To trade forex, it’s imperative to know what moves markets. News events, economic releases, and central bank announcements can all see a currency turn around and move in another direction. Technical indicators, too, can signal just when a market has hit a high and is on the way down.
Track the currency and see how it responds to the good news. If it can only manage a small 20 or 30 pip gain, then the chances are the currency has peaked. How a currency reacts to news releases is an important method traders use to gauge the strength of a currency.
market and crossovers usually signify important turning points. If a currency’s fast moving
average crosses under it’s slower moving average, it signals that a new downtrend has started and this gives a strong indication that the market may have peaked.
If the currency pair trades near the top Bollinger Band, it’s likely that the currency will be near a peak. Usually, it will hit the top band then start to move back towards the middle area and sometimes down to the bottom band. This is particularly true for short term durations but always remember, on longer timeframes a breakout may be taking place leading to a new trend.
Has the central bank stopped raising rates?
Usually, a currency will appreciate when it’s central bank is raising interest rates. Higher interest rates translate to higher yields and that attracts more demand for the currency. Likewise, currencies fall in value when the central bank cuts interest rates. Therefore, if you are sure that the central bank has stopped raising rates, the currency will most likely have peaked and will be about to turn down.Did the currency go up less than expected on a news release?
Let’s say that a wildly bullish news release comes out causing the forex pair in question to move higher. Perhaps GDP came in 2% higher than expectations, or maybe unemployment dropped sharply.Track the currency and see how it responds to the good news. If it can only manage a small 20 or 30 pip gain, then the chances are the currency has peaked. How a currency reacts to news releases is an important method traders use to gauge the strength of a currency.
Has the RSI hit 80?
The Relative Strength Index (RSI) is a popular tool among traders, particularly swing traders as it reveals tops and bottoms of a market with great accuracy. Normally, a market that moves past 70 is overbought and one that is below 30 is oversold. So, if a currency moves beyond 80, it is significantly oversold and there’s a high probability that it’s near a peak.Have moving averages crossed over?
Moving averages are a good way of objectively analysing the average price direction of amarket and crossovers usually signify important turning points. If a currency’s fast moving
average crosses under it’s slower moving average, it signals that a new downtrend has started and this gives a strong indication that the market may have peaked.
Are we near the top Bollinger Band?
Bollinger Bands use the standard deviation to show volatility and can indicate when a currency is oversold or overbought, according to it’s recent mean.If the currency pair trades near the top Bollinger Band, it’s likely that the currency will be near a peak. Usually, it will hit the top band then start to move back towards the middle area and sometimes down to the bottom band. This is particularly true for short term durations but always remember, on longer timeframes a breakout may be taking place leading to a new trend.
Editors’ Picks
EUR/USD looks sidelined around 1.1850
EUR/USD remains on the back foot, extending its bearish tone and sliding towards the 1.1850 area to print fresh daily lows on Monday. The move lower comes as the US Dollar gathers modest traction, with thin liquidity and subdued volatility amplifying price swings amid the US market holiday.
GBP/USD flirts with daily lows near 1.3630
GBP/USD has quickly given back Friday’s solid gains, turning lower at the start of the week and drifting back towards the 1.3630 area. The focus now shifts squarely to Tuesday’s UK labour market report, which is likely to keep the quid firmly in the spotlight and could set the tone for Cable’s next move.
USD/JPY advances on weak Japanese GDP, holiday-thinned trading
USD/JPY rises while US and Japanese markets remain closed for holidays. Weak Japanese Gross Domestic Product figures curb tightening expectations. Investors await speeches from Federal Reserve Vice Chair for Supervision.
Editors’ Picks
EUR/USD looks sidelined around 1.1850
EUR/USD remains on the back foot, extending its bearish tone and sliding towards the 1.1850 area to print fresh daily lows on Monday. The move lower comes as the US Dollar gathers modest traction, with thin liquidity and subdued volatility amplifying price swings amid the US market holiday.
GBP/USD flirts with daily lows near 1.3630
GBP/USD has quickly given back Friday’s solid gains, turning lower at the start of the week and drifting back towards the 1.3630 area. The focus now shifts squarely to Tuesday’s UK labour market report, which is likely to keep the quid firmly in the spotlight and could set the tone for Cable’s next move.
Gold loses momentum, eases below $5,000
Gold is giving back part of Friday’s sharp rebound, deflating below the key $5,000 mark per troy ounce as the new week gets underway. Modest gains in the US Dollar are keeping the metal in check, while thin trading conditions, due to the Presidents Day holiday in the US, are adding to the choppy and hesitant tone across markets.
Bitcoin consolidates as on-chain data show mixed signals
Bitcoin price has consolidated between $65,700 and $72,000 over the past nine days, with no clear directional bias. US-listed spot ETFs recorded a $359.91 million weekly outflow, marking the fourth consecutive week of withdrawals.
The week ahead: Key inflation readings and why the AI trade could be overdone
It is likely to be a quiet start to the week, with US markets closed on Monday for Presidents Day. European markets are higher across the board and gold is clinging to the $5,000 level after the tamer than expected CPI report in the US reduced haven flows to precious metals.
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