How do you use Moving Averages for FOMC trading


18 May, AtoZForex – Although Moving Averages are probably the most common trading indicators, most traders don’t know the proper use of these amazing instruments. Each time we host a webinar we keep on receiving the same question – how do you use moving averages? Which moving average is it? Traders, we have the answer to your questions today.

When you look into Moving Averages in action you can get to understand that these indicators can be used in so many ways which include the following:

  • Defining the trend direction
  • Entry confirmation
  • Signaling position closing
  • Locating Support and Resistance

MA crossovers

Among the most common ways of using Moving Averages traders will find double and triple moving average crossovers. Crossover defines one of the moving averages crossing over another one. In general, a crossover of a fast moving average above a slow moving average would signal a buy signal. As an example, if you are using 20 and 50 period simple moving averages and you see 20 moving average is crossing over 50 period moving average, in this case you are expected to avoid short entries and look for long positions.

MA and Candlestick crossover

Similar to MA crossovers, MA and candlestick crossover can signal the direction of the trend as well as possible trend reversals.

Often, when the price is far away of the moving average traders lower their exposure on the trend direction as it is believed that the market is likely to visit the MA before continuing its trend direction.

Moving Averages as support and resistance

Often Moving Averages are used as support and resistance levels as well. Since moving averages are dynamic indicators, these support and resistance levels will often be referred as dynamic support or dynamic resistance.

The use of moving averages are clearly outlined in the video recording below:

Technical expectations for FOMC announcement

According to the technical outlook overall we could expect to see the USD appreciating today after the FOMC announcement. However, since the market is moving on a narrow channel for most pairs, traders should be cautious.

Most focus is based on two keywords:

  • Rate hike – if, when and how many times will the Fed hike the rates
  • Concerns – how concerned is the Fed about the state of the global economy

EURUSD FOMC outlook

EURUSD has been trading on overall sideways bias and is expected to trade between 1.1280 and 1.1140 levels which are respectively 88% and 61.8% Fibonacci retracement zones.

The pair has short bias mostly from 1.1320 level with SL positions at or just above the 1.1345 level and targets at 1.1140 level.

You can also see the EURUSD Symmetrical triangle analysis for bullish EURUSD entries.

Gold FOMC outlook

Gold is also showing signs of weakness at the moment ahead of the FOMC announcement. At the time of the webinar we commented that the valuable metal is expected to have its first support at 1267 level which has became reality now. For bears 1267 level should be broken clearly only then we will be aiming to have 1244 achieved.

USDCAD FOMC outlook

As a commodity currency the Canadian Dollar is correlated with the crude oil prices but the wild fire in Canada as well as relatively strong USD is keeping the USDCAD pair at a flat sideways level.

At the moment although we expect to see further bullish developments from USDCAD due to technical outlook, I am convinced that long positions should be placed at or above 1.30 psychological resistance level.

The webinar was delivered by AtoZForex in association with AtoZForex approved Forex broker Fidelis CM.

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