Hello Forex traders,
The GBPJPY has an identical situation as the EURJPY, which was discussed in yesterday’s article. It too is in a tremendous uptrend and it too has space to continue.
The most noticeable chart element is the daily uptrend channel (blue). This channel is well balanced in time and in price movement, which gives the channel a sustainable angle. Price was near the top of that channel end of December 2013, but in the meantime has retraced back to the middle line.
Price accelerated the quickest upon the break of the previous two trend lines with the magenta and purple colors. The most recent break (above purple) saw price accelerate upwards within a neat uptrend channel (green) and that channel worked very well in our trading room as a guide for the speed of uptrend. Currently price is below this channel but there could be other reasons for potential support.
a) If a Fibonacci retracement tool is placed on the last swing up, then price used the 38.2% Fibonacci retracement area (green) as a bouncing spot. This particular Fibonacci level is a shallow level, but could certainly be used in strong trends. And the GBPJPY is certainly an example of the latter. Thus the 38.2% Fib level would make plenty of sense in the current context.
b) Also the Oscillator tool is indicating that the bars have returned to the midpoint (0 line) after a very strong reading to the upside, which means that there is a decent chance that the retracement is finished.
The main target is the -27.2% Fibonacci level at 179.80. It also ties in with weekly resistance (highest red line) and the psychological round figure.
LOWER TIME FRAMES
The most recent break of the resistance lines (orange) is showing the power of the GBP versus the JPY. There is currently one more resistance line left: the top of the smaller channel (purple lines). A break above that level means more upside continuation to test the tops (red horizontal level) and potential break out continuation trades (green arrows). A break below the channel could see the GJ reverse down lower, maybe back to the 50% Fibonacci retracement level (red arrows).
The EURCAD has an equally well developed uptrend channel (blue) as the GBPJPY. There is one significant difference: the EURCAD broke out of its uptrend channel to the upside, thereby actually accelerating out of the channel. It later on pull backed to that channel and then used it as support. In the meantime it is building a channel with a steeper angle (magenta).
The Fib levels are also important to mention. The currency stopped at the 50% Fibonacci retracement, then continued up towards the -27.2% which, as expected, caused the currency pair to retrace, and then made one more push towards the next Fib at -61.8%. This level caused price to make a substantial consolidation zone as well, but in the mean time price has broken above that Fib and the previous top (from 27th of December 2013).
Basically: the trend seems to be strong and it seems to be accelerating. Can this CAD weakness continue? The next target should be the -100% target at 1.5289.
IDEAL BREAK OUT WAITING?
Let’s zoom in to the 4 hour world and a Forex trader would see various interesting elements such as:
a) Impulsive price action to the upside.
b) A bull flag (purple trend lines) within this uptrend channel.
c) Broken resistance providing support.
d) A 38.2% Fib bounce.
e) A high Oscillator hump to the upside.
f) A retracement back to the middle line in the meantime.
All those aspects are leaning towards a potential break out to the upside. All that is still needed is price to break out of the bull flag and the nearest 4 hour resistance level. Target could be the -27.2% at 1.5149.
Are you looking to trade the EURCAD or GBPJPY? Let us know down below!
Thanks for reading and sharing – Good Trading!
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