Hello Everyone,

I hope the forex markets have been treating you as well as they have been treating me and I hope you all have been using that technique I showed you to make lots of pips.

Today we are going to take a look at what happened with the eur/usd breakout I told you to watch out for in my previous post

In case you missed it here is the chart I showed you guys last time:

I told you to watch for a candle to close outside the yellow lines and then open up a trade in the direction of the break.

Now let’s see what happened:

This was a huge breakout that hopefully you guys traded and made some money on this breakout. This pair moved down hard as the price fell for about 500 pips before it pulled back. I chickened out and only grabbed about 300 off of this trade. Did any of you guys do better? Let me know how much you made in a comment below.

This trade is an excellent example of the power of this technique and I really hope you guys try this out and use it to make some pips. I have already gotten feedback from some of you telling me how this technique has made your trading simpler and way more profitable, but I’m not going to stop until I hear from all of you.

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Hello Everyone,

By now you all should be familiar with the inside candle breakout technique I showed you in my previous posts, and hopefully you have been making some pips with it.

Today I am going to alert you to breakout that is going to happen in the Eur/Usd before it does so that you can be in position to profit from this move.

Look at this daily chart of the Eur/Usd:

(Click to enlarge)

The price action of the Eur/Usd has been contained completely within in the daily candle from 4/27/2010 for the last 4 days.

This is a classic inside candle pattern and when a candle is able to close outside of this zone then price should continue to move in that direction. Just look at the two previous inside candle breakouts I have marked on this chart and how price moved down hard after the breakout.

In terms of the direction of the break and when its going to happen only time will tell, but given the size and direction of the last candle I going to say it will be to the downside. However, do not make a trade until a candle is able to close below the low or above the high of the containing candle, because until that happens there is no trade.

If you have never traded with this technique before then I suggest that you take this trade in a demo account because you should never try a new technique without demo trading with it first. Until next time.

Happy Trading,

Jason Madison

If you would like to learn about more patterns like these and how you can discover how you can learn the secrets to trading for a living then visit BeatWallStreetNow.com

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The European finance ministers made an unusually timed teleconference on Sunday, and came out with a dramatic announcement – an approval of a mechanism that will supply Greece a huge safety net for borrowing below market rates – 30 billion euros. Adding 10 billion euros of IMF money, Greece gets a big breather. Coordinations between the EU and the IMF will begin on Monday.

This news of a rescue plan are good news for the Euro, and for global recovery. The announcement came at a perfect timing for forex trading.

Just as the markets opened, traders in the Sydney session sent the dollar to the ground on risk appetite trading.

EUR/USD leaped above 1.36, a high it reached two weeks ago and reached 1.3672, the highest level since March 18th. It now trades lower, but still more than100 pips above the close on Friday. A huge weekend gap.  The Euro is not alone.

GBP/USD confirmed the break of the stubborn hurdle of 1.5350 and peaked at 1.5467 before calming down. This is the highest level since February 24th.

Another big winner is the Aussie, which jumped above the extremely strong resistance of 0.9327 and reached 0.9388, the highest since November and very close to the 2009 high of 0.9405.

The Canadian dollar isn’t enjoying this dollar weakness, as it struggles with parity, and also begins getting a status of a “safe haven” currency – sought in times of trouble and unwanted on optimism. USD/CAD didn’t make strong moves.

Is this just jumpy,thin volume trading?

This is the big question. Volume is low at the very start of the week, as it’s only Sunday evening in the US and night time in Europe. The Tokyo session didn’t begin yet, so we’re only with the Sydney session. Things could change when the Tokyo session begins at midnight GMT. These gaps could be filled.

Learning from the past, if the gaps aren’t closed within an hour of the opening of Tokyo session – it means that the market is really moving, and that the trend, dollar weakness here, will continue through the London and New York sessions.

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Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

EUR/USD, the world’s most popular pair, now trades at 1.4530, falling from the area of 1.4650 in which it traded earlier in the day. The 1.4625 support line supported the pair up to now. The free fall doesn’t seem over yet.

The breakout began a little before the news: the all-European ZEW economic sentiment fell from 51.8 to 48 points. This isn’t only lower than than last month. It’s also lower than the early expectations of a fall to 50.9. This continues the trouble for the Euro from last week.

Also the German ZEW economic sentiment fell, but it was a smaller fall. It fell from 51.1 to 50.4. This was within the early expectations.

EUR/USD already began the fall before the release. There is a chance that the outcome was already leaked to some significant players in the market.

Another explanation is that the there are new concerns about the credit crisis in Dubai. While the immediate bonds were paid by neighboring Abu Dhabi, there is a dark cloud above further bond payments. The outbreak of the Dubai crisis already hurt EUR/USD during Thanksgiving.

The next big target for EUR/USD is the range of 1.4444 – 1.4480. The resistance line during the summer was 1.4444, and after the pair broke it, the support line was 1.4480 – EUR/USD didn’t go below this point.

For more on the events for the Euro this week, read the EUR/USD forecast.

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Also the rising Pending Home Sales in the US help the Euro, as the feeling of world recovery makes the “safe haven” dollar unnecessary. American Pending Home Sales rose by 3.7%, much better the 0.4% fall that was predicted.

Inflation, or the lack of it, is one of the big weaknesses of the Euro. Falling prices in Europe help keep the interest rates low, at 1% for a very long time. Deflation is a sickness that the Euro-zone has. Well, the month of November might be the beginning of a change:

CPI rose by 0.6% in November according to the initial release. This is the first rise since April, and this figure also exceeded early expectations for a 0.5% rise. The cure for deflation might have arrived.

The unemployment rate that was published in Europe has ticked up to 9.8% exactly as expected. But, the more fresh data from Germany was good again. The Unemployment Change number fell again, this time by 7K. Early expectations saw a rise in unemployment.

This is the 5th month in a row that German unemployment squeezes. This is a good sign for the whole continent – the demand for jobs continues to grow.

EUR/USD rises

The reaction to these figures has been positive: EUR/USD has escaped the frustrating range once again, and is now trading at 1.5090, above the 1.5060. Last week, good figures didn’t help the Euro.

The break out of the range came only after the dollar collapsed across the board. The Dubai crisis sent the pair back to the range, and this week’s good figures have their impact.

The close technical barrier is 15144 which was last week’s short lived peak, and also a place where EUR/USD stopped to rest on its way up last year.

The next level is 1.5283. This was the bottom line of the high range that the Euro was trading in throughout last summer, before Lehman Brothers collapsed. The 1.5283 line is a strong resistance line.

Will EUR/USD go there?

This depends a lot on the rate decision by Jean-Claude Trichet on Thursday. For more on the events awaiting the Euro, read the EUR/USD forecast.

EUR/USD forex graph.

Last week, the Euro moved mostly on the dollar’s weakness, in two waves, rather than on good data, such as the German Factory Orders. Let’s see what’s up this week:

1. Industrial Production:  The industrial production for the whole continent is published after France and Germany, but can still bring serious surprises. Last month’s figure disappointed by falling 0.6%, when a rise of 0.3% was expected. This month pessimism is back, and the number is expected to fall again, by 0.3%. Published on Monday at 9:00 GMT.
2. French CPI: France releases the CPI after Germany, so only a big surprise can have an impact. After Germany posted a surprising rise in prices, France is also expected to do so, and show a rise of 0.4% in prices. Published on Tuesday at 6:45 GMT.
3. German ZEW Economic Sentiment: 500 German industrial investors are surveyed in this very important survey. This survey showed great optimism last month and rose to 56.1 points, much higher than expected. It’s now expected to continue up to 59.8 points, and push EUR/USD higher. Published on Tuesday at 9:00 GMT. At the same time, the all-European ZEW Economic Sentiment is also released. It’s expected to rise from 54.9 to 57.8 points. Since the ZEW is a German institute and Germany leads Europe in the recovery, the German number is more important.
4. CPI: Consumer Price Index for the all of Europe is still expected to show deflation. Prices are expected to fall by 0.2% (annually adjusted). Also the Core CPI figure is predicted to be low, declining from 1.3% to 1.2%. Prices weigh on the Euro, since the interest rate isn’t expected to rise in the near future. Published on Wednesday at 9:00 GMT.
5. Trade Balance: European Trade Balance is published after the main economies do that, but still has an impact. The surplus is expected to grow from 1 billion to 1.2 billion. France and Germany lean on exports. Published on Thursday at 9:00 GMT.
6. German PPI: Inflation figures continue to draw attention. German Producer Price Index fell badly last time – by 1.5% last month. This time it’s expected to get back to normal levels of change, and rise by 0.1%, similar to the changes in previous months.
7. Current Account: This figure is important mostly for seeing the cash flow into the continent. The deficit in the current account was triple the expectations last month, standing on 5.3 billion. This time it’s expected to squeeze back to 4.3 billion. Published on Friday at 8:00 GMT.

EUR/USD will naturally move by American figures as well with CPI and Retail Sales being the most important ones.

EUR/USD Technical Analysis

After I’ve complained again about the range trading in last week’s EUR/USD Outlook, the big breakout on Tuesday sent the EUR/USD to new highs. Although the break was small at the beginning, a second wave sent the EUR/USD to a peak of 1.4634, almost 200 pips above the resistance line. It finally closed at 1.4569, still convincing.

I’ve left the uptrend channels in the chart, although they’ve also been broken. Looking at horizontal lines, 1.4444 now serves as support. After EUR/USD closed above this line, it shouldn’t test it soon.

Looking up, 1.4720 is the next resistance line. It was the swing peak in mid-December. The next major resistance line is 1.4908. It served as a peak in August 2008, as well as several times at the beginning of 2008.

Will the EUR/USD adopt a trading range of 1.4444-1.4720? Or will it continue to move?

Check out Casey Stubbs’s insightful technical analysis for EUR/USD.

Further reading:

• For a broad overview of this week’s events, read the Forex Weekly Outlook.
• For the British Pound, read the GBP/USD Outlook.
• For the Canadian dollar, check out the USD/CAD Outlook.
• Trading the Swissy? Here’s the USD/CHF Outlook.

• Adam Kritzer’s post on Monday about the dollar being under pressure on all fronts foresaw its collapse later on in the week. The reasons are there.
• James Chen talks about the breakout of a somewhat overshadowed pair – USD/CHF.
• Mohammed Isah details on the USD/JPY breakout.
• Kathy Lien writes about how September’s trading could set the tone to the end of the year.
• Casey Stubbs explains how to spot a forex scam. This is important for every trader seeking a broker.
• James W dives into technicals and talks about why he doesn’t use the ADX indicator in his strategy.
• Michael Greenberg reports about a new forex portal by eToro and elaborates on the trend of brokers having portals.
• TheLFB look back at the wild days of October 2008, and show how the EUR/USD volatility is back to normal.

That’s it for this time. I’m waiting for Tim Barnby to return and post new stuff.

GBP/USD now trades at 1.6598 after making a trip to 1.6659 and back. Also NZD/USD made a similar round trip. The resistance line is amazing in its strength. While the EUR/USD, USD/CHF, AUD/USD and NZD/USD are in new ground, enjoying the dollar’s weakness, the Pound reached the resistance line just today. And it bounced.

1.6660 served as a resistance line many times in the past. It was created on October 30th 2008 when is was a swing peak. It was tested over and over in recent months. For one week in August, GBP/USD traded above this line. But after it fell back down, 1.6660 preserved its status.

Mervyn King and the other BoE members released a rather calm rate statement. Apart from leaving the interest rate unchanged at 0.5%, the historic low, also the Quantitative Easing program remain unchanged at 175 billion.

After they surprised last time with an expansion of the QE program, this statement had no surprises. The Pound initially enjoyed a rally that took it over 100 pips higher, until it reached the resistance line. There, no energy was left for it.

The US dollar has a really bad weak. The first wave of dollar weakness was followed by a second wave. EUR/USD finally broke out of range. In those posts I wrote that the Pound was left behind. Also today, when GBP/USD already got close, it didn’t break the super strong resistance.

Here’s Mohammed Isah’s GBP/USD updated analysis.

Will the Pound make a breakout later?

Alan Bollard didn’t surprise with the decision to leave the rates unchanged. Here’s the negative sentence from the statement:

As a result, we continue to expect to keep the OCR at or below the current level through until the latter part of 2010.

But the beginning is much better:

Reserve Bank Governor Alan Bollard said: “There is more evidence that the decline in economic activity is coming to an end, and that a patchy recovery is underway.

Read the full statement here.

Confused? So is the kiwi.

NZD/USD fell from 0.6963 to 0.6930 in the minutes before the announcement. After the announcement it shot back up. To exactly the same place.

This knee-jerk behavior, or V-shaped graph occurred in the recent Non-Farm Payrolls release in the US. Kathy Lien elaborates about it here.

Earlier today, the kiwi flirted with the magical and round number of 0.70. During the second wave of dollar weakness, NZD/USD managed to reach 0.7007 before returning to around 0.6960 towards the rate decision – levels in which it traded yesterday, after the first wave of dollar breakouts.

NZD/USD was the second currency pair to make a breakout, right after AUD/USD was the pioneer on Friday.

NZD/USD is a relatively easy pair to trade. Though it isn’t my favorite, it still ranks high on my list of most predictable currencies. New Zealand is at the end of the world, and also the kiwi doesn’t usually enjoy the limelight.