The EURUSD break, GBPUSD consolidation and USDJPY massive momentum all provide interesting opportunity during this week. With one more week of trading remaining in the month of November, time will tell whether the market has enough energy remaining to make any bigger moves in the week of the US bank holiday of Thanksgiving. Also be aware of bigger volatility during the last trading day of the month.
The EURUSD broke the 11 day consolidation with an impressive breakout: a 200 pip bearish daily candle with a close only 12 pips off of the candle low (a mere 6% of the candle was a wick at the bottom). Also at least half of the bearish candle was below the support trend line (blue), which is another requirement I often demand before considering a breakout successful or false.
I therefore consider a short at the 38.2 Fibonacci retracement (blue) at 1.2450 a logical entry, but price could retrace deeper to higher Fibonacci levels like the 50 and 61.8. An entry (purple circle) could done via a pending order at any of the 3 Fib levels or via a market order once price confirms the bounce (candle stick pattern).
I am placing a stop loss (red line) above the top at 1.2610, which is last week’s high and therefore critical bear – bull line and per definition the invalidation level of any shorts. The target (blue circle) is aimed at the confluence of -27.2 Fibonacci target (green) and -61.8 Fibonacci target (blue) at 1.2210-20.
USDJPY BULLISH MOMENTUM
The USDJPY bullish momentum has heavily accelerated and in the last 6 weeks the pair increased by 1300+ pips. Could the USDJPY uptrend continue or is the pair heavily overdue for a correction?
My answer is short and simple: probably both. When a trend this strong is under way, price often enough keeps pushing albeit with smaller increments, until of course the ultimate moment of correction occurs. Usually it’s better advice not to expect the retracement too soon, as many reversal traders know.
The current momentum upside should keep price pushing up higher until the price reaches the next major and key resistance spot: 120 psychological round resistance number. I am looking for another long when today’s daily candle closes bullish and the close of the candle is not too far off from the candle high (not more than 30% wick on top). Stop loss below the candle low and a target will be aiming at 119.70.
GBPUSD REMAINS IN CONSOLIDATION
The Cable is going sideways in a smaller consolidation (red box) but still heavily entrenched in a larger down trend. I am keeping a close eye on the following 2 developments:
- A bearish break of the consolidation;
- A bullish break of the consolidation that turns into a false break for more downside.
I am only interested in bearish setups as long as price stays in bearish territory, which is below the key resistance level (purple circle). If price manages to break above this key ‘line in the sand’, then I am reverting back to neutral on this pair until more information reveals the trend direction.
What are you looking for on the majors today?
What is your favorite trade setup?
Let us know down below in the comments.
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