13 January Probability Studies – Bucky strong, risk aversion returns

by Johan Kriek (Jkriek@fxinstructor.com)

Key notes:

- Risk aversion returns as equities turn lower

- Yen strengthening continues

- Greenback strengthening continues

Probability Studies:

The weakening bias of the EUR is still intact as we can see on the 4 hr chart above how the bearish cycle within our Bullish Major trend shows no signs of ending at this stage especially after the EUR kept on taking out new lows yesterday

On the 1 hour chart we can see the Probability Study. Due to the fact that the 60minute trend is still bearish we will only execute entry systems within this context. The trading condition will remain bearish as long as the 1 hour stochastic is bearish. A bullish cross will present me with a no trade zone and force me to stand aside and wait for new selling opportunities. Keep an eye on the ECB rate announcement tomorrow..

On the Cable we can see how the broadening formation is still intact but it does not keep us from trading the cycles within the price pattern till the break arrives. If you open a 4 hr chart you will clearly see the pattern. Also remember that according to the Probability Study method, a Current trend can take on the form of a price pattern

On this chart we can see the direction of highest probability for today. The 60minute trend has been adjusted to reflect the move active cycle and as long as it remains bearish we will have a bearish probability. It is now up to the 1 hour stochastic to give me a bearish cross to present us with a suitable bearish trading condition. Your patience will be rewarded…

In a nutshell, risk aversion is rife as we can see how equities and commodities are heading lower due to many reasons:

- US earnings are expected to fall immensely

- ECB, BoE rate cuts just adds to the weakness of the latter

- Repatriation of funds from emerging markets to the US just adds strength to the Buck

- Downside on Equities, Strong Dollar will gain momentum as carry trades unwind

To learn more about the Probability Study technique please visit http://www.fxinstructor.com/eng/courses/probability.php and reserve your seat

See you in the Live Trading Room

Johan Kriek