Hello Forex Traders,
Today’s article is focused on reversal trade setups in the Forex market.
First of all, the break out trade on the GBPUSD, mentioned in yesterday’s review of the Majors in the Forex market, is working very nicely so far. It was also mentioned in the Double Trend Trap video of last week. Hope you caught those pips on the Cable, but also EURJPY and USDJPY.
Today’s focus will review a mix of charts and currencies. It will be a wide variety of ideas, trade setups, warnings, and observations so please take a look what catches your interest. All of the currency pairs do have reversal potential. First stop is the AUDNZD.
The AUD has been weakening quickly, but not only against the U.S. Dollar, Euro and Pound. The NZD was also significantly strengthening against the Aussie.
Price is moving down nicely in a well built down trend channel (blue). However, price is close to the bottom of that channel and yesterday’s daily candle was a bullish pinbar after a significant move down of some 31 trading days in total and 6 days most recently.
Therefore, this could be a decent spot for a potential retracement or reversal. A long on the AUDNZD is obviously counter trend and therefore risky but there are supportive arguments for such a play.
The Stop Loss would need to be +/-10-15 pips below the bottom at 1.0940 and the target / take profit should not be aiming for higher than 1.120, which is the 61.8% Fibonacci retracement of the last move down and the most recent bottom on the left. Aiming for the top of the trend channel and the 50% Fib at 1.1080 could make the most sense.
EXPANDING WEDGE EN
Ann interesting chart pattern could be arising on the EURNZD. Although the chance of this pattern working out exactly as planned is rough to estimate, a potential expanding wedge could be taking place (orange). In this scenario the expanding wedge would be a bearish signal. In that case the target would be the -27.2 Fib at 1.5744 (red circle). The confirmation of such a scenario is the break of the daily support at 1.6440 (green horizontal and red arrow).
In the meantime the EURNZD might be building an uptrend (blue) as well. A break of the daily trend line (purple) could translate into a great Strike trade (special break out trade in our trading room) up to the next Fib which is the 78.6% at 1.7020 (purple circle and green arrow).
The uptrend on the GBPCAD has so far been a very quick movement. The big momentum burst (green arrow) accelerated in particular the last 3-4 weeks but the first breakout above the weekly consolidation zone (purple trend lines) already occurred a while ago.
The main target of the breakout is the -61.8% and 61.8% Fibonacci confluence area at 1.75/1.76 (green box). Price has now reached that level in one shot. The uptrend might be able to continue but obviously there is a potential retracement / reversal potential in this zone.
Especially if one considers the weekly Doji candle last week (red circle), which indicates a temporary indecision and a lack of steam to the upside. Last week’s high and low could be good levels to keep an eye on.
1) A 15-20 pip break of last week’s high could indicate the continuation of the uptrend.
2) A failure to break could mean more retracement or reversal.
3) A break of last week’s low could mean a deeper retracement or a reversal. Check out here how to trade this.
What pair are you most interested in at the moment? Let us know down below and we will take a look at this currency pair on Thursday!
Thanks for reading and sharing! Good Trading!
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