The Forex market could be ready to pick up pace as the month of August slowly comes to an end. What could we expect from the last trading week?
The Australian Dollar is picking up speed in its battle versus the New Zeeland Dollar. Last week’s weekly candle is towering above a top (purple) and a 3 week consolidation (red box) with a candle close well above both resistances and near the weekly high.
The AUDNZD is developing a strong breakout to the upside. What has happened?
First of all, it is important to note that the bounce up is occurring after a big downtrend of 3 years and 3000+ pips. After such a streak a retracement of that trend is not uncommon.
Secondly, price had approached a massive bottom with lows dating back to 20 years ago.
Thirdly, price was lingering at the bottom for 6 months but was unable to break the bottom. One of the rules in trading is: if a breakout takes too long, then expect price to retest the other side (with a breakout down/up, expect price to retest top/bottom).
With the break in place (magenta and purple lines of image below), how can traders capitalize on it?
An entry for an AUDNZD long could be a retracement of the weekly candle about half way at 1.1060. A stop loss should be below the weekly candle low at 1.0947. The target could be aiming for the -161.8% Fibonacci target at 1.1488. The AUDNZD uptrend in fact could go higher but traders must be cautious of the various resistance levels above it (orange and red lines).
Another currency pair to keep an eye on this week and next month is the British Pound versus Swiss Franc. The GBPCHF has been building on a steady uptrend ever since February 2013 (blue uptrend channel). Price recently made a retracement to the downside after hitting the top of the channel (blue) and -61.8 Fibonacci target (magenta).
Price could bounce in a bouncing zone due to various factors:
- Broken resistance often becomes support in the future (green lines)
- 38.2% Fibonacci retracement
- Half way the uptrend channel (light blue dotted line)
- Last week was a bullish weekly candle
Do these factors guarantee a profitable trade? In trading, nothing is certain but the factors do provide sufficient confluence for traders to be interesting a long setup.
The GBPCHF has some resistance remaining such as the resistance trend line (magenta) and the Fibonacci (orange). Potential trade setups could occur at bounce or break spots (decision moments). These bounces (green) are at the bottom of the channel (blue) or upon the break (purple) of the channel and resistance line.
Hope this analysis helps with your trading! Please let us know if it does or else, let us know how we can improve it.
Wish you Happy Trading!
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