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 treads water above 1.1850 amid thin trading
EUR/USD stays defensive but holds 1.1850 amid quiet markets in the European hours on Monday. The US Dollar is struggling for direction due to thin liquidity conditions as US markets are closed in observance of Presidents' Day.
GBP/USD flat lines as traders await key UK and US macro data
GBP/USD kicks off a new week on a subdued note and oscillates in a narrow range near 1.365 in Monday's European trading. The mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.
Gold sticks to intraday losses; lacks follow-through
Gold remains depressed through the early European session on Monday, though it has managed to rebound from the daily trough and currently trades around the $5,000 psychological mark. Moreover, a combination of supporting factors warrants some caution for aggressive bearish traders, and before positioning for deeper losses.
Bitcoin, Ethereum and Ripple consolidate within key ranges as selling pressure eases
Bitcoin and Ethereum prices have been trading sideways within key ranges following the massive correction. Meanwhile, XRP recovers slightly, breaking above the key resistance zone. The top three cryptocurrencies hint at a potential short-term recovery, with momentum indicators showing fading bearish signs.
Global inflation watch: Signs of cooling services inflation
Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.
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