Last week was a trading week which was filled with news events from all parts of the world but ultimately the weekly candles closed very bullish for the US Dollar. Therefore, yet another clear confirmation of the US Dollar uptrend was visible via the weekly candles:
- Big sized weekly candles removed any doubt whether the candles were ‘indecision candles’;
- All 3 major currency pairs – the USDJPY, EURUSD, GPBUSD closed with USD bullishness;
- The closes of the weekly candles were a few pips off of the candle low (EU, GU) or candle high (UJ), which indicates USD bulls were in control right up to the market closure.
Forex Traders have seen week after week of USD bullishness and I see no reason to change that analysis unless a clear reversal candle stick is present on the weekly chart. Luckily those who read the Winners Edge blog in July were promptly warned of the looming USD uptrend (click for the massive warning that was given!).
TRADING PLAN FOR THIS WEEK
With the trend direction clearly established, let us move on to discussing support and resistance, filters, triggers and potential entries.
Last week the USDJPY had a round psychological resistance level of 120 plus double divergence on the 4-hour chart but ultimately it managed to break that level after some expected volatility. The USDJPY could bounce at various levels but ultimately I am not expecting price to go back below the 120, which has turned into a support level.
Looking for confluence on lower time frames for a bounce is the best method. When placing a Fibonacci tool on the weekly candle itself, potential bouncing sports are the 23.6 or 38.2 Fibonacci levels at 120.90 or 120.30. A stop loss could be below the candle low (conservative) or the 50 Fib (119.70). The target is the -27.2 Fibonacci level at 122.90.
Important note: be cautious of the elections in Japan on Sunday December 14th.
The same Fibonacci tool can be used for the EURUSD and GBPUSD weekly chart so I am not going to bore you with exact same analysis. In case of the EURUSD the main target zone is the 1.2050-1.2250 level, which is where the bottom of a monthly wedge is present and support trend line can be found. The stop loss could be above the candle stick confirmation or above the weekly high.
When zooming into the lower time frame (4-hour chart), I am using 2 Fibonacci tools: one of them is the Fib on the weekly candle (blue); whereas the other one is the last swing high and swing low (orange). I am looking for price to retrace to any of these Fibs but preferably 38.2 or higher and then I am expecting a bounce for a turn back lower on the 4-hour chart. In this chart a stop loss above the origin of the orange Fib is sufficient with a target aiming at the -27.2.
Straight forward and simple analysis plus trading plan for this week on the EU and UJ.
How do YOU see these pairs and are you interested in trading them?
Thank you for sharing and Happy Hunting!
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