When Does The Trend Change?

The following chart sequence shows a great example of how I define a change of trend. The chart is a 1-minute chart of the GBP/USD. The market and timeframe are irrelevant though. The concept applies to all markets and whichever timeframe you're using to define the trend. I just happen to currently use the 1-minute chart.

As a background to the price action we see price in an uptrend leading into a resistance area between 1.5796 and 1.5802. Momentum clearly slows as price makes three failed attempts to breach the area (1 x test of resistance and 2 x breakout failures), before finally breaking the swing low between breakout attempts 2 and 3.

I call this break of the swing low the "objective" change of trend. 

"Objective" refers to the fact that there is no discretion involved. Price traded below the swing low - there is no doubt.

However, for me, a change of objective trend definition does NOT mean a change of trend.

I define a change of trend as requiring two components:

1. an objective change of trend; and
2. price acceptance in this new area (what I usually refer to as a subjective change of trend)

Price acceptance means seeing evidence of price continuing to trade beyond the point at which the objective trend definition changed. In this example, that would be continuation lower.

A reversal straight back through the point of objective trend definition implies a rejection of the potential trend change (and usually a beautiful trade opportunity back in the original trend direction).

This is an interesting example. As shown below, price stalls immediately following the objective change of trend as both bulls and bears find some balance.

From this point, a break higher would reject the objective trend change, leading to continuation higher for a fourth test of resistance. The uptrend would remain in force.

A break down will demonstrate price acceptance, confirming our "subjective" change of trend. The trend would then be considered down.

As seen below, a break downwards occurred from the area of price stall, confirming our change of trend.

S&P downgrades US credit rating to AA-plus

The United States lost its AAA debt rating, on late Friday, from Standard & Poor’s for the first time in history. The credit-rating agency said the political system of the world’s top economy has become less stable and is still concerned about the government's budget deficit and rising debt burden.

"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.

The outlook on the new U.S. credit rating is "negative," S&P added, which means another downgrade is possible in the next 12 to 18 months.


US government says S&P is wrong


The White House reacted with indignation to Standard & Poor's credit rating downgrade from AAA to AA-plus. A government spokeswoman said to media that S&P was wrong in its calculation, the debt value was overestimated by 2 billion, she stated.
Republicans asked President Obama division

NFP numbers likely to show a slight rebound in July

June witnessed very low NFP results followed by a decrease in initial jobless claims and a stronger ADP report, which builds up hopes for better employment data in July.

Most of the analysts polled agree that we can expect an improvement in NFP figures, although Illian Yotov does not allow us to forget that still "the unemployment rate could remain stubbornly high at 9.2%," reflecting the slow progress of economic recovery in the US.



If the NFP results are similar or just slightly better than those from the last two reports it will be "not enough to lower the unemployment rate, and not enough to help the greenback," according to Yohay Elam. Weak numbers could "put downside pressure on the U.S. dollar, since it could boost expectations of QE3" as Sinan Saleh points out. Such a situation would be in Adam Narczewski's opinion "obviously deadly for the dollar, especially against the yen and franc."

Read below the complete forecasts and opinions of the experts.

Bill Hubard - Chief Economist at Markets.com:

"We are expecting another relatively subpar reading on employment for July. Our estimate of a 90,000 rise in payrolls is not as soft as the May and June figures but still not consistent with any improvement in unemployment. We have felt that labour market fundamentals were never as strong as data suggested in the February-April period but not as weak as the past couple of reports. Although Initial jobless claims have been mildly encouraging and business hiring surveys imply job gains, we worry that the unusual backdrop of major policy uncertainty poses downside risk to July readings on a range of activity measures. If the next few days result in a safe hurdle of default risk that preserves financial stability and heads off another shock to confidence, recovery still faces headwinds but we would be more confident about moderate second half growth."

Ilian Yotov - FX Strategist and Founder at AllThingsForex:

"After two dismal Non-Farm Payrolls reports which confirmed the Fed’s concerns about the 'frustratingly slow' pace of recovery, we could see a bit more optimistic employment data with consensus forecasts expecting the U.S. economy to add up to 85K jobs in July from 18K in June. The unemployment rate could remain stubbornly high at 9.2%, a daunting reminder of the lack of significant improvement in the U.S. job market. A weaker-than-expected employment report could reinforce the Fed’s view of keeping rates low for 'extended period' and maintaining its accommodative monetary policy, and could put additional pressure on the USD. On the other hand, a more upbeat U.S. Non-Farm Payrolls data could become supportive of a USD relief rally, especially if the U.S. averts a credit rating downgrade and the debt ceiling deadlock in Washington comes to an end after the August 2 deadline."

Adam Narczewski - Financial analyst at X-Trade Brokers, XTB:

"The readings for June were a bit puzzling with payrolls exceptionally weak but also with a drop in initial claims and a relatively strong ADP; For July – at this moment- I would see a reading in a proximity of +100k; I wouldn’t be surprised by an upward revision of the data for June either.
Another weak report would be obviously deadly for the dollar, especially against the yen and franc, on a surge in QE3 speculations."

Yohay Elam - Analyst at Forex Crunch:

"The US economy and the job market are still in first gear. Another month of a small gain in jobs is likely now, around 50K. This is not enough to lower the unemployment rate, and not enough to help the greenback. The yen and the Swiss franc are likely to gain on such an outcome. A loss of jobs would accelerate the dollar's losses against the aforementioned currencies, but could have the opposite impact on the euro and the pound. Only a gain of over 100K jobs can help the dollar and show that growth is back, but this scenario seems unlikely at the moment."

Sinan Saleh - Analyst at ecPulse.com:

"The labor markets has been showing signs of weakness over the past few months, where the pace of hiring had slowed noticeably, but given the recent data from the labor market, it seems that hiring continued, albeit at a slow pace. Accordingly, I expect Non-farm payrolls to rise in July between 50k and 70K jobs.
However, another weak result will most likely put downside pressure on the U.S. dollar, since it could boost expectations of QE3, although it will take sustained weakness in the labor market for the Fed to consider QE3, nonetheless, I don’t think that will stop investors from raising bets for QE3."

Andrei Tratseuski - Director of Currency Research at Forex Club:

"We see a slight pickup in Non-Farm Payroll figures in the United States in July, our projections call for figures to print between 50,000 to 75,000. We see a slight pick of NFP figures as Unemployment Claims dropped significantly in the week prior below a pivotal 400,000 mark. If another weak performance in comes from the NFP figures, we shall continue to see appreciation in safe haven assets which include the Swiss Franc and the Japanese Yen. More than anticipated growth in the NFP figures could spur a relieve rally in the United States Dollar which has been suppressed for a prolonged period of time against other trading counterparts."

Dr. S. Sivaraman - CEO and owner of i-knowindices.com:

"On Friday 05th August by 12:30 GMT NFP numbers are to be announced along with unemployment rate and hourly earnings m/m. last month there was an addition of 18k.This time the number may be within the range of 23 - 45 k. When compared with earlier lower number the market may show some USD gaining move for the week end.
USD is expected to gain considerably against most of the currencies and precious metals during that time."

Valeria Bednarik - Chief Analyst with FXstreet.com:

"The employment sector continues to be the stone in the US recovery shoe. While early this year data was encouraging, past 2 months readings deny any chance of growth for this 2011. I do believe that right now, the market is being too optimistic waiting for nearly 100K new jobs for July, and a reading near 50K will be more likely. However, the unemployment rate will remain well above 9.0%, being at the end a quite negative reading for the dollar. Outstanding positive numbers won't favor the greenback but temporarily, as won't be enough to build up investors confidence in the US currency.