It seems that I’m not the only one who is wondering which market is the prior one.The currency rates differ from supplier to supplier but have several points of difference and have no great importance. As far as I understand, the CME is not the only place where futures have traded, which means that the futures quotes will differ in different markets. Market participants just decided to stick to the quotes given at the CME as it is the most liquid exchange.
If we take the CME as a basis, I wonder how the futures liquidity, which is a derivative instrument, can influence the main asset. If I’m not mistaken, futures follow the pair’s trajectory but not the other way round. At least, this is the logic of how I see it since a futures contract is a derivative instrument.
Also, the question is whether the liquidity volume of currency pairs on different exchanges has compared to the futures contracts volume on the CME. I haven’t checked it yet, but I think that the trading volume on Forex is much higher than that on the futures exchange. If this is so, I don't understand how the futures market liquidity can influence currency pairs. It would be great to figure out how it all works.
1 - In the morning, the euro surprised us with a rapid surge to the upside. So the daily bar chart is now under bullish control. On the daily chart, the price has crossed the middle Bollinger band after fluctuation and has moved towards the upper band. The Bollinger bands have shown no reaction to this so far as the distance is still quite long. So if we take into account this indicator, we should wait until the price touches the upper band and the two bands move outwards. If the bands open wide, this will serve as a signal for further uptrend.
On the other hand, if the price turns down from the middle line, we should wait for similar steps towards the lower band. Judging by fractals, the price broke through the fractal that formed on October 14. After that, it quickly reached the first target located at the fractal of October 4. If the price consolidates below it, then it may well move lower to the fractal of August 20.
2 - The AO indicator was exhausted in the negative zone and moved towards the zero level. The price reacted to this signal with a good rise. Later we will see whether the indicator will approach the zero level and cross it. If this is true and the indicator moves into the positive zone, this will be another signal for quotes to rise.
3 - On the 4-hour time frame, the price moved from the middle line towards the upper Bollinger band. It touched the band, and both of them turned outwards. Then the price was moving along the upper band. The bands are open, and the price is still moving along the upper band, a sign of a possible continuation of the uptrend. If we take fractals, the price broke through the two nearest fractals of October 15 and 14. Then it reached the target of October 4. The next target is at the fractal of September 29.
4 - Meanwhile, the AO indicator began to accumulate strength in the positive zone. It is what we were waiting for as before that the downward movement was losing momentum. So, at present, the AO indicator continues to rise, but it is not clear yet when the first peak will form. We can assume, though, that the price will continue to move higher.
So far, the situation looks dubious, and we shall wait and see whether the AO indicator will change direction and form a new high, which will point at the continuation of the uptrend.
30M time frame
5 -The assumed entry point for the long position was confirmed by the market yesterday, and the price broke through the level of 1.16102. I didn’t reach the first target at 1.16274 right away and retested it later. But then, it quickly reached the first target and broke through it. At the moment, it is approaching the second target at 1.16440.
6 - When the price retested the 1.16102 level, the Bollinger bands went horizontal and narrowed. Then, the price again moved closer to the upper band and touched it.
At this point, both bands opened wide, and the price moved along the upper band. So, the scenario is common. Both bands are going outwards on the 30-minute time frame while the price is moving along the upper band. It generates a signal for further growth.
On the 1-hour time frame, both bands are also pointing outwards, and the price is similarly moving along the upper band. It is another signal confirming the uptrend.
7 - The AO indicator is actively gaining ground in the positive zone, which also signals the continuation of growth. Besides, the indicator has formed a new high, which means the price is likely to start a new upside cycle. We can also expect the AO to form a divergence which will be another confirmation of an uptrend.
On the H1 chart, the AO indicator is also actively rising, but it is still unclear when the first peak will form.
8 - We can consider entering the market to open buy positions when the price breaks through and settles beyond the 1.16440 level. The first target is at 1.16554. Upon reaching it, the price may then move towards the level of 1.16714.
9 - We can consider entering the market to open sell positions if the price breaks through and settles beyond the level of 1.16102. The first target is at 1.15987, and the second one is found lower at 1.15887.
5M time frame
10 - On the 5-minute chart, the price is moving along the upper Bollinger band, which is still turned outwards. It can serve as a good sign that the price will continue to rise.
11 - The AO indicator has formed the first high and two divergences. They can indicate that the upward movement is losing momentum, and a local correction may start soon. The AO indicator may even cross the zero level and move to the negative zone during the correction.
Later, however, the price may go up again, forming the final divergence. We’ll see how it turns out.
12 - It is better to keep the buy entry point according to the 30-minute time frame. We can consider short positions when the price breaks through and settles below the 1.16440 level, with the next target at 1.16274.