steve.jarvis's picture

Don't overlook the long-term FX charts!

Once a quarter I contribute longer-term Technical Analysis outlooks to FX Trader Magazine, and this gives me the opportunity to undertake a complete review of a wide ranges of FX rates, including key regional ones for Eastern Europe / Middle East and Asia / Australasia. The latest edition of the magazine has just been released and in this latest edition I feature GBP/USD, EUR/NOK, USD/ILS & AUD/CAD, where some interesting turning points have been identified.

In my most recent (2nd October) blog I was talking about the importance of the 260 day (1 year) moving average.  At that time I also listed my favourite combinations over a range of time-frames, but overlooked my really long-term outlook based on 10 year charts (monthly Candlesticks) where I plot the 12, 60 & 120 month (1, 5 & 10 year) moving averages.

Of the four FX rates featured in the latest edition of FX Trader edition, the (blue) 10 year moving average has been a key upside barrier for both GBP/USD and USD/ILS over the past 5 years.  GBP/USD's 1.7186 peak in July was almost spot-on that barrier and a steep retracement of the advance from the 2013 double bottom at 1.4836 / 1.4816 is now under way.  Meanwhile, USD/ILS is starting to retrace the decline from the 10 year moving average in 2012 (at 4.0078) which reached as low as 3.4014 in July.

Above: GBP/USD left chart, USD/ILS right chart. Double click on either to see a larger image 

Of course, not all of the moving average combination I look at work for every FX chart for all of the time, but having just scanned through a wide range of my longer-term charts, there are plenty of others where the 10 year average does indeed regularly play a part. This brings home the importance of not overlooking the long-term FX charts, as they can help to identify significant turning points, sometimes when least expected.