As we can see by the EURUSD and GBPUSD charts below, the Pivots have been dictating where price has been getting rejected at this week since volatility levels are down a bit with our slew of economic releases to come tomorrow (ECB and BOE Rate Decisions) and Friday (NFP).

value=500value=500What we are seeing is how trend or momentum methods will not work in such environments.  When this happens, we need to shift our focus to the methods that will work when volatility is down - that being looking closer at pivots and CCI for cues to get in and out.

Taking a look at the EURUSD below, we can see how the pair is pretty much where it opened yesterday. We can also see how well the pivots are containing many of the moves giving solid rejection areas for us to trade.  When the markets are lower in volatility and direction, only a few pivot breaches will occur while the majority will reject.  Once you can detect which ones they are, you can usually find good trade opportunities.


A good example of this behavior over the last two days is the triple pong off the current M3 pivot which was yesterdays R2 pivot.  Each time it decided to bang into the pivot the Momentum and CCI posted a lower high and the divergence was quite striking.  What was also interesting for the CCI was how it printed a strong 298 reading on the first impulsive move up towards the 1.3032 level, and during the second attack it could barely make it past 100 with that level acting as a ceiling.  With the divergence being that stark, the CCI finding a resistance level with price making new highs, combined with declining momentum peaks, that usually presents a good trade opportunity suggesting the pair is losing momentum and the Pivot should hold.  Time for a rejection trade.

Remember pivots are one of the more common places institutional investors like to place orders.  If the pair has the momentum strong in its favor, a breach of the pivot should accelerate price because the stops on the other side are getting tripped.  When this fails, its often good to look for a second rejection with a declining CCI and Momentum.  If the divergences are strong enough, the pivot should reject the pair and give us a trade opportunity.  Thus, in the current market environment leading up to the ECB, BOE and NFP triumvirate of announcements coming up, markets are more likely to not break out heavy to one-side for the lack of commitment to a particular direction.