Last week I mentioned that most of the time the state of the market remains neutral. In fact this is the case more than 60% of the time. Here’s another phenomenon that keeps repeating itself: every time there is a neutral trend with expanding or shrinking boundaries, the market reacts – sharply and volatility – with a breakout in one direction or the other.
Looking at the overall market picture, more and more assets, currencies, and commodities are experiencing this neutral trend. This could be an indication that the market is preparing for a huge move.
From the perspective of fundamental analysis, there were more analysts publishing pessimistic market interpretations around the 2008 crisis. Lately the attitude has been much more positive. There are much less articles warning traders about what fall is coming and more articles about the heights the market should reach. However, when the market moves there is no sign or warning. There will always be a reason but I feel the market is preparing us for a surprise.
There is not much to say about the major currencies. They acted as anticipated within the boundaries of their neutral trend except for JPYUSD. For those who follow my analysis each and every week, I mentioned you should pay attention to a breakout. This week it finally happened. Congrats to all those traders who took advantage and made some good money!
Here’ s what it looks like – JPYUSD on a weekly chart:
All you have to do is use one of your strategies. I personally like to use ladder option or one touch option, which both provide great profit rates. As for the rest of the majors, as I mentioned, there is nothing new with their neutral trend. The volatility has also reduced. If you do want to take action, the EURUSD has reached the upper boundary resistance line. There is a good chance for a retrieve from this point towards the support line.
One of the assets I feel most comfortable with is Gold. The commodity is currently on an upward trend, it seems that it’s just the beginning of the journey. Until a breakout from the upward trend line there is nothing much to say. The direction will remain up.
Another interesting currency for this week will be USDCHF, which experienced a breakout from the uptrend support line. Prepare your put options, it is expected to be a great move down hill.
I learned the best way to trade this pair is not use any indicators, only a naked chart. USDCHF holds a lot of surprises, so trade the currency carefully and follow the rules for your strategy and money management.
When the market is following a neutral trend, you can also take advantage of the situation to trade the boundaries. One of the greatest opportunities can be found with GBPUSD. The volatility is so low and the boundaries are in a shrink rectangle; it’s the perfect condition for boundary trading.
That’s it for this week. Good luck with your trades! If you like the analysis please share it.