As I mentioned yesterday history will judge whether this week's action by the FED was prudent or foolish but what cannot be denied is the effect on the US which is free fall and looking to move towards the 96 price point. This makes today's non farm payroll release even more important as a strong number should give the USD some support. The weekly chart for the DXY shows the extent of this week's move as well as the downside levels ahead.
And it's the nzd/usd which has been the strongest of the majors this morning as we can see on the charts below.
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Some classic price action on the CAD/JPY daily chart and in particular several volume price analysis lessons to take away. First, note the volume anomaly on the wide spread up candle. Volume is average and therefore the market makers are not participating as the trap is prepared. Clearly volume and price are not in agreement and a sure signal of weakness ahead.
The price waterfall duly develops and note the rising volume in a falling market confirming the strength of the trend. Finally in the last few days we have had a two bar reversal on good volume with the currency pair looking weak. And remember, the Canadian dollar is closely associated with oil and with the recent fall in oil prices, this has also been reflected in the currency and one of the topics I cover in my free forex webclass.
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The crossover sessions in forex occur when trading in one timezone closes and another opens and can be a very dangerous time for traders. Why? Because this is where insider traps are set. The London open always is a fertile ground and there was a great example on the usd/jpy.
Heavy buying in the pair on the previous day resulted in a nice move higher in Asia with the pair moving into consolidation ahead of the London open.
Prior to the open the pair started to move higher on reasonable volume but reversed lower at the open on high volume until the hammer candle, again on high volume pushed the pair back towards the consolidation (the yellow line on the chart).
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