Monday’s focus is on the Major currency pairs.
Our blog post will answer questions such as:
- Will the GBPUSD find support at the lowest point of the last 4, 5 years?
- How far can the EURUSD fall?
- And can the USDJPY find its bullish legs again?
Our journey starts with the GBPUSD!
GBPUSD REACHING MAJOR SUPPORT
The Cable is in massive free fall during the last 6 months (starting point was July 2014).
BUT price is approaching the monthly support (green) at 1.4813.
This means that the classical battle between trend and support/resistance will erupt soon. And this monthly support level is certainly a very interesting decision spot (read more here about decision spots). Let’s discuss the scenarios:
- A bearish break (red arrow) of the support trend line (blue): price falls towards the monthly support (green);
- A bearish break (red arrow) of the monthly support (green): price falls towards next major support (purple);
- A bullish bounce (green arrow) at support: price bounces and makes a retracement rally.
The screenshot shows the various decision spots in more detail and where the wide open spaces are located.
HOW FAR WILL THE EURUSD FALL?
The EURUSD keeps falling and falling with no stop in sight: the decline has especially accelerated since mid December and price is breaking the monthly wedge (purple) lines.
A wedge break could be huge and translate into an enormous decline. The Fibonacci targets are examples of how far price could fall throughout 2015. I am looking for the EURUSD to hit the monthly support at 1.1650 (blue line), followed by the -27.2 target at 1.13 and then the -61.8 target at 1.00.
Trade setup: during all bearish trading weeks so far, a EURUSD short with a stop loss above its previous week’s high has done spectacularly well. And this week could be the same.
Remember: never change (!) a winning football team. The same holds true for Forex trading.
THE USDJPY RETRACEMENT
There is little doubt about the strength of the USDJPY bull run when reviewing a weekly chart.
The big question for this chart is: at what price level am I expecting the uptrend to continue?
There are 2 levels that seem roughly equally likely, although the first has a tad higher probability:
- A double bottom at the 23.6 Fibonacci level around 116.70-90. Stop loss should be below the weekly low at 115.30. Target at 1.27 (-27.2 target).
- A deeper retracement back towards the 38.2 Fibonacci level around 113.87. Stop loss should be below the 50 Fib at 111 but a tighter 100 pip stop loss could be enough as well. Same target at 1.27 (-27.2 target).
Both areas look like excellent longs to me. Do you agree?
Here is YOUR challenge for January: a) Analyze the EURUSD, GBPUSD, and USDJPY. b) Find a trade setup. c) Write down the figures in the chat box below. d) We monitor which trades went well and which didn’t. e) We then discuss what was good and what could be better.
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