Hello Forex traders,
Last night’s FOMC statement did not create any volatility in the Forex market and price remained roughly at the same spot. Yesterday’s market was particular dominated by Aussie weakness. The CAD and JPY weakness trades struggled to continue and made bigger retracements.
Don’t forget to drop a note (in the comment section) which trades you took based on our summary video. Did you trade the AUDUSD, AUDJPY or EURJPY for instance? Let us know down below!
Due to the bigger consolidation zones, the market looks almost exactly the same as yesterday. Let’s review it together.
EU + GU CHART PATTERNS
The EUR is still making a bull flag pattern on the 4 hour chart versus the USD. It has respected all of the Fibonacci retracement levels to the dot (very exact bounces at those levels) – most recently the 61.8% Fib. Will the EURUSD break down or up?
I am keeping an eye on the trend lines (green and orange) for that answer. Also be aware of the 4 hour top at 1.3690. A break of that level (red) would indicate a potential break out towards the -0.272 at 1.3796. A break down will most likely struggle at the lower Fibs again.
The GBPUSD has a similar story as the EURUSD. It too is caught in a consolidation zone after an uptrend. It too has major resistance (weekly top) close by (red).
YEN WEAKNESS HANGING IN THE AIR
The Yen weakness trend is still in force on the weekly and monthly charts but it is finding support on the 4 hour and daily chart. Will the Yen continue to weaken or will there be a bigger correction?
Most recently price bounced off of the daily 38.2% Fibonacci retracement and it made a 2nd retracement to the 88.6% Fib in the subsequent pullback. The major lines which I am keeping an eye on are:
1) The support (green): a break of that indicates a decent probability of the USDJPY to correct lower – down to the 50% Fib;
2) The resistance (light green, purple and red): each break of the resistance increases the chance that the USDJPY is resuming the bigger uptrend.
Of course if the USDJPY moves up, other Yen crosses will follow suit such as the EURJPY, GBPJPY and NZDJPY. Watch out for the CADJPY and AUDJPY as the CAD and AUD are relatively weak as well and Forex traders preferably trade against stronger pairs.
AUD WEAKNESS CONTINUES
The Aussie had less doubts with its trend. It continued to decline to lower levels against the USD, EUR, GBP, CHF and also against the Yen. Take a look at this link to read more about correlations.
The break of the bear flag chart pattern (green and purple) was a classical break out opportunity, which many in our trading room capitalized on due our analysis (WET however choose CAD trades).
A continuation to break the bottom, however, is certainly not an automatic guarantee. A bigger retracement is always possible, but this move up should find tons of resistance at the 2 Fibs on the 4 hour chart (green and blue) and the top of the 4 hour trend channel.
An immediate break and continue would need a break out below the support (orange) trend line and the bottom at 0.8660. The targets are the minus Fib numbers mentioned on the chart.
What will you be trading in the last 2 days of the 1st month of the year? Let us know down below!!
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