Juicy Forex Trade Setups

Hello Forex Trader,

A new trading week is ahead of us: in fact it is the last week of the 1st month of the year. Let us take a look at potential trade setups in the Forex.

USDJPY 38.2% DAILY

As mentioned in the trading room frequently, the USDJPY made one more downside correction back towards the 38.2% Fibonacci retracement of the entire swing high, swing low. This Fib level could be of tremendous importance, especially considering the fact that the USDJPY is in a strong weekly and monthly uptrend.

27- 1- 2014 uj d

Yes, the 38.2% Fib is certainly a shallow retracement level. However, in strong trends the 38.2% is the main bouncing spot. The 2nd level to keep an eye on would be the 50% (in case price breaks below the 38.2%).

Upside targets are the Fibonacci targets:

1)      The -27.2% Fibonacci level (green) at 107.75

2)      The -61.8% Fibonacci level (green) and -27.2% Fibonacci level (blue) at +/- 110.70

EURUSD TRIANGLE

The EURUSD used the support level (light green) and the bottom of the daily support trend line (purple) at around 1.35 to eventually break above the falling wedge chart pattern (blue).

27- 1- 2014 eu d

Can this upside momentum continue?

Certainly: currently price has used the 38.2% Fib (green) as a support. The targets of that Fib are at the -27.2% Fib at +/- 1.38 and at the -61.8% Fib at +/- 1.3864.

What will happen at the next resistance (orange and red)?

Nobody knows, but Forex traders can establish that this is a bounce or break spot. If price were indeed to break above the resistance then a breakout trade on the weekly chart is in play. If price does not manage to break and price respects that resistance, then a fall back to the bottom of the triangle (purple) is the other likelihood.

27- 1- 2014 eu w

From the weekly perspective the triangle (magenta and purple) becomes better visible. The currency most recently bounced off of the 61.8% Fib (blue). A break above magenta or below purple would indicate the potential break out direction. For the moment with last week posting a bullish weekly engulfing candle, the route up seems more likely. The next weekly target for the upside breakout is the 78.6% Fib of the last weekly down move.

GBPUSD REJECTION

The GBPUSD moved up strongly from the expected support area at around 1.63. That support zone had multiple confluences come together such as broken resistance (green lines), broken weekly resistance (purple), and the bottom of uptrend channel (blue).

27- 1- 2014 gu d

The spike up saw price take out and touch the weekly Fib target (green) at 1.6650 without breaking the weekly top (red). That weekly top at around 1.6730 is a major resistance for the Cable. One more move up to challenge it could happen, but sooner or later a big retracement or even a reversal off of this level is certainly a decent probability.

What do the bullish and bearish scenarios imply on the longer time frame chart?

Currently price is above the weekly triangle. If this a false break out, then price would need to break below the broken resistance and now used as support (green and purple) again.

If price is indeed breaking the weekly triangle to the upside, then price would need to break above the 1.6730 (red). A break above this level could signal continuation of the bullish run up to 1.70, 1.7150 and then 1.77.

27- 1- 2014 uj m

Make sure to check out these links as well:

1) The quick and dirty guide to modern portfolio theory for currency traders 

2) Before a strategy matters

3) Weekly Forex recap January 24 (video) 

Thanks for tuning in and sharing this article with others!

Good Trading!

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