Tuesday, February 10, 2015

EUR/USD Market Update With TWAP

Yesterday in our EUR/USD Market Update we mentioned the stubborn support level... and it still holds. Today the market tested again that level inside of the daily balance area and could not continue to move lower. Same picture for the US Dollar Index that is trading inside of a bracket with a resistance level.


240 minutes

US Dollar Index (Daily)

Anyway, here is the TWAP Update for EUR/USD. We will using the monthly, weekly and intra-day TWAP to better visualize the current imbalances and balances that occuring on the various timeframes. Here is the description about TWAP from our Trading Glossary again:

Twap is an abbreviation for the Time Weighted Average Price. This is just like VWAP only it is weighted upon time. This is also an order type that many institutional investors utilize to work in and out of significant positions. It behaves like an Iceberg order by only showing a certain amount of orders to be executed but continues to refresh the orders throughout the session until the position is complete.

Let's start out with the monthly TWAP and we can see a quite rotational month so far. The market is trading around the previous month's VAL close level and sitting currently above the monthly developing value low. There is actually plenty room for a downside move:

With looking at the weekly TWAP, we can see that the market has been rejected several times from the previous week's VAL close level. The market is trading in a rotational behavior here as well.

Moving forward to the intra-day TWAP, we can observe resistance at the previous day's VAH close level and a small selling imbalance in the London session. However, the market found support at our persistent level and lead the market back into the developing value to quiet down a bit.

As said, there is still plenty room for the downside. The US Dollar Index seems also ready to test the daily bracket area high. Anyway, firstly and foremost the market have to breakt the mentioned levels. Keep it simple and be open minded for every scenario.

Stay happy!

All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.