Forex Triangles

Hello Forex Traders,

The first thing I do every early morning is to browse through the charts and search for trading opportunities. Are there any trend line breaks? Is there a pullback after a trend line break? Are there are chart patterns in play? What is the trend?

One thing I started to notice is the lack of a trend on most currency pairs. The GBPUSD has been bouncing up and down between 1.59 and 1.62 in big daily range. The USDJPY is still in a triangle as well – just as the GBPJPY and CADJPY. The NZDUSD is another classical example as well.

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The exceptions to this range environment have been the Euro and Australian U.S. Dollar, which have seen decent trending moves against the USD and GBP for instance. GBPAUD for instance has moved up and down within a 1,300 pip range, which offers decent trending trades, but is historically a rather tight range for this currency pair.

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The Kiwi was unable to break the key support level at 0.82 yesterday. This support in fact caused the Kiwi to bounce and make a momentum push up, which closed with a big exhaustion wick. That wick could be a trend line bounce but if we take recent price action into account, then the entire zone becomes a massive range. A move back towards the top of the range is possible.

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This daily consolidation (red and green) is in fact just part of a bigger triangle on the weekly (purple trend lines).

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The UJ too is in a well established contracting triangle. The range has slowly but surely tightened to a range of a mere 200-300 pips on a daily chart. A break out – when it finally does occur – could be very powerful due to prolonged quietness. Price is currently right at the top the triangle and is at a bounce or break spot. Both an up and a downside break out are good trades to capitalize on.

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In this regard the GBPJPY might be leading the way because its 2 month’s consolidation zone of 300 pips is breaking as we speak. The GBPJPY owes its nickname – the Ferrari – due to its fast and big movements. This tight consolidation zone, therefore, lasted relatively long for the Ferrari among the currency pairs.

The current daily candle is pushing above the trend line and is in the process of breaking. No worries if you have missed the breakout. Remember, there the Forex market always offers retracements. Forex traders always have tons of time to plan a trade. And it is our job to implement our plan to best of our abilities, which then should lead to profitability. Never focus on profitability without a clear plan, otherwise the success will not repeat itself.

In any case, a good plan would be to wait for today’s candle close. A massive wick would not inspire us to consider this a sustainable break for the moment. Also, there is a lot of resistance to the left of the chart (red line). And last but not least, the USDJPY is at a top of the triangle. Keep an eye on that currency pair as well. As soon as the UJ breaks upwards, there will be a high chance of seeing upside follow through on the Ferrari.

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Thank you for tuning in! Do you like trading ranges or are you a trend trader? Are you going to trade the Yen break out if it occurs? Let us know down below!

Good Trading!

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