Divergence is a common theme involved in my analysis. Generally, I focus on short-term divergences (hourly & 4-hourly charts) with price-action and the MACD oscillator. However, when divergences occur in the situations depicted above, all FX traders should take notice.
The first chart involves the Euro Index (the Euro vs a basket of currencies) and the EUR/USD. In June, the EUR/USD put in a lower low, but the Euro Index diverged and marked a higher low. This ultimately was a turning point that was also depicted in the second chart. Here, the EUR/USD net non-commercial position also diverged with price-action. In June, speculators lightened up on their short positions while the single currency headed lower. While these divergences occur only once in a while, they often hint of significant turning points.
