Forex Majors Ready to Bounce

Last week’s trading week was filled with a ton of news events throughout the entire week, which was the equivalent of a big Forex “storm”. With those now behind us, the weather might be able to settle down again during the upcoming week and provide some clear sky sailing and trading for us Forex traders. Here below is a list of potential opportunities. Don’t forget to add a pair you find interesting as well (in the comments below).

EURUSD

The EURUSD downtrend has been strong and non-reluctant but there are signs of trend exhaustion. The two main contributors are:

  1. A falling wedge chart pattern on the 4 hour chart (orange line)
  2. Single divergence between the 4 hour bottoms (green line on oscillator)

22- 9- 2014 eu 4

These two facts do not necessarily translate into an immediate reversal, but they do increase the chances of the down trend stalling, retracing or even reversing.

I will keep a close eye on how price responds to the various resistance levels such as:

  1. The top of the falling wedge
  2. Horizontal resistance at 1.29 – 1.2925 (red)
  3. Horizontal resistance at 1.2975 – 1.30 (red)

These decision spots provide clues whether price will bounce and remain in the downtrend or break and exit the downtrend (for a bigger correction).

GBPUSD

The GBPUSD retraced deeply last week back to the 38.2% (magenta) Fibonacci of the entire bearish swing and the 78.6% (dark red) Fibonacci of the most recent swing.

After a strong run up, the Cable showed a massive bearish candle stick pattern on Friday with a big wick on top and a bearish close. Such a pattern usually entails the end of a correction. If it does, the GBPUSD could be heading back in the downtrend and targeting the support below it (Fib levels, 1.60 round number, weekly support (blue)).

22- 9- 2014 gu d

The 4 hour chart displays the support (green) which needs to broken for downtrend continuation. It also shows that price managed to break above the resistance trend line (red). Is this a 1st signal of a reversal or will it be considered a false break out?

Forex traders will be able to make that judgment by analyzing how price responds to the smaller uptrend channel (green lines) and resistance levels (red lines). These decision points lay out the classical break and bounce spots for this trading week.

22- 9- 2014 gu 4

USDJPY

The USDJPY uptrend remains strong with weekly candles towering above the consolidation. How far can the USDJPY bull run last?

With such a massive breakout candle on the monthly chart (although September month is still open), the most likely target is the -61.8 Fibonacci level at 120.

However, price will make some retracements along the way and 110 could be such a stalling spot due to a confluence of resistance such as the 110 psychological round number and the -27.2 Fibonacci target. I would not be surprised if price does something like this:

22- 9- 2014 uj m

Conclusion: I am cautious with the USDJPY but there could be some upside remaining until the next resistance layer at 110-111. EURUSD is showing signs of exhaustion and I will keep an eye on how price reacts to the resistance for more info. GBPUSD could have completed its retracement and I am keeping an eye on the support line for a downside break.

How do you see the market? Any setups that are interesting?

Thanks for sharing this article and wish you Happy Trading

 

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