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Yesterday’s stale and quiet market was replaced today by electrifying movements. After the Yen rate decision was announced, the Asian and London sessions saw price volatility increase enormously with huge swings up, down, up and down. The firework work just never stopped and it was a field day for scalpers and intra-day traders.
It is time for the swing traders and long term position traders to start interpreting the new pieces of clues and puzzle pieces and incorporate that into a new analysis.
These pieces of information seem the most relevant to me:
- Yesterday’s bearish day candle on the USDJPY seems to get follow through on today’s day candle (pending that it in fact does close to something similar).
- In any case, although the 4 hour candles were very bearish in their move down and they broke through the orange trend line which acted as a support in the rising wedge, the move down could have completed the correction back down to the bottom of the light blue up trend channel. Price could and should use this support for a bounce back up.
- Price also respected the 786 Fibonacci retracement level so a move up from here has decent probabilities.
The question is how price will behave when it eventually does make a move up. Will it be corrective of nature? In that case the USDJPY might be ready for a break of the uptrend channel and the double divergence on the 4 hour chart is about to play out.
I am keeping a hawk’s eye on price action reversal signals on the 1 hour chart and lower. I will monitor to see how price reacts at the 500 and 618 retracement Fib of the last move down. At those levels we would also:
- Square up the bearish day candle
- Hook back to the previous bottom / support
Lets see how this pans out… Just in case you catch a trade… Once the trade does go your way, then read here how you can add to a winning trade.
The USD also seems week in relationship to the other currency majors such as the Euro, Aussie, and Kiwi. Even the GBP might be showing some signs of reversal of its down move.
Let us review the EURUSD and AUDUSD.
The EURUSD is making an ABC correction which signals continuation to the upside. The question is at what price level? A move down to the 500 and 618 Fibonacci retracement is still possible. Either a bounce from these levels or a break of the top are areas which I am monitoring closely.
The Aussie is acting a bit loony as of late but the bulls won today’s tug of work with style. The impulse up is being followed by a corrective pattern. If price action remains just as corrective in nature as it is now when the Oscillator reaches the zero line, then that is when I am interesting in catching a buy to the up side on the 1 hour and I will wage an attempt to position myself for a potential break of the top. If the move up fails again, then I should have sufficient reward to risk to take some profit at the top and move the rest to break even. If you are wondering why I am waiting for a move back to the center line of the AO, please read here more information about momentum, convergence and divergence!
As always, I wish you Good Trading and please don’t hesitate to drop a question or comment down below !
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