Although August turned into a bearish doji candle, overall the USDCAD still has a bullish market structure when looking at the long-term trend. Here are the main factors to consider:
- Uptrend trend line has acted as support (green line)
- Price has bounced off of broken resistance, which was used as support (red-blue line)
- All of the recent price action (last 7 monthly candles) has stayed within the boundaries of 1 bullish candle (purple)
However, the last time a higher high was made by a monthly candle dates back to March of 2014 and thus the uptrend should continue THIS month of September, otherwise the currency pair runs a high risk of making a reversal (price down) or bigger consolidation (price flat). Read more here about why and how time factor of importance in Forex trading. Keep on the look out for bullish signals throughout this month.
The Euro has not managed to recover any ground against the British Pound in the last 5 months. In fact, of the last 13 monthly candles 9 of them were bearish, 1 was a Doji and only 3 were bearish (of which 2 had wicks on top of the candle). The statistics speak for themselves: obvious bearishness.
How much downside momentum could still be expected with a massive bottom (blue) nearby? The magnitude of the bottom is enormous: it has been the lowest point in the EG history of the last 6 (!) years. With such a major support level around the corner I am staying on the sidelines until either:
- The 6 year low of 0.7750-60 is broken and bearish downtrend can be expected (red arrow)
- Last month’s high (red line) is broken and a reversal bounce could take place (green arrow)
The Kiwi versus US Dollar had a very bearish summer (in the northern hemisphere) as the months of July and August turned into big bearish candles and a 500 pip drop. With a double top in place the main question is: how far can the reversal fall?
The answer lies in market structure of the NZDUSD and this potential seems limited for the moment – although a bigger rising wedge chart pattern (green lines) did form AND break last month. However with various support levels long the way the NZDUSD could easily bounce at multiple spots (blue lines). A break of the bigger support lines is needed before more bearish momentum is expected.
The GBPCAD has dramatically reverted from its highs after it was unable to break the top and failed to continue with its previous bullish momentum. The bearish engulfing twins (orange circle) on the monthly chart have concluded the uptrend and placed any bullish ambitions in the freezer. A retracement of the Augusts’ bearish candle is therefore a short opportunity for further downside, which is something that traders can monitor on lower time frames throughout the month.
Is there any particular pair that you would like to see added to this monthly analysis? Let us know down below!
In the meantime Happy Trading!
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