Long-Term Candles in Forex

Hello Forex traders,

The first month of the year is closed and completed and the new trading year of 2014 has its first monthly candle’s high, low, close, and open. Last week’s FOMC statement sent the USD higher but is price action supporting this rally? Find out here below as we take a look at the monthly candles!

To review the monthly candles via a video, please click on this link. 

EURUSD

The EURUSD posted a very bearish candle in January. The close of the candle closed very near the low, which adds bearish momentum to the mix. Another interesting observation is the lack of power to break through the resistance lines (magenta and orange) and the exact turn at the 61.8% Fibonacci retracement level (green).

The EURUSD is still in an uptrend on this monthly chart, but there is a chance that the uptrend ended here which would mean bigger downside in the long run.

1)      For that to happen, more downside confirmation is needed such as a break below the monthly low of November at 1.33 and later on a break below green.

2)      The upside trend will most likely continue when price is able to push through the trend lines (orange and magenta).

3- 2- 2014 eu

GBPUSD

The Cable also posted bearish monthly candles but it did it after breaking a wedge (purple) to the upside. Price is now caught in between major resistance (thick red) and support (purple and green). From this higher time frame perspective, price needs to break above resistance or below support for a better understanding of the long-term potential.

3- 2- 2014 gu

USDJPY

Whereas the USDJPY uptrend had lots of power at the end of 2013, the previous month of January could not sustain the same pace and it posted a bearish candle too (similar to EU and GU). The interesting aspect about the candles is this: the price action formation looks like railway track candlestick patterns, which indicate a bearish reversal.

Is this indeed the end of the uptrend? For the moment I am more inclined to give the uptrend the benefit of the doubt and regard this downside as a potential retracement. In such cases, it is best to place a Fibonacci retracement key from the breakout of the wedge to the top (blue Fib). The 38.2% and 50% Fib levels could easily be the turning spot for upside continuation. Failure for price to do so could mean a bigger consolidation zone or even trend reversal.

How do you view the USDJPY?

3- 2- 2014 uj

AUDUSD

The Aussie posted yet another bearish monthly candle amidst a series of bearish candles. The downtrend is showing no signs of exhaustion as yet, which means that the Fib targets are the primary levels to aim for as the Aussie has wide open spaces (WOS) down below. As always though, be cautious of the possibility for price to correct last month’s candle before making a drop. Last month’s high is at around 0.9120-30.

3- 2- 2014 au

Alright traders, before we wrap it up, please leave a comment down below in the comment section: what do you think of the USDJPY and other candles? Let us know here below.

Tomorrow we will be back with more monthly analysis on many of the major crosses such as EURJPY and GBPAUD. In the meantime, thank you for your attention and any of your comments and/or shares!

Wish you Good Trading!

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  • Chris

    Hi Gerhard, thank you for your comment and contribution! 🙂 great analysis. Yes you are spot on with the USDJPY long-term trend. The Yen has strengthened significantly over the last 30 years and this impulse / trend up is a correction of that major move down. Whether the corrective impulse is over is the big question indeed. As long as price stays above 100/max99 I remain bullish when looking at the daily formation (sufficient power to break), but if those levels dont provide enough support, then the bigger long-term resistance level is winning. Thanks again for your insight!!

  • Gerhard

    Hi
    in regards to USD/JPY the USD/JPY is actually in a very long downside Trend, if you look at the monthly over years. Therefore the fundamentally based short-term upside move from Nov 2012, from the lows actually can also be viewed as a correction in the very long time frame. Only if the upside correction (or short-term uptrend) breaches the the very long down trend line will we see a move with Potential for 124. But first we need the break and confirmation.

    Regards Gerhard