Hello Forex Traders,
The EURUSD and GBPUSD made volatile spikes up and down yesterday as the currency was bouncing in between support and resistance multiple times. For instance, the EURUSD challenged the 4 hour resistance at 1.3570 but did not manage to break and come crashing down. The downside however again failed to break the 1.3450 daily support level.
In fact, the EURUSD has been more or less range bound ever since the FOMC spike on September 19 and it has been bouncing up and down ever since within a tight 200 pip range. However, the currency has bounced off of the 23.6% and has never moved lower than that. Also, considering the up move prior to this range, one could argue that an upside break would make sense.
I am keeping a close eye on trend lines to distinguish when a potential break out might occur.
1) The green trend line is to see whether the currency can break to the upside. The goal of the upside would be 1.37 and 1.3850.
2) The orange and purple trend lines are to see whether the currency can break to the downside. Potential targets are the up Fibonacci retracement with a 38.2% at 1.3390, a 50% at 1.3368, a 61.8% at 1.3282, and a 78.6% at 1.3204.
However, be aware that an upside break might encounter heavy resistance with all of the previous tops (red lines). The first major resistance to crack is the immediate top at +/-1.3570.
The Kiwi in the meantime is steaming forward against the USD after a 3 week range of 200 pips and an uptrend continuation is clearly unfolding. Both the last week’s high and previous top have already been broken which leaves little doubt about the upside intentions of this currency pair.
With an uptrend in place, the next step we need to do is identify the next potential resistance:
1) The top of the weekly wedge indicated by the purple trend line is a massive resistance spot for the Kiwi.
2) On the daily chart the 88.6% Fibonacci retracement level at 0.8560 could cause havoc for traders who went long.
On the 4 hour chart, however, we are able to detect that the NZD is running out of steam – at least in the short-term perspective. A rising wedge pattern (purple) is visible and 4 hourly wicks are pushing through the red resistance line, not strong bullish candles.
I would like to see either:
a) Strong bullish candles break the top (red line) and then hook back to the same broken top that now should become support OR
b) Wait for this weekly candle to finish and then wait for a retracement of this week’s weekly candle for a long up to the weekly top of the wedge.
Do you like these 2 trade ideas? How do you see the EURUSD unfolding now that the U.S. budget talks have resulted in success? Let us know down below!
For more trade ideas from our trading room, take a look at this video with Double Trend Trap trade setups!
Wish you Good Trading today and thank you for sharing this article!
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