended to leave the EA operate uninterrupted through this news event.

Conservative/low risk traders can choose to set Friday_Trade=false - this will prevent the EA from entering new trades that may be triggered by sudden increase in volatility. In this case the setting can be changed back to Friday_Trade=true after market closes for the weekend and the EA will trade again as usual from when the markets reopen next week.

Please refer to our March 2012 Technical report to know more about Friday/News Trading and how PhiBase Pro works during such times. This report can be accessed using the following link:

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