US Dollar Pushes Higher as Traders Bet on Wall St Weakness (Euro Open)

The US Dollar advanced to start the trading week as US stock index futures slipped over 1% in overnight trading, suggesting risk aversion may be returning to financial markets. An uneventful calendar in European hours will likely see risk sentiment remain the principal driver for forex price action.

Key Overnight Developments

• US Dollar Rises as Dow Jones, S&P 500 Futures Slip Over 1%
• Euro, British Pound Follow Risky Assets Lower

Critical Levels



The Euro trended lower against the US Dollar, losing as much as -0.7%. The British Pound followed suit, shedding as much as -0.6% against the greenback. Technical positioning favors a bearish outlook on both EURUSD and GBPUSD.

Asia Session Highlights



With little of note on the economic calendar, markets fell back on risk sentiment as the principal driver for forex price action. Futures on the Dow Jones and S&P 500 stock indices slipped over 1%, suggesting investors are betting that Wall St. stocks will move lower to start the trading week. The MSCI Asia Pacific Index erased initial gains after Hong Kong stocks dropped over 2% in early trading as Financial Times reported that American Express Co. and Allianz SE will sell their stakes in ICBC, China’s biggest bank, for a combined $2 billion. Asian exchanges initially moved higher following Friday’s Wall St. rally on news that the US Federal Reserve’s stress tests revealed most banks are adequately capitalized.

The retreat in risky assets boosted US Dollar – an index of the greenback’s average value against six top global currencies gapped higher to start the week and rose as much as 0.5% ahead of the opening bell in Europe. The US Dollar has been seen as a safe-haven asset amid falling stock markets, showing a -84% inverse correlation with global stock performance (based on a 90-day rolling correlation study).

Euro Session: What to Expect



An uneventful economic calendar is likely to yield to risk sentiment as the principal driver for forex price action in European hours. If stock markets continue to slip into negative territory, the US Dollar is likely to extend gains against the spectrum of major currencies.

A brief scan of European data is set to reveal deepening recession – the Import Price Index is set to drop -6.5% in the year to March, the most in over a decade; meanwhile, the GfK Consumer Confidence Survey is expected to print at 2.3 in May, the lowest since February.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Pushes Higher as Traders Bet on Wall St Weakness (Euro Open)

Forex Trading Weekly Forecast - 04.27.09

US Dollar Facing 1Q GDP, FOMC, Earnings and G20 forecasts

Fundamental Outlook for US Dollar: Bullish

- First quarter earnings may have been a positive factor so far, but the outlook is still far from encouraging
- Fed says recession ‘substantially reduced’ some banks’ capital though most are still well-capitalized
- Do technicals support a dollar bullish forecast? Read the FX Technical Weekly to find out.

Despite a relatively light docket of scheduled economic event risk, the US dollar tumbled against most of its counterparts this past week. This was due to the market’s acute interest in risk trends and the dollar’s association to such macro concerns. In the week ahead, fundamental conditions threaten to be far more complicated which could in turn lead to far greater levels of volatility and/or momentum. To garner a sense of what could move the market and how specifically it impacts the world’s most liquid currency, we will address each of the major themes likely to influence price action one by one. However, it is important to distinguish between those drivers that will have an immediate and decisive impact on the dollar and those that could have a drawn out impression. Both the first quarter GDP release and FOMC rate announcement have clearly defined parameters for timing and influence. In contrast, there is no clear scenario for how forecasts from global policy officials and the steady flow of earnings reports could sway a currency that has to balance its place in the economic food chain with its status as a safe haven.

There is no way of telling which manner of event risk (schedule release or general risk) will have the more pervasive effect on the US dollar; but recent history suggests we follow the currency’s function as a capital refuge. Immediate concern is the cumulative and distilled outlook for global growth and policy that comes out of the various meetings scheduled over the weekend and beyond. The G7 released met on Friday; but their seemed to offer little progress towards the world-wide rescue beyond offering a forecast for a ‘weak’ recovery by the end of the year and offering a warning that toxic assets are still a serious threat. There was sideline commentary suggesting the member nations have taken steps towards realizing the G20’s Agenda points from the London summit; but there is little evidence to substantiate such claims. Going forward, market participants will actively monitor the news wires for signs that the recovery in sentiment is unrealistic. An official statement from the G20 would be read over with a fine-toothed comb, traders will gauge the sway of proposals from the IMF and World Bank meetings this weekend, and fundamental traders will never ease up on their vigilance over nation’s individual efforts to stabilize their own economies.

The other indeterminable factor for dollar traders is the ongoing release of first quarter earnings reports. On the whole, its seems revenues and net income for American firms was stronger than analysts were predicting through the first quarter. However, this is an unreliable benchmark to gauge sentiment and economic health against. Firms are still clearly struggling with the recession and lack of credit as bottom lines that are splashed in red. This is an particularly important point to make with the financial sector (and more to the point, the 19 banks that are being reviewed for the Fed’s stress test). Traders the world over are waiting for the Federal Reserve’s assessment of how the banking giants will fair should the recession linger. In a white paper that explained the examiners’ methodology for judging each institution’s health, it was said that ‘most’ of those under scrutiny had sufficient capital – suggesting some will fail.

It is far easier to prepare and scale the impact of the advanced reading of 1Q GDP and the Fed’s rate decision. There is growing consensus that the central bank will further shrink its target range, but such a move would change little. More meaningful is the growth report. There have been claims from various policy officials of initial signs of stabilization and a decelerating pace of recession. These assertions will be immediately confirmed or denied by this specific piece of event risk. As the world’s largest economy, should data confirm a slower pace of annual contraction (as economists predict), it would be the first tangible sign that conditions are indeed improving.

Euro at Critical Crossroads versus US Dollar

Fundamental Outlook for Euro This Week: Bearish

- Euro gains as PMI shows signs of “Second Derivative” Growth Improvement
- German IFO Business Confidence survey improves – Euro rallies
- Euro Bear Trend may nonetheless be in its infancy

The Euro finished the week marginally higher against the US Dollar, but it extremely choppy price action makes it difficult to anticipate continued gains through near term trade. Last week we forecasted that a turnaround in the US S&P 500 and other risky asset classes would lead to a similar pullback in the Euro. Yet an early-week decline quickly reversed and led to a similar bounce in the EUR/USD. The US S&P now stands an impressive 30 percent higher from multi-year lows and a mere 4.1 percent down on a year-to-date basis. The impressive recovery in risk appetite has had a noteworthy effect on the Euro, but we continue to question whether such financial market improvement is truly sustainable. Early-week market tumbles emphasize that equities and other key risk barometers remain extremely fragile, and it may be only a matter of time before we see large corrections in the S&P and major world equity indices.

Our outlook for the Euro/US dollar remains bearish, but the true litmus test may come at resistance near the 1.3400 mark. Said level represents an important multi-week high and the 61.8 percent Fibonacci retracement of the 1.3750-1.2880 move—a “line in the sand” for technical traders. Fundamental biases are far harder to establish due to the current economic climate. A busy week of European and US economic event risk may only exacerbate this point, and it will be critically important to watch for shifts in trader sentiment following a key number of data releases.

Likely highlights in the week ahead include German and broader Euro zone Consumer Confidence, CPI Inflation, and especially important Employment results. Recent German Ifo Business survey figures suggest that investor confidence has bottomed and many now expect business conditions to improve through the foreseeable future. This may amount to little, however, if Consumer Confidence does not show a commensurate improvement, and markets will likely respond to any surprises in German Gfk survey results. The very next day’s German Consumer Price Index inflation results could likewise spark volatility in the EUR/USD. Analysts predict that yearly price growth remained at a relatively robust 0.8 percent through April. This stands in stark contrast to a -0.1 percent rate in the United States and perhaps explains why the European Central Bank has thus far kept interest rates well-above their US counterpart. Uncertainty surrounding ECB monetary policy may make for especially large moves on big surprises.

Last but certainly not least, markets will pay close attention to Friday’s Unemployment stats out of Germany and the broader Euro zone. Labor market reports remain very politically important, and any especially noteworthy deterioration in jobless rates could put further pressure on domestic governments and the ECB. Though further fiscal stimulus packages seem unlikely, politicians continue to lean on the ECB—calling for Quantitative Easing measures in order to boost money supply. Any such announcement could easily derail the Euro’s recent bounce.

Japanese Yen Trades Must Gauge Risk and the Currency’s Relation to It

Fundamental Outlook: Bearish

- G7 forecasts a ‘weak’ rebound later this year; though banks’ toxic assets still a serious problem
- Japanese trade balance marks it worst annualized deficit in 29 years
- Bank of Japan Governor Masaaki Shirakawa tells economists not to mistake a temporary rebound as a genuine recovery

There is an ongoing debate as to whether the yen is a sensible safe haven currency considering the financial and economic troubles Japan is suffering. This is argument that will carry over into next week – and just as the market’s tolerance for risk is put to the test through a wave of major fundamental catalysts. Therefore, traders will first have to assess the ever-fluctuating level of sentiment through G20 and IMF policy statements, a mooring US first quarter growth report and ongoing register of market health derived through earnings releases. Then, they will have discern the level of optimism or panic that is borne from this mix and judge whether the Japanese currency is a viable safe haven via the depth of its markets and sheer size of its economy. Anything less than borderline fear or a dour forecast for the markets will likely see the once sacrosanct safe haven / yen correlation drift apart.

First, in taking stock of the economic mines that could leverage panic and volatility; we can see that there is a lot to keep track of. This weekend, the spot light will fall on the various meetings scheduled for the world’s policy makers. The G7 meeting has already passed with little more than cheerleader optimism; and any G20 statement is likely to provide little more. What traders really crave is tangible policy steps with responsibility and consequence along the way that can truly put the world on track to correcting what is clearly a global problem. To the extent of its capabilities, the IMF’s semi-annual meeting will likely produce better results. However, while this group has been very blunt on the current state of affairs and what needs to be done to genuinely turn economic activity around; the organization doesn’t have the clout to push policy onto the world’s leading nations. Moving beyond the weekend, the risk barometer will find input from the change in sentiment derived from earnings. Better-than-expected revenues is not the same thing as profits that are expected to expand as the year progresses. Net profit, write downs, delinquencies and non-performing assets are components that will not be overlooked. Finally, in measuring the health of the financial markets; we first gauge the health of the economy that supports it. The first quarter reading for US GDP will fill this role nicely. Should the world’s largest nation report a slower pace of contraction as expected, it could interpreted as the first (meaningful) step towards a working recovery.

After assessing the ebb and flow of risk sentiment, the fundamental crowd then has to decide whether the yen is indeed the proper currency to represent safety. This leads us to examine the health of the island economy. Over the past few days, Japanese policy officials have painted a grim outlook for economic activity (even taken within the context of a global recession). Despite confirming the worst recession for the world’s second largest economy in over a quarter of a century through the fourth quarter, the Bank of Japan’s top economist predict worse over the opening months of this year. The same sentiment was shared by BoJ Shirakawa. Data is working hard to confirm such fears as well. This past week, the ministry reported the worst annual trade deficit in nearly three decades. This will be followed up by employment, spending, factory activity, and auto sales data in the days ahead. When measuring this economic fodder against sentiment, questions will only arise should pessimism reign. Otherwise, if sentiment is improving, there is no need for a safe haven and the bleak future for Japan means there is really no reason to buy yen.

British Pound to Follow Stock Prices Lower if Risk Appetite Abates

Fundamental Forecast for British Pound: Bearish

- UK House Prices Rose for Third Straight Month in April, Says Rightmove
- Retail Prices Turned Negative for the First Time Since 1960 in March
- Unemployment Rate Rises to Highest in Over a Decade
- UK Budget Deficit Tripled, Rising to 90 billion Pounds in 2008
- Gross Domestic Product Shranks 1.9% in the First Quarter, Most in 30 Years

The British Pound is likely to look past an uneventful economic calendar to be driven lower by a reversal in risk trends across global financial. The sterling’s average value against a trade-weighted basket of global currencies is now 83.2% correlated with the MSCI World Stock Index, a composite of global equities’ performance. For its part, the MSCI metric began last week with a sharp reversal lower from resistance at the top of a falling channel that has contained prices since October 2008. Stocks inched higher for the remainder of the week, managing to re-test resistance but failing to close above it by Friday’s close. If this was merely a correction to re-test resistance, a return to bearish momentum awaits in the week ahead that is sure to take the British Pound along for the ride. Some upside risk does remain, however, on the heels of cautiously optimistic rhetoric from the G7 summit in Washington, DC.

Looking at the data docket, Gfk Consumer Confidence is expected to continue to advance for the fourth consecutive month in April, rising to -28 from -30 in the previous month. The news is hardly encouraging, however, even if we assume that the metric has put in a bottom despite rising unemployment. Looking at a comparable period of low consumer confidence during the 1990-91 recession, we see that the GfK metric reversed upward in March 1990 but GDP follow suit only 6 months later and did not return to positive growth for a full two years down the road. The absence of expanding output will mean that the central bank is likely to maintain a very loose monetary policy, holding the British Pound back against the currencies of countries where economic growth and by extension interest rates will head higher sooner (most notably the US Dollar). Turning to the housing market, any immediate impact from small improvements in March Consumer Credit and Mortgage Approval readings may be offset with Nationwide expected to report that property prices turned lower in April to shrink at an annual pace of -15.8%. The survey would conflict with a similar report by Rightmove, but its later release suggests a more accurate reading on what April’s housing market actually looked like.



Written by John Kicklighter, David Rodriguez, Ilya Spivak, John Rivera and David Song, Currency Analysts
Article Source - Forex Trading Weekly Forecast - 04.27.09

Forex Trading - Moving Average

What is Moving Average?

Moving average is one of the most popular and easy to use tools available for doing technical analysis. It means the average price of a currency over a specified time period (the most common being 20, 30, 50, 100 and 200 days), used in order to spot pricing trends by flattening out large fluctuations. Moving average data is used to create charts that show whether a currency’s price is trending up or down. They can be used to track daily, weekly, or monthly patterns. Each new day's (or week's or month's) numbers are added to the average and the oldest numbers are dropped, thus, the average "moves" over time. In general, the shorter the time frame used, the more volatile the prices will appear, so, for example, 20 day moving average lines tend to move up and down more than 200 day moving average lines. There are four different types of moving averages: Simple (also referred to as Arithmetic), Exponential, Smoothed and Linear Weighted. Moving averages may be calculated for any sequential data set, including opening and closing prices, highest and lowest prices, trading volume or any other indicators. It is often the case when double moving averages are used.



The only thing where moving averages of different types diverge considerably from each other is when weight coefficients, which are assigned to the latest data, are different. In case we are talking of simple moving average, all prices of the time period in question are equal in value. Exponential and Linear Weighted Moving Averages attach more value to the latest prices. The most common way to interpreting the price moving average is to compare its dynamics to the price action. When the instrument price rises above its moving average, a buy signal appears, if the price falls below its moving average, what we have is a sell signal. This trading system, which is based on the moving average, is not designed to provide entrance into the market right in its lowest point, and its exit right on the peak. It allows acting according to the following trend: to buy soon after the prices reach the bottom, and to sell soon after the prices have reached their peak. Moving averages may also be applied to indicators. That is where the interpretation of indicator moving averages is similar to the interpretation of price moving averages: if the indicator rises above its moving average, that means that the ascending indicator movement is likely to continue: if the indicator falls below its moving average, this means that it is likely to continue going downward.

Simple Moving Average (SMA)

Simple Moving Average is the simplest type of moving averages. Basically, SMA is calculated by adding the last number in the period from the closing price, and then dividing that number with a period. Let me explain in example, if you select SMA 5 on a 1 hour graph, add the closing prices for the last 5 hours, and then divide that number by 5. If you select SMA 5 on a 30 minute graph, you will add the closing prices for the past 150 minutes (30*5), and then divide that number by 5. In the same way you can calculate SMA for any time period.

Most of the trading platforms will make all these calculations for you. The reason why I am bothering you with this component of technical analysis is because it is extremely important to understand how to calculate the moving average. If you understand how every moving average is calculated, you can make your own decision, which type is the best for you.

Like any other indicator, SMA works with a delay. Because you observe the average price, you are actually looking at the "forecast" of future prices, not the concrete future. Here's an example of how moving averages reduce the price activity:



On the previous chart you can see 3 different SMA. As you can see, the bigger period SMA you take, the more it stays behind the more prices. You probably noticed that the 62 SMA is much further away from current prices then 30 and 5 SMA. This is because with 62 SMA you are adding closing prices from the last 62 periods and dividing it with 62. The higher the number of periods that you are using, the slower is reaction to the movement of prices. SMA on this graph shows the overall sentiment in the market in a given period. Instead of just looking at the current price on the market, moving averages provide a broader view, and give us the general prediction of prices in the future.

SMA = SUM (CLOSE, N)/N ; Where:
N = number of calculation periods

Exponential Moving Average (EMA)

Although SMA is an excellent tool, one major problem is associated with it: SMA is very sensitive to sudden jumps (spikes). By looking at the next example you will better understand what I mean:
Suppose that we draw a 5 SMA on the daily chart of EUR / USD and the closing prices for the last 5 days are as follows: 1st day - 1.2345, 2nd day - 1.2350, 3rd day - 1.2360, 4th day - 1.2365, 5th day - 1.2370. SMA would be calculated as: (1.2345+1.2350+1.2360+1.2365+1.2370)/5 = 1.2358. But what if the 2nd day price was 1.2300? SMA result would be much lower and you get the impression that the price is going down, when in reality, 2nd day may perhaps have been only one remote event (for example, reduction of the interest rate).

What I am trying to indicate is that the SMA may sometimes be too simple. If there was only a way to filter the jumps so that we do not get the wrong picture and make the most out of moving averages. It exists and is called the Exponential Moving Average (EMA).

EMA is a type of moving average that is similar to Simple Moving Average, except that more weight is given to the latest data. The Exponential Moving Average is also known as "Exponentially Weighted Moving Average". This type of moving average reacts faster to recent price changes than a Simple Moving Average. In our example above, EMA would put more weight on the 3rd-5th day, which means that jump on the 2nd would have a lesser value and would not influence so much on the moving average. It would put more emphasis on what traders are doing right now. While trading, it is more important to see what merchants are doing right now, not what they were doing last week or last month.



EMA = (CLOSE(i)*P)+(EMA(i-1)*(100-P)) ; Where:
CLOSE(i) = the price of the current period closure
EMA(i-1) = Exponentially Moving Average of the previous period closure
P = the percentage of using the price value

Smoothed Moving Average (SMMA)

A Smoothed Moving Average is sort of a cross between a Simple Moving Average and an Exponential Moving Average, only with a longer period applied. The Smoothed Moving Average gives the recent prices an equal weighting to the historic ones. The calculation does not refer to a fixed period, but rather takes all available data series into account. This is achieved by subtracting yesterday’s Smoothed Moving Average from today’s price. Adding this result to yesterday’s Smoothed Moving Average, results in today’s moving average.

In a Simple Moving Average, the price data have an equal weight in the computation of the average. Also, in a Simple Moving Average, the oldest price data are removed from the moving average as a new price is added to the computation. The Smoothed Moving Average uses a longer period to determine the average, assigning a weight to the price data as the average is calculated. Thus, the oldest price data points in the Smoothed Moving Average are never removed, but they have only a minimal impact on the moving average, which is similar to how an Exponential Moving Average places more weight on the more recent data.

The first value of this smoothed moving average is calculated as the simple moving average (SMA):
SUM1 = SUM(CLOSE, N)
SMMA1 = SUM1/N

The second and succeeding moving averages are calculated according to this formula:
SMMA(i) = (SUM1-SMMA1+CLOSE(i))/N ; Where:
SUM1 = the total sum of closing prices for N periods
SMMA1 = the smoothed moving average of the first bar
SMMA(i) = the smoothed moving average of the current bar (except for the first one)
CLOSE(i) = the current closing price
N = the smoothing period



SMA versus EMA

If you want a moving average which will match the movement of prices quite quickly, then the EMA with a short period (eg. 3, 5, 8) is the best choice for you. This may help to ''hunt down'' the trend in the early stage, which will result in higher profits. Specifically, the earlier you have caught the trend, the more you can ''ride'' through it, and you can make more money. The pitfall is that while using this type of moving average you can get a false signal which you won’t recognize and lose your investment. Since the moving average quickly matches the price, you can even think that a new trend is forming, but in fact it is just an abrupt jump, which returns to the starting position (spike).

With SMA the situation is completely opposite. If you want the moving average to respond more precisely and slowly to the price changes, then the longer period SMA is the best choice for you. Although slow responding to the price changes will save you from many possible pitfalls, the smaller SMA may also result in too much delay and missing of a good trade.



Uses for Moving Averages

There are many uses for moving averages, but three basic uses stand out:
1. Trend identification/confirmation
2. Support and Resistance level identification/confirmation
3. Trading Systems

Which is better?

Which moving average you use will depend on your trading and investing style and preferences. The Simple Moving Average obviously has a lag, but the Exponential Moving Average may be prone to quicker breaks. Some traders prefer to use Exponential Moving Averages for shorter time periods to capture changes quicker, while others prefer Simple Moving Averages over long time periods to identify long-term trend changes. In addition, much will depend on the individual security in question. Moving average type and length of time will depend greatly on the individual security and how it has reacted in the past.

The initial thought for some is that greater sensitivity and quicker signals are bound to be beneficial. This is not always true and brings up a great dilemma for the technical analyst: the tradeoff between sensitivity and reliability. The more sensitive an indicator is, the more signals that will be given. These signals may prove timely, but with increased sensitivity comes an increase in false signals. The less sensitive an indicator is, the fewer signals that will be given. However, less sensitivity leads to fewer and more reliable signals. Sometimes these signals can be late as well.

For moving averages, the same dilemma applies. Shorter moving averages will be more sensitive and generate more signals. The EMA, which is generally more sensitive than the SMA, will also be likely to generate more signals. However, there will also be an increase in the number of false signals and whipsaws. Longer moving averages will move slower and generate fewer signals. These signals will likely prove more reliable, but they also may come late. Each investor or trader should experiment with different moving average lengths and types to examine the trade-off between sensitivity and signal reliability.

Trend-Following Indicator

Moving averages smooth out a data series and make it easier to identify the direction of the trend. Because past price data is used to form moving averages, they are considered lagging, or trend following, indicators. Moving averages will not predict a change in trend, but rather follow behind the current trend. Therefore, they are best suited for trend identification and trend following purposes, not for prediction.

When to Use

Because moving averages follow the trend, they work best when a currency is trending and are ineffective when a currency moves in a trading range. With this in mind, investors and traders should first identify currencies that display some trending characteristics before attempting to analyze with moving averages. This process does not have to be a scientific examination. Usually, a simple visual assessment of the price chart can determine if a security exhibits characteristics of trend.

In its simplest form, a currency’s price can be doing only one of three things: trending up, trending down or trading in a range. An uptrend is established when a currency forms a series of higher highs and higher lows. A downtrend is established when a currency forms a series of lower lows and lower highs. A trading range is established if a currency cannot establish an uptrend or downtrend. If a security is in a trading range, an uptrend is started when the upper boundary of the range is broken and a downtrend begins when the lower boundary is broken.

Once a currency has been deemed to have enough characteristics of trend, the next task will be to select the number of moving average periods and type of moving average. The number of periods used in a moving average will vary according to the currency's volatility, trendiness and personal preferences. The more volatility there is, the more smoothing that will be required and hence the longer the moving average. There is no one set length, but some of the more popular lengths include 21, 50, 89, 150 and 200 days as well as 10, 30 and 40 weeks. Short-term traders may look for evidence of 2-3 week trends with a 21-day moving average, while longer-term investors may look for evidence of 3-4 month trends with a 40-week moving average. Trial and error is usually the best means for finding the best length. If there are too many breaks, lengthen the moving average to decrease its sensitivity. If the moving average is slow to react, shorten the moving average to increase its sensitivity. In addition, you may want to try using both Simple and Exponential Moving Averages. Exponential Moving Averages are usually best for short-term situations that require a responsive moving average. Simple Moving Averages work well for longer-term situations that do not require a lot of sensitivity.

Conclusions

Moving averages can be effective tools to identify and confirm trend, identify support and resistance levels, and develop trading systems. However, traders and investors should learn to identify currencies that are suitable for analysis with moving averages and how this analysis should be applied. Usually, an assessment can be made with a visual examination of the price chart, but sometimes it will require a more detailed approach.

The advantages of using moving averages need to be weighed against the disadvantages. Moving averages are trend following, or lagging, indicators that will always be a step behind. This is not necessarily a bad thing though. After all, the trend is your friend and it is best to trade in the direction of the trend. Moving averages will help ensure that a trader is in line with the current trend. However, markets, currencies spend a great deal of time in trading ranges, which render moving averages ineffective. Once in a trend, moving averages will keep you in, but also give late signals. Don't expect to get out at the top and in at the bottom using moving averages. As with most tools of technical analysis, moving averages should not be used on their own, but in conjunction with other tools that complement them. Using moving averages to confirm other indicators and analysis can greatly enhance technical analysis.