Friday, April 28, 2017
Today is the end of the trading week and in a few hours the market will close, but the situation on the H4 time frame is a serious warning that there will be a trend reversal. That would mean a likely closing of the 180 pips gap that formed on Monday after the presidential elections in France.
To confirm this expectation I’d like to point out that the pair has reached a strong resistance on the D1 and W1 time frames and another rally would be difficult without a correction.
Regarding my expectation about what is the target of that correction, considering the divergences, I would say that the main target on the way down is 1.40860, together with several closer ones at 1.41965, 1.41766 and 1.41176.
If the pair reaches the target at 1.40860, the gap that began from 1.42097 will definitely be closed. So all that remains is to wait and see how the pair will develop next week.
Thursday, April 27, 2017
The 192 pips gap that formed on Monday after the French presidential election has not been recovered yet.
The pair was range-bound practically during the entire week and moved below the resistance at 1.0950, which can be seen on the weekly and monthly time frames. The range was quite wide, it was between 1.08206 and 1.0949 and in the end on the H4 time frame formed a figure that resembles head and shoulders.
Considering this technical analysis picture I think that it is very probable for the pair to reverse its trend and begin falling, which will lead to the recovery of the above-mentioned gap. I think that the move to the upside appears exhausted at this stage and I see no serious perspective for its renewal in the next few days.
Wednesday, April 26, 2017
USD/JPY picked the scenario where it continues moving north and today it reached the strong resistance level at 111.00. At this stage it could not break out above it, but I think that it is possible to continue rallying to the resistance trend line of the channel after a small correction.
Still, I don’t know of many cases where the currency pair reverses its trend so suddenly without making at least one attempt to test the support trend line and I admit that I find the current development surprising. I still think that at least one test of the trend line could still be possible. There is also the fact that the gap from 24th April has not been recovered yet.
For now, however, USD/JPY is moving within the channel and while it remains that way all surprises are possible.
I have drawn the most probable scenarios, in my opinion, on the screenshot. In all cases, I think that the interesting development will begin once there is a breakout of the channel. I expect it will be to the upside, and if that happens we could expect a considerable move north.
Tuesday, April 25, 2017
GBP/USD stubbornly broke out to the upside if with significant difficulty.
The pair has remained above the resistance trend line for seven hours now, after it formed a flag from 19th April until today, when it started rallying. (H1 time frame screenshot)
The limit of that flag is 90 pips from the breakout level at the resistance trend line to the upside, which means that the target is at 1.2908.
Which, by the way, is likely not the end target of the rally.
The triangle (in red) it broke above has a limit of 779 pips to the upside and we also need to take into consideration the resistance trend line of the bearish trend that started on 6th July 2014 (weekly time frame screenshot). I think that if the pair reaches the limit of that triangle it will probably test that trend line.
Monday, April 24, 2017
The results of the elections in France caused the market to open with a gap on most instruments. That was the case with the EUR currency pairs – EUR/USD rose with over 190 pips, EUR/AUD - with about 180 pips, EUR/JPY – with 370 pips. That was a reaction to the fact that the pro-European candidate, Emmanuel Macron, had more votes. His presidency is expected to be a stabilizing factor for the European Union and the Euro, which went through such strong shocks in the past months.
The USD-related currency pairs opened with smaller gaps, but the reaction of the market had an indirect effect on them as well.
USD/JPY opened with a bullish gap of about 130 pips.
Despite that, until the next round of the elections in France there are two more weeks, enough time for the market to follow the logical technical development of the currency pairs. In my opinion, USD/JPY could still form another technical drop below 108.
However, if the pair just recovers the gap and then continues rising, we could see another rally to 111.50 or even to 112.50, i.e. to the resistance trend line of the channel.
Saturday, April 22, 2017
Although the pair reached the support trend line, so far there is no signal that the drop is over.
On the H4 time frame we can see that there is a flag forming, with a height at its base of about 108 pips, which means that after a breakout below the support trend line we could expect another move to the downside for 108 pips. Or, if we follow the support trend line of the channel, we could expect that the pair will fall to 107.70.
Friday, April 21, 2017
After the powerful rally from 18th April GBP/USD continues forming a correction, which, however, is developing much better than I expected.
I expected a drop to 1.27.
The Pound, however, stubbornly refuses to fall that easily, despite three days of correction. The only thing that it is forming now is a flag that is becoming clearer and clearer. It has a height of 90 pips at its base and that is a good indication what the first target of the pair will be on its way to the upside after the possible breakout.
Now all we can do is wait for the development of that flag and said breakout so we can use that opportunity to open long positions.
Wednesday, April 19, 2017
That happened yesterday, during the sudden announcement by the UK Prime Minister Theresa May that there will be a snap general election on 8th June this year due to her opponents’ disagreements with Brexit. She also stressed that decision was taken in the name of stability. The Prime Minister’s Conservative Party currently has 330 out of the 650 seats in the House of Commons and winning a bigger majority would give her more room to maneuver regarding Brexit-related decisions.
Regarding the technical analysis picture:
GBP/USD jumped to the upside with 400 pips and at the moment it is around 1.2780.
I expect a corrective drop to around 1. 2770 – 1.2675 and then a renewal of the move to the upside. If the pair climbs to the limit of the triangle, it could reach 1.3380 – 1.3400.
Tuesday, April 18, 2017
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Monday, April 17, 2017
GBP/USD obviously is aiming to reach the support trend line of the triangle that has been forming since the beginning of September 2016.
There are only 25 – 30 pips left until it does reach it and likely no one doubts that will happen. With that the pair will form the fourth wave of a classic Elliott wave triangle.
According to the Elliott Wave theory the fifth wave should be to the downside toward the support trend line and the sixth should break out to the upside, which is logical, because the triangle is forming at historical lows and it could become a trend-reversal figure.
That is according to Elliott.
According to other technical analysis theories, however, four waves are enough to say that there is a fully formed triangle. So there is a scenario where the pair will break out to the upside now, or it will reverse to the support trend line and break out to the downside.
For now it can’t be said for certain which one of these scenarios will occur, but we do need to focus on this pair. In either case there will be a large movement if the limit of the triangle is reached.
Saturday, April 15, 2017
During the last work day of this week the market was not particularly active, which is not surprising considering that we are at the eve of Easter, i.e. one of the largest Christian holidays.
EUR/USD, like most pairs, was moving within a tight range of about 20 – 22 pips during the whole day and when the market closed it was at 1.0610.
At the beginning of next week I expect a move to the downside to 1. 0580 – 1.0550.
If the drop deepens I think it is possible to reach even 1.0500.
On the other hand, if the pair starts climbing there is a strong resistance at 1.0670.
Still, I think that the scenario for a drop at the beginning of the week is more probable for this pair.
Friday, April 14, 2017
The Easter holiday is about to begin and with it the markets are winding down.
Despite that you can see that there is very little left (about 40-50 pips) until USD/JPY touches the support trend line of the channel.
That will happen either today after the beginning of the American session, or on Monday – I doubt there’s a trader who questions whether that will happen.
All that is left to do is to watch what the pair will do once it does touch the trend line – how large the rebound will be and whether there will be one or more new lows after that. Also, whether the pair will break out below the trend channel or will it reverse and move upward. Either way, we need to be very careful when opening new positions once the pair reaches the trend line.
Thursday, April 13, 2017
If we look at the weekly time frame, we will see it is important for the pair to break out below and remain under the support zone around 1.3270 – 1.3250. In case that does happen, the next support level that USD/CAD needs to break out below is the zone around 1.3000 – 1.2980. The pair rebounded from that zone once already and moved back to 1.3530.
If the pair breaks out below 1.2980 successfully this time around, we could expect another drop to 1.26 – 1.25 and even lower.
But that is a long-term prognosis. For the moment let’s focus on the successful breakout and the pair remaining below 1.3250.
Tuesday, April 11, 2017
The USD/JPY situation appears clearer and clearer.
The pair is moving within a trend channel and after the strong daily hammer bar that formed right under the resistance marked by the Bollinger Bands indicator we could expect that the pair will renew its move to the downside toward the support trend line of the channel, its target being around 108.50.
That is how the pair would reach the trend lines of the channel for a fourth time, which is the most logical thing to expect.
What will happen after that though?
The first most probable scenario, in my opinion, is a move to the upside toward the resistance trend line after the pair reaches the trend lines for fourth time. In case there is a breakout, the upward trend could be renewed with targets around 122 – 123.
In the second scenario there will be a breakout to the downside and a continuation of the bearish trend.
Monday, April 10, 2017
USD/CAD continued “persisting” and testing the trend line it broke out below, but could not break out above it yet again and as you can clearly see on the H4 time frame it fell with nearly 90 pips after its failure to do so.
I think that that regardless of how long this trend line test continues, the pair will continue falling, as I have already mentioned, and if the limit of the flag is reached then we should see a drop below 1.2500.
Considering that the flag is a trend-continuation pattern, it is possible for the move to the downside to be quite a bit deeper in the long-term – toward 1.2200 or even toward 1.2000.
For the moment, however, the first targets to the downside are at 1.3300, 1.3250 and 1.2950.
Friday, April 07, 2017
The US Change in Non-Farm Payrolls data that was released today turned out to be much worse than expected and despite that, apart from causing major volatility, the USD did not weaken at all, on the contrary – right now it is rising.
As far as GBP/USD is concerned my expectation came true completely – the GBP fell with 65 pips, I suppose that after a correction the drop will continue.
EUR/USD fell with 60 pips.
USD/JPY is an interesting case – the pair is moving within a downward channel, but it hasn’t reached the trend lines for a fourth time.
Despite that the pair has been range-bound for four days now and for now that just confirms the double bottom. It would be good to watch how today’s daily bar will close – in case it forms another clear pin bar, we could logically assume that the pair will rise toward 111.00 or higher.
To the downside the target should be at the support red trend line of the channel.
The data about the US Change in the Non-Farm Payrolls will come out in a few hours. This data usually has a pretty strong effect on the market as a catalyst of large movements at the very least.
As I read the economic calendar, I see that the expectation is for the data to be worse than last month, which should cause a weakening of the USD.
The GBP/USD chart, however, makes me expect something different:
On the weekly time frame the pair has been consolidating since October 2016 and sooner or later there should be a break out in either direction.
It is obvious that after the pair closed last week with a doji bar on the weekly time frame (something which is interpreted as indecision) it started falling.
My expectation is that move to the downside will deepen and we will see another return to the support at 1.21.
In case the pair renews its move to the upside the first resistance is at 1.2700.
We’ll know whether this prognosis is correct in a few hours.
Wednesday, April 05, 2017
A few hours ago, as I was drawing the parallel trend lines I thinking that it’s possible for USD/JPY to form a flag or a pennant, but the price proved me wrong, breaking out above the resistance trend line of the channel.
The pair rose with 36 pips, and, as it could’ve been expected, fell back to test the trend line it broke out above.
Under these circumstances it’s logical for the pair to continue moving to the upside toward 111.80 – 112.00, which was one of the scenarios I talked about in my last analysis of this pair.
I think that we need to watch this pair carefully as it reaches the resistance zone, as it is possible to begin a lengthly range there.
It’s possible for the pair to break out above 112.00 and to continue rising. The reason I think so are the two pin bars at the double bottom on the daily time frame.
We should also be on the lookout for the possible formation of a technical analysis pattern that could bring some clarity how the pair will develop further.
Tuesday, April 04, 2017
USD/JPY made a second, for now unsuccessful, attempt to break out below the strong support in the zone at 110.30 – 111.00 and began a correction yet again after rebounding from it.
That is very visible on the weekly, daily and H4 time frames.
I think the first target of the move to the downside is the zone around 110.80 – 111.20.
In case this zone proves too hard to break out above for another rally to follow, we could witness a new test of the local low around 110.30 – 111.00. In case USD/JPY does break out below it – after its third attempt, we could see a drop toward 108.50 or even lower than that.
Still, we should keep in mind that all movements to the upside of this pair for the past six-seven months until now have been strong and in the form of an impulse, while all moves to the downside have been corrective. That makes me think that the long-term move to the upside is not over yet.
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Saturday, April 01, 2017
The GBP/USD pair continued moving to the upside, and in my opinion that means that for the moment we have to pay attention mainly to the technical analysis picture, as the fundamental one does not seem to play any considerable role.
I will begin from the monthly time frame: the pair has been moving within a wide range of 700 pips for five months now and we can see that on this large time frame has formed an obvious barbed wire pattern.
The range can be seen very well on the weekly time frame and the target of the current move to the upside is around 1.2650 – 1.2700.
In case, however, the pair breaks out of this zone, we could see a rally toward the red diagonal trend line, connecting the highs of the move to the downside from 13th July 2015 (1.71910) until today.
Despite that I think that is a corrective move to the upside and the downward trend from the last two and a half years is not over yet.