Tentative Analysis of FX Majors

[Purple Brain]

I wonder if the more experienced traders can comment on the following observations and analysis of the forex majors. It is a fledgling foray into an attempt to understand what is really going on in the currency markets with regard to what the big money players are doing. Inspired by some quite exceptional advice and support received. Even if horribly in error (quite likely), it is in no way a reflection on the individuals outstanding efforts in trying to inform and educate me and most definitely due to a lack of ability on my part.

The euro has potentially changed from an overall position of strength to one of weakness and rather too obvious for it to be true, probably occurred around April 17th. (Did anything occur on or around April 17th to change the mood?) While there will be sporadic up moves, the ‘money’ is selling.

Japanese Yen deliberately weakened by BoJ through effective and fairly massive QE will be the sale of choice albeit with sporadic buying to more optimum levels from which to sell.

Swiss Franc weak but subject to SCB intervention of both soft and hard flavours which makes it a volatile partner and therefore risky for directional plays.

British Sterling is in a position of some strength and possibly the buy of choice at the moment.

US dollar is strong except against sterling and the commodity dollars (Canadian, Australian and New Zealand).

A tentative and probably laughable attempt at a longer term view of the relative strengths of the majors as perhaps perceived by the strong hands and a perspective even us weak hands could perhaps consider (if correct) in the context of our much shorter term trades, not necessarily just to go with these relative strengths, but also to construct counter-strength moves to take advantage as the levels are manipulated to obtain better entry/re-entry levels for the professional money. While a 500 pip move for me would be several weeks’ worth of trades, I get the impression that’s an amount the big money would be willing to spend to move the level to get a better entry the other side of it.

GBP
CAD NZD
AUD
USD
EUR
CHF JPY

 

[Purple Brain]

I am being presumptuous in assuming anyone would have the time to wade into that amount of analysis. Taking as a working hypothesis my analysis of relative strengths was correct (far from likely and yet to be proven) and if I just pick up on one of those pairs that didn’t perform directly in accordance with those strength assessments and therefore (hypothesis #2) are being artificially bought/sold to bring the price to a better level at which to re-enter in-line with the underlying strengths, and give my rationale for what levels they may start to reverse perhaps someone could jump in and start to list the errors of judgement I’m making.

If you look at gbp/chf , that should have been a really strong buy as per my analysis at 07:28 this morning. It’s dropped over 100 pips since then. So, if (big ‘if’) it is being artificially sold down, to what level is it likely to be sold down to before showing signs that significant money is again being applied on the buy side? I’m going to take a stab at 1.4300 which is about 200 pips below the current (as at 19:50) level.

This appears to the level at which any gains made over the last trading week by the shorter timeframe traders will have been factored out. Traders having taken profits on their shorts or been stopped out of their longs, providing sufficient liquidity for the strong hands to commence re-establishing or adding to their long positions after pumping a bit of money into the sell side to start the price downward last Thursday.

Does this seem likely?

 

[Purple Brain]

Of course, there is a distinct possibility the gbp/chf pair is still bearish on the longer serious money side of things, in which case its current action is perfectly in line with the underlying bias and the upward pressure discernible since early March was the manipulation to bring it up to a level for a better price from which to short.

This raw novice’s view is that the price is above the value area set over the last couple of months in the 1.4000 – 1.4400 range and is therefore a genuine longer term reversal into an up trend. I suggested a level of 4300 in my above post as being a level at which any sign of strength might be interpreted and a new major up move, but of course, I am quite clueless and even if I am correct in every other detail, the reversal could commence at any level between current (4500) and 4300. But when and if that does occur, it will give me additional data upon which to refine my embryonic assessments and analyses of the interplay of trading forces.

I strongly suspect my normal trading chart of 15 minutes has conditioned me to think in an extremely short term way. I am imagining the institutional traders to be looking at the changes on a day by day basis, but even that might be laughably short for them. A 2-month exercise to artificially manipulate a price seems like a lifetime, but perhaps from their perspective it's par for the course.