Yesterday I posted an outlook which was fundamentally bearish whilst price action remains beneath the cloud base. I also posted a perspective on the battle between dollar strength and euro recovery in as much that the clear winner would be the dollar.

Todays candle (most recent in the chart to the left) was indeed very bearish largely due to a rise in US consumer confidence. The Consumer Confidence released by the Conference Board captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. Generally, a high reading is also positive for the USD, while a low reading is negative.

Today's release revised last months figure from 68.1 to 69 and gave a figure of 76.2 against an anticipated 70 and dollar strength increased because of this and moved the EUR/USD to todays low of 1.28517, from a high of 1.29490. At the time of writing the pair has risen slightly to 1.28691. The hourly chart (below right) shows the intraday movements in more detail.

In todays trading I was happily short from 1.29438 and profited from today's release.

Tomorrow sees a burst of high impact data releases from Germany in respect of unemployment and CPI.
See my economic calendar below for more info. Needless to say, worse than expected data will be a further bearish driver which could eliminate any gains the pair makes overnight during the Asian session.

Better than expected data, however, could push price higher to test the daily tankan sen, currently at 1.3000.
Whilst still being bearish on the pair now is not the time to be placing further shorts ahead of this data.

Should I decide to trade tomorrows releases it will be with a lesser risk and I may adopt straddle entries in order to capture an either/or trade in the resulting direction which currently is a little unpredictable and volatile. 

The chart to the left shows daily EUR/USD price action. As you can see, the theme has been somewhat bearish, and continues to be so as price remains beneath the cloud.

In recent weeks there have been recoveries back to the 1.30 zone but overall price has failed to breach the cloud to the other side.

Until price attacks the cloud base again, I'm going to remain bearish on this pair.

The hourly chart to the right shows the battles that have been fought as the pair has attempted recovery.

Again I reiterate that the bulls are only here for the short term and I anticipate shorting once price breaches the cloud base (1.29067) again.

My trading style and strategy is very short term and essentially relies on a 5 five minute kijun sen crossing an hourly kijun sen in the direction of the bias set by the daily and hourly charts.


Its a moving average crossover - with ichimoku flavouring, one that I believe presents high probability set ups in trending markets.

I also trade the news, but generally in bias with the rest of my strategy and this week has plenty of high impact releases, as the table below indicates. I look forward to review this pair again next week to see if I was anywhere near right! In the meantime some further reading in support of my view that the only winner of this battle will be the USD.

http://www.fxstreet.com/news/forex-news/article.aspx?storyid=86d3ae47-ce68-4c5f-883b-4653c08112bd
http://www.forexstreet.net/profiles/blogs/td-securities-eur-usd-short-term-trend-remains-lower-key-weekly-s
http://www.efxnews.com/story/18954/ecb-wont-be-pacifist-currency-war-so-where-does-leave-eurusd-hsbc

For today, a bearish candle, a lesson on the Tenkan Sen and a thank you....

Today my gains took a bit of a battering as bears pushed price action further down. Remember yesterday I set my stop to the closing tenkan sen of 139.444? Well todays low got pretty close to it at 139.475. This shows just how important the Tenkan Sen is as a short term support and resistance value. My trade is still alive, but only just.

As Ichimoku traders will know, when price crosses the Tenkan Sen it is a major accomplishment because it has broken a major short term support/resistance value. During a trend, if price action crosses the Tenkan Sen it can indicate one of three different scenarios:

1. Minor Short-Term Pull Back:     A minor short term pull back is where price crosses over the Tenkan Sen but never crosses over the Kijun Sen and later resumes on the path of the original trend and this usually happens when short term traders take profit. The long term traders continue to hold their current position.

2. Major Short-Term Pull Back:     A major pull back will have price crossing both the Tenkan Sen and Kijun Sen in the opposite direction of the trend. Once it has done that, price eventually continues on the original path crossing them both again. In this scenario, long term position traders are taking some profits, They are not closing out their position at all because they believe the instrument will continue the trend after the major pull back has finished.

3. Countertrend:     The third scenario is similar to the second scenario where price crosses over both the Tenkan Sen and the Kijun Sen. The crossover takes place in the opposite direction of the trend. However, the majoy trend never resumes. Either the instrument (currency pair in this case) enters a consolidation pattern (sideways) or a new trend forms. In this scenario, the long term traders are exiting their positions completely. They can do so over a certain time period or all at once in some cases.

Price currently has not fully crossed at a close but it may well happen. I would hope that price is just returning to equilibrium with the Tenkan Sen and at worst we are experiencing a minor short term pull back. I did predict a bounce from the 139.000 area so at this stage I am prepared for my stop to be hit soon as per my prediction and as well that it may be the Tenkan Sen value I used as my stop is not strong enough to support price action any further. Nonetheless I am still enjoying a highly profitable run from my 135.615 buy order. Price at the time of writing is 140.033 and I am looking forward to seeing what tomorrows candle brings.

Happy trading and as a foot note I would like to thank all visitors for thier support and interest, I have noted that views are increasing daily and a further thank you for the 400+ who have taken it once stage further and are now following me on twitter.