USD Impact On Majors

Hello Forex traders,

Patience is key in trading Forex and the EURUSD certainly tested that skill to the maximum. The long drawn out correction which slowly had turned into an uptrend was smashed yesterday as the EURUSD crashed through the trend line with lots of momentum.

In our trading room we have been consistently warning that the upside trend is corrective and will find its borders sooner or later before a break unfolds. The same holds true for the GBPUSD where we explicitly warned for the 78.6% Fibonacci retracement level at 1.6180. The EURUSD break and GBPUSD bounce signaled USD strength during the day of the FOMC meeting minutes.

If you were not aware of these pending “threats” for the bullish case, then take a look at the link of our trading room – it is definitely worth it 🙂 The question now rings: what next? Let us take a look!

EURUSD

The trend channel (purple) had a weak angle and price action behaved correctively and choppy, which easily could be described as a bear flag pattern. The turn occurred at the 50% Fibonacci retracement and the downside breakout has so far been accompanied with a decent thrust and momentum. This downside momentum was already very strong prior to the bear flag and supports the potential downside continuation in fact.

21- 11- 2013 eu 4

When zooming out to the daily chart, the bearish momentum translates into a big bearish daily engulfing twin. Downside continuation is imminent and test of the bottom at 1.3290 is more a question of when, not if.

Of course, a retracement of yesterday’s daily candle and a hook back to the broken trend line is always possible. A Fibonacci retracement key can be placed on yesterday’s daily candle if a retracement were to happen.

21- 11- 2013 eu d

However, that does not necessarily have to occur today. The EURUSD could continue its fall before making a correction. Smaller time frames would have to be used to trade a break below yesterday’s low at 1.3415.

Once price breaks through the bottom at 1.3290 then the Fibonacci targets are in play. The first one is 1.3150, then 1.2960, then 1.2760. The downside scenario becomes less likely when price were to move up aggressively today and then make a bull flag or when the 4 hour chart is showing higher lows and higher highs.

GBPUSD

The Cable respected the 78.6% Fibonacci retracement level, but this does not necessarily translate into a confirmed downside. The respect for the Fib level could still be a retracement and the currency could push up to the 88.6% Fib.

21- 11- 2013 gu 4

A key level is the 4 hour support at 1.6060. A break of that level is a very good first confirmation of impeding bearish momentum turn. The fall down could have lots of space. The only way I can become bullish on the GBPUSD is if price were to break above the daily resistance at 1.6250 and 1.6330 OR the Cable must provide clear higher highs and higher lows after the downside retracement to 1.5980 or 1.5920.

21- 11- 2013 gu d

USDJPY

The USDJPY is clearly pushing to the upside and breaking the 100.60 top as I am writing this article. The triangle break and subsequent bounce off of the broken triangle is thereby getting a bullish continuation. The next major level to break is the 101.60. Once that happens then an upside trend would seem hard to stop. First target is the daily top at 103.70, after which the currency pair could make its move all the way to 110, 120 or even 125 eventually. Of course, expect ups and downs along the way, but the USDJPY could make many shallow bull flags once it is indeed in a confirmed weekly uptrend.

21- 11- 2013 uj d

How do you see the above currency pairs unfolding? Let us know down below!

Thanks for sharing this article!! Good Trading!

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