Hello Forex traders!
Last week was a slow mover. The EURUSD weekly candle was only a mere 120 pips measured from high to low. The AUDUSD weekly candle was an unsual 100 pips in length from top to bottom. The GBPUSD and the USDJPY weekly candles were the biggest in size: 200 pip candles. Obviously last week was a slow week for swing traders and intra-day traders. Maybe this week more fireworks can be expected. Let us start with the EURUSD, but just in case you missed the „How to trade Gartley pattern” article, please check that out here.
EURUSD had an inside weekly candle which means that last week’s high and low could not break the high and low of the week prior to that. The close was roughly equal to the open as well, which indicates indecisiveness and a lack of signal in either direction.
Technically speaking the EURUSD is in an uptrend BUT it is also very close to a major top – resistance (red) horizontal line and it does have divergence on the daily chart. When a trend encounters such a major obstacle, then price needs to make a decision: break out or bounce.
In this particular case a major top and a yearly high is not an easy level to break through and the market is hesitating in front of this major resistance: can it break and continue with the trend north or will it bounce and reverse/retrace south?
A break north above the 1.3710 top would mean a high chance of getting to the next level or resistance which is at:
1) +/- 1.3835 which is the 61.8% Fibonacci retracement level
2) +/- 1.4320 which is the 78.6% Fibonacci retracement level
A break south below last week’s weekly low or daily trend line (purple) would mean a fair chance of getting to next level or support which is at:
1) +/- 1.3100 weekly bottom (green)
2) +/- 1.2770 2nd weekly bottom (dark green)
However, currently EURUSD is making higher highs and higher lows on the daily chart and because the EURUSD has been in a steady uptrend, we must realize that the downside could encounter support at the daily Fibonacci levels such as for example the 38.2% at 1.3440, the 50% at 1.3376, the 61.8% at 1.3310 and 78.6% at 1.3170.
In certain ways, the Aussie is currently in the same boat as the EURUSD. Price is in an uptrend but right in front of major resistance. The Aussie even has a neat uptrend channel to go along with its rise (blue channel). The top is highlighted by the horizontal resistance (red).
A break above the top could indicate a high probability of uptrend continuation on the AUDUSD to the next resistance level which is the 50% Fibonacci retracement confluence and the -0.272 target at 0.97 (green circle). The currency will pause, retrace or reverse at that spot. In case of a pause or reverse then there could be one more push remaining up to the next Fibonacci resistance level at 0.9920 (dark green circle).
If the trend cannot break the top, then I would consider a reversal to take place only after price has broken through the uptrend channel (blue) and the daily support (purple).
Are you looking to trade the AUDUSD as well upon the break?
As always, thanks for sharing this article and for your comments!
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