Forex Setups on Majors

Hello Forex Traders,

Friday’s NFP and unemployment figures were better than expected for the U.S. During the news event the EURUSD dropped from 1.3680 to 1.3620 but then strongly rallied back up to 1.3720. The price movement on the Cable was similar as the currency fell from 1.6375 to 1.6290 and then back up to 1.64, whereas the USDJPY made a rally at first and then went sideways.

The overall message was the same: USD strength as an immediate reaction to the news and then USD weakness as a second response. Technically speaking all the majors were in an uptrend and Friday’s news event caused trend continuation plays, albeit after some retracement. What can we expect now?

EURUSD

The EURUSD price action is bullish as last week turned out to be yet another bullish weekly candle, which marks the 4th one in a row. The close of the last week’s candle was also very near the high of the week, indicating a lack of selling pressure at the end of the week.

9- 12- 2013 eu w

The currency, however, is close to multiple resistances: the bigger weekly trend line and the 78.6% and 88.6% Fibonacci retracements (orange circle).

1)      A breakout above these resistances would mean that there is potential space for this currency pair up to the bigger 78.6% Fib at 1.432.

2)      A rejection and bounce could translate into the EURUSD falling back to 1.33, 1.3150, 1.2950, or 1.2750 horizontal support levels.

RETRACEMENT TIME

From a 4 hour perspective price has reached the target mentioned in Thursday’s article and has also reached the top of the trend channel. Whereas Thursday and Friday price had retraced sufficiently for an upside breakout, pullback and continuation trade, as mentioned in the trading room & summary video as well,  price now will have a hard time continuing to higher levels as the confluence of resistance is substantial.

9- 12- 2013 EU 4

The likelihood of a retracement is therefore very high and a drop is most probable. It will depend how price action will make the expected correction before a judgment can be made whether:

a)      The EURUSD makes small sideways correction such as a flag or triangle (purple) before the EURUSD climbs higher to the 88.6% Fib at 1.3770.

b)      Price makes a bigger retracement (orange) but then still bounces off of the bottom of the uptrend channel (dark green arrow).

c)       Price reverses and break out of the uptrend channel (blue) will take place (red arrow).

d)      Price could break immediately out of the top trend line of the uptrend channel and hit the 88.6% soon (mustard green arrow).

What are you looking for in the EURUSD? Do you use other tools that indicate other information? Let us know down below!

CABLE BREAK OUT

The Cable has been retracing sideways ever since the 2nd of December. So far the retracement has been very mild as price bounces up and down in a tight range. This scenario seems ideal for a with the trend break out scenario (green trend line), which will most likely happen this week. Join our Forex trading room if you want to catch this trade setup live with us.

The expected bull flag break out scenario would probably not happen if price were to break below the currency low at 1.6290. A break below this level would confirm the turn around on the Cable and potential reversal. Price is already passively breaking out of the uptrend channel (blue) so a break below the support invalidates the upside trades.

9- 12- 2013 GU W

USDJPY CAUTION

The USDJPY also had a great break out trade recently, which was also mentioned in the trading room. Price however is very near the daily top (red line) and a pullback to or close to the bottom of the uptrend channel or a sustainable break out above the top is needed to remove the potential resistance area.

9- 12- 2013 uj 4

If you haven’t read these articles already, make sure to take a look at:

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Thank you for sharing this article! Good Trading!

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  • Mak Desuza

    Really nice article I’ve found here thanks for this really helpful for me at fx-insight.

  • Chris

    Thank you GuruTrade! Happy to hear that! 🙂

  • Thanks a lot for a useful review! 🙂