AUD and GBP in focus at the start of the London forex session

AUD and GBP in focus at the start of the London forex session

As we begin another week, here it’s the Aussie and the British pound in focus as I take a look at their slower timeframe charts for these two currency pairs.

00:03

Introduction and Trading Disclaimer

00:03

The webinar begins with a welcome message and a reminder about the risks involved in trading. Participants are advised not to use money they cannot afford to lose. The session will focus on analyzing trading charts.

00:33

Volume Price Analysis Overview

00:33

The session introduces volume price analysis, a methodology that examines price action alongside trading volume to validate chart movements. The presenter notes the attendance of various participants, including forex students, quantum users, and newcomers, indicating a diverse audience interested in understanding this analytical approach.

01:05

Combining Technical, Fundamental, Political Factors

01:05

The speaker discusses analyzing books available on Amazon and emphasizes the importance of considering not only the technical aspects of charts but also fundamental news, related markets, and the political situation. They highlight the complexity of integrating these factors and mention the use of quantum indicators to assist in this analysis.

01:39

Quantum Indicators and Currency Flow

01:39

The speaker explains that they and their husband David developed specific indicators primarily for their own forex trading. These indicators help quickly identify where money is flowing across all timeframes by measuring currency strength through a clarity strength indicator. The tool is more broadly a currency flow indicator, showing which currencies are gaining or losing strength. They analyze these flows by pairing currencies in a matrix, reflecting the relationship between a currency and its counterpart in the market.

02:48

Current Market Sentiment and Aussie Dollar

02:48

The Australian dollar has experienced strong buying interest, driven by positive reactions to the Reserve Bank of Australia and overall optimistic market sentiment, exemplified by the Nasdaq trading above 11,000. Despite potential disconnects between market performance and the real economy, the Aussie acts as a risk currency, rising in positive market moods and falling in negative ones. Analysis focuses on flows into the Aussie and its pairs like the Aussie-Yen. Tools such as the matrix indicator, the array (which measures move strength in currency pairs), and the currency heat map are used to assess these trends in detail.

03:52

Currency Heat Map and Trading Platforms

03:52

The speaker discusses analyzing currency pairs across multiple time frames, emphasizing the sophistication of the currency heat map indicator and plans to explore it in detail. They mention using different trading platforms: Ninja 8 for charts and MT5 for its broader time frame options and multi-asset capabilities compared to MT4. The speaker highlights having separate charts for the heat map and matrix indicators, focusing on identifying strong buying activity, particularly noting significant buying strength in the Australian dollar against the Swiss franc.

05:29

Recent Economic Data and Market Sessions

05:29

The market sentiment is currently very positive, supported by recent technical indicators and economic data. The first of the month brought important PMI data releases, including China’s data from Friday and the U.S. ISM report, which exceeded expectations by staying above the 50 inflection point. This positive news has influenced overnight market activity, with the Nikkei rising over 1%. Traders are advised to monitor the previous session’s events carefully, considering the market operates in three distinct sessions—Asia, Europe/London, and New York—where sentiment and trader participation can shift significantly.

06:41

An example of shifting market sentiment occurred with the British pound (Cable) where the hourly chart showed a strong sell-off during the European and London sessions, followed by a sharp reversal driven mainly by the U.S. dollar in the New York session. This highlights the importance of observing price action across sessions. Futures markets are also reflecting optimism, with the Dow up 88 points, the S&P 500 up 6 points, and the Nasdaq surpassing the key 11,000 level, indicating a determination to move higher. This sets the stage for further market developments at the beginning of the month.

07:52

Seasonality and Trading Biases

07:52

The speaker discusses August as a traditional summer month in the northern hemisphere when many traders take holidays, leading to lower market liquidity and potential volatility. Seasonality is a common topic in trading, with predictable patterns such as the gold buying season during Indian weddings influencing gold prices. The concept of seasonality also applies to equities and currencies, exemplified by the saying ‘sell in May and go away, come back on St. Ledger’s Day’ (September 8th).

09:06

Seasonality may occur frequently enough to be statistically significant, but traders must be cautious as it can create cognitive biases when interpreting charts. This bias can lead traders to make decisions based on expected seasonal trends rather than objective analysis. Maintaining an open mind is essential to avoid being influenced unduly by these patterns.

10:08

Human biases strongly influence trading behavior. For example, one trader has a bias toward short selling because markets tend to decline faster than they rise, making short trades potentially more rapid and profitable. Recognizing and being aware of these biases is valuable; they are not necessarily weaknesses if managed properly. The current market environment is filled with opinions about overvaluation and limits to growth, but traders must remain flexible and open-minded.

11:17

During this time of year, holidays and reduced liquidity can create a ‘perfect storm’ resulting in unexpected market movements and stop-outs despite proper trade setups. Seasonality also affects fund managers psychologically, often leading to self-fulfilling prophecies as they sell upon observing market rollovers. Volume Price Analysis (VPA) can provide valuable signals by interpreting price action and volume through specific candle patterns, helping traders navigate these complex conditions.

12:17

Volume Price Analysis in Action

12:17

The speaker introduces the use of candle patterns combined with support and resistance levels to remove bias and focus on the chart itself. Using the 60-minute chart of the Aussie dollar as an example, the discussion highlights the price action during the London session. The Aussie dollar traded in congestion before selling off at the European open, illustrated by a significant down bar. The importance of interpreting volume in relation to trading sessions is emphasized.

13:28

The analysis continues with observations on volume and price movement, noting a low volume node and subsequent buying activity. Price moves higher at the London open, hitting resistance defined by price levels rather than volume point of control, followed by a sell-off during the rest of the London session. Around the US open, a notable candle signals a move lower near important support tied to the Camarilla indicator, setting the stage for a potential reversal.

14:35

A bullish engulfing candle forms with strong volume, signaling a strong reversal as price moves higher by the end of the US session. Trading activity quiets down with decreasing volume and price drifting sideways. The session transitions into the US market as traders await news from the Reserve Bank of Australia (RBA), with positive PMI data providing a boost to the Aussie dollar.

15:11

The speaker emphasizes patience when trading on the hourly time frame, waiting for signals to develop fully. Volume price analysis is described as a method that generates repeatable signals across all time frames—from seconds to hours—helping traders remain objective and avoid emotional reactions during volatile moves. Candle patterns combined with volume analysis provide reliable setups and highlight trading opportunities.

16:21

Trading Signals and Time Frame Considerations

16:21

The speaker discusses trading opportunities using an hourly chart to illustrate how sentiment in a currency pair can shift between sessions. They highlight a bullish engulfing pattern on the 60-minute chart and the importance of observing faster time frames, such as spotting a hammer candlestick. The decision to trade based on a hammer or wait for validation on a slower time frame depends on the trader’s level of aggressiveness. An example is shared of a trader who successfully traded a shooting star pattern but later mistakenly took a long position on a candle that resembled a hammer but was not, emphasizing the need for careful candlestick identification.

18:03

Examples of Candle Patterns and Seasonality Effects

18:03

The speaker explains the significance of the shooting star candlestick pattern as a strong signal often accompanied by high volume, using the British pound (cable) daily chart as an example. They describe how the shooting star on Friday suggested a potential price drop, which initially occurred, but was influenced by the US dollar’s movements causing fluctuations. The discussion highlights the complexity of trading around seasonal trends, noting that although August is often a selling period for the pound, recent price action showed both selling and buying pressures. The speaker emphasizes the importance of recognizing strong candle patterns but also adapting to real-time market dynamics rather than relying solely on historical seasonality.

20:16

Importance of Trading What the Chart Shows

20:16

The speaker explains that in the 24-hour forex market, price movements in one session may not continue into the next. This characteristic creates diverse trading opportunities for both long and short positions across different sessions.

By Anna Coulling – creator of volume price analysis