Last week’s educational article discussed candle sticks and candle stick patterns. Today we will be using that information to analyze and evaluate the Forex market. Our first stop is the GBPUSD.
The GBPUSD posted a very bullish candle last week. The open of the candle was equal to its low, which practically means that the bulls kept control from the very first minute of the trading week. The bulls also did not lose any of that control: the wick on top is only 10.5% (22 pip wick / 208 pip candle) of the candle body.
That development does not come as a surprise to our trading room members, who were diligently warned for the potential bounce the Cable could make in this zone due to:
1) The 61.8% Fibonacci retracement level
2) The bottom of the daily uptrend channel
[tweetable alt=””]A retracement of last week’s candle could take place on the GBPUSD before upside continues[/tweetable]. A break below its low would invalidate the bounce and change the dynamics of the price structure. A stop loss at this level would therefore make sense and be technically the best. The question is: how much of a retracement of last week’s candle could be expected?
The break of the downtrend channel becomes visible when zooming to the lower time frames. A hook back after the break to a Fibonacci level such as the 50% (with potential extension down to 61.8% or the 78.6%) Fibonacci retracement levels seem like an ideal bouncing spot. The first main target is the -27.2% at 1.6970 (magenta Fib).
The EURUSD has not yet reached the same bullish development as the Cable. It still has a clear resistance above it.
A) A break of this trend line would signal that the EURUSD is probably bouncing off of the 50% Fibonacci retracement level for more upside.
B) A failure to break this trend line (purple) could mean that this pair could correct to lower ground such as the 61.8% Fib.
The fate of the EURUSD is therefore still hanging in the air – just like the USDJPY. Time will tell what the momentum of this week will be: will there be a retracement or break?
The USDJPY is still stuck in a contracting triangle, which are indicated by the magenta trend lines. A break of these lines could finally indicate which longer-term direction the USDJPY could head towards.
a) A break above could mean that the 50% bounce is active
b) A break below could mean a lower correction down to the 61.8% Fib at 100
A break above the monthly trend line (orange) would really be needed before substantial gains upwards towards 107.50 and 110/111 could be expected. Then the Yen weakness trend would be back in play.
What is your analysis on the USD and the majors? Let us know down below in the comment’s section if you agree with me, or whether your tools and indicators are indicating something else!
Thank you for sharing this article and wish you Happy Trading and many pips! Let us know if you took any of the trades via articles or DTT videos, that is always much appreciated.
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