As some people in the banking world take a few days off to enjoy the summer (in the northern hemisphere), the market does continue to offer a few trends. An example of a strong trend has been the EURUSD: yesterday’s price action saw yet another trigger candle and bearish break (red circle) develop well – just like previous EURUSD down trend triggers (orange circles). That trade setup (red circle) is now in positive territory because the stop loss is used to protect against any sudden (deeper) retracement.
Another trending currency pair is the GBPCAD. Both the 4-hour and daily DTT trend indicators are confirming an uptrend (green colors); similar to the EURUSD where both DTT indicators are showing a downtrend (red colors). The uptrend is easy to spot with the help of the DTT trend indicator, but a trader also needs to check other steps (check here for more info).
Besides the trending environment, the GBPCAD also broke above resistance levels (purple, magenta and red) during Tuesday’s trading for 1st potential scale-in opportunity. A trader might think this is an ideal situation to trade a pullback. But is this really a scenario where a trader wants to trade the retracement in anticipation of more upside?
To answer this question, it is recommended to review higher time frames to get a better view of the market structure. The 4-hour and/or daily chart will provide much more guidance on the long-term situation than any chart which is one hour or lower.
Tuesday’s daily candle closed near the high which signals bullish control and hence strength. The candle close also occurred above the resistance level of +/-1.8465 (orange line), which indicates a clear break of resistance. It could also be a break of the contracting wedge (green and magenta) to the upside.
Despite this good news there are some serious and substantial elements blocking any potential trade setup such as:
- The 2 resistance tops (red lines)
- The resistance trend line (red)
Due to the fact that the daily chart is showing a wedge, its good practice to look at one time frame higher to establish the environment and context of that wedge. And in the case of the GBPCAD, traders are then able to see the uptrend prior to the contracting wedge. Although it does not remove the resistance, it does show a potential breakout into the same direction of the bigger weekly trend.
Is it worth a trade setup right now? In my opinion: no. With the resistance so close by I would rather wait for the weekly candle to close. This will provide an important clue as to whether price was able to close near the high and whether it retained control throughout the entire week, which also has a GBP interest rate announcement on Thursday.
What do you think of the GBPCAD trend??
Wish you Happy Trading!
Winner’s Edge Trading, as seen on: