Wednesday, May 31, 2017

USD/JPY Is Bearish Despite My Expectations For A Rally

Despite my expectations for a USD/JPY rally, it seems that the pair will continue falling. I am not sure how certain that is from a technical analysis point of view and how much of an effect the Trump administration behavior has on it, but for the moment the USD weakness appears to be a fact.

The pair returned within the trend channel it had broken out above and if it breaks out below the support at 110.20 I think it will start falling to 109.50 – 109.00.

The true move to the downside for this pair, however, will begin if it breaks out below that zone as well.

That is a medium-term perspective, which could give the pair a push for three more waves to the downside, since from 118.66 to 108.128 there are three A-B-C waves.

In the alternate scenario the pair will stop falling above 109.00 and it will renew its rally.

I Expect A EUR/USD Rally

EUR/USD, without a doubt, is trying to continue its rally toward the resistance at 1.1500 or even at 1.1600 visible on the monthly time frame.

On the daily time frame we can see that there is a strong bullish bar that closed yesterday, after which the pair continued rising after the London session opened today.

On its way up the local resistance is around 1.1268 – 1.1270. If the pair breaks out above it, we could expect another rally to 1.1300 – 1.1350.

On the H4 time frame we can see an inverted head and shoulders figure, which serves only to strengthen the expectation that the pair could reach the last high at 1.1268 and decide at that level whether it will continue its consolidation or it will break out to the upside in the next one-two days.

In the alternate scenario the pair will continue consolidating between 1.1100 and 1.1270 for a few more days, but even if that were to happen I still expect an eventual rally. In my opinion, the longer the range lasts, the larger and stronger the rally will be.

Tuesday, May 30, 2017

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Monday, May 29, 2017

GBP/USD Will Probably Test The Resistance Trend Line It Broke Out Above

GBP/USD could not break out above the resistance at 1.3050 and began a correction to the downside.
There is a strong possibility that the pair will test the resistance trend line of the red triangle it broke out above, which has now turned into a strong support zone around 1.2550 – 1.2530 on the weekly time frame.

This expectation is confirmed by the flag that is developing at the moment and can be seen clearly on the smaller time frames.

What will happen next depends largely on the results of the snap general elections in the UK on 8th June, and there is little over a week left until that time.

In the alternate scenario the pair will try to test the resistance at 1.3050 immediately, but in my opinion it’s not very likely to break out above it right away.

As it is I think the latter scenario is less probable at the moment.

Friday, May 26, 2017

Will USD/CAD Break Out Below The Support Trend Line?

As I thought it would, USD/CAD reached the support trend line of the blue trend channel, which once again confirmed the bearish slant of this pair.

The rebound from that support is logical but the important part is to watch whether the pair will actually break out below the support trend line or not. If it does and that breakout is confirmed, the possibility for a larger drop increases. In that case, we could expect a move to the downside for about 650 pips. In the alternate scenario the pair will rebound from the trend line and it will continue rallying toward the resistance (blue) trend line.

For the moment I am not analyzing the larger (red ) channel, which has a limit of over 700 pips. The perspective of the pair to reach that limit is still valid, but it seems to be a possibility in the long term.

EUR/USD Is Forming A Possible Flag

Apart from the strong support zone around 1.1150 – 1.1170 which EUR/USD could not break out below, above this zone we can see that the pair is forming a trend channel (possibly a flag) with a 98 pips height at its base.

Here there are two possible scenarios, in my opinion. EUR/USD will either directly break out above the resistance trend line and rally to 1.1350 or it will fall to the support trend line and only then it will renew its move to the downside.

If it breaks out below the support trend line, I think we could expect a drop to 1.1060 – 1.1050.

I believe that my expectation for a rally to 1.1500 remains valid. In my opinion, it’s not a question whether it will happen but when it will happen. I think that we could expect such a rally in the medium term, i.e. in a month and half – two months, considering how the pair has developed so far.

Wednesday, May 24, 2017

The Strong Support around 1.1170 – 1.1190 Stopped The EUR/USD Move To The Downside

The lengthy consolidation period in that zone is hinting that a breakout below it won’t be easy and the pair might start moving north to 1.1210 – 1.1220 or even slightly higher than those levels.

That, in turn, makes me think that the pair might form a second shoulder of the head and shoulders figure. That, of course, is only a possible scenario that we should look out for. If it does happen, however, the next target of the corrective move to the downside would be at 1.1170 – 1.1150.

At this stage the direct renewal of the move north to 1.1490 – 1.1500 seems less likely to me, although at the end of the correction that is exactly what I expect to happen.

Tuesday, May 23, 2017

EUR/USD Reached A Resistance Level At 1.12681 And Began A Correction

The divergence on the H4 time frame between the last four highs was also a signal for a possible correction, which, if it reaches its limit, should lead the pair all the way down to 1.0950. When I examine the larger time frames I remain quite convinced to expect a deeper correction and the target at 1.0950 seems realistically reachable.

The correction, however, is just beginning, and we still don’t know what patterns the pair will form. In the next two-three days I hope we will get a clearer idea what to expect of this corrective move to the downside.

Also, despite the expected correction, I don’t think that the upward trend is over in the medium term. After the end of the correction I expect a renewal of the bullish trend which should lead the pair to 1.1450 – 1.1500.

Monday, May 22, 2017

At The Moment There Are Three Possible Scenarios For The USD/JPY Development In The Short Term

Today is Monday, a day when usually there are no major movements and the market is undecided in picking a direction. Despite that the USD/JPY picture is developing and getting clearer (at least in the short term).

I will begin my assessment from the smaller H1 time frame – as we can see, the pair is at the lower end of the range, which began on 17th May 2017 and continued until today. If we examine the range we could conclude with equal certainty that a breakout is possible in either direction – it could either possibly reach the limit of the wedge>>>, or it could break out to the upside.

On the H4 time frame the picture is clearer. The pair has reached the middle line of the Bollinger Bands indicator, and the price has already formed a range channel. Judging from years of experience observing this indicator, I can suppose that the pair will reach the lower band of that channel and the local low at 110.232 on 18th May 2017.

On the daily time frame the pair is definitely bearish and the target is around 110.40 – 110.00. It would test the low at the very least.

We should also watch what pattern the pair will form at the support at 110.20 – 110.00.

One of the scenarios is a move to the upside and a development within a range channel between 110.00 and 112.00. The second scenario allows for a continuation of the movement to 109.00 and in the third scenario there will be a renewal of the rally.

Saturday, May 20, 2017

An Interesting Development On The USD/CAD Charts – All Paths Lead Down

Regardless of the strong correlation between USD/CAD and WTI Crude Oil the former still moves following its own rules and forms figures that we can try to analyze.

This is what I see on the chart today:

It is noticeable that on the monthly time frame the pair is moving along the middle line of the Bollinger Bands indicator, which draws it close like a magnet and while doing so USD/CAD is forming a barbed wire pattern.

This pattern is very large and sooner or later there will be a huge outburst in either direction.
On the weekly time frame the pair is forming a trend channel once again (in blue) and I think it will probably reach the support trend line at around 1.3420 – 1.3400.

If USD/CAD breaks out below the support trend line of this new channel, the possibility for the pair to continue dropping is increasing, with the limit of the blue channel being 394 pips to the downside from the breakout level.

Friday, May 19, 2017

USD/JPY Broke Out Below The Support Trend Line Of The Wedge

This is a decent example of a wedge figure. The pair has reached the support and resistance trend lines four times, and after the breakout it has retraced in order to test the support trend line it broke out below, then it started falling again.

In the best case scenario USD/JPY will reach the limit of the wedge, which is its height at its base, i.e. 120 pips. Should that happen, the pair will drop to around 110.20.

We should not forget, however, that wedges are characterized by numerous false breakouts, and that their limit is not always reached.

Still, considering the fundamental factors which have an effect on the USD, this time we could see it reach said limit.

In the alternate scenario, the first target to the upside should be around 112.00.

Thursday, May 18, 2017

After A Huge Drop USD/JPY Stopped At The 110.00 Support Level

The scandals around President Trump in the past few days became a powerful catalyst for a huge drop of the USD against all other main currencies.

Only for six days the USD/JPY pair fell with over 400 pips, and yesterday alone the drop was 250 pips. In other words, the move to the downside reached exactly 61.8% Fibo of the last rally from 108.128 (17th April 2018) to 114.22267 (11th May 2017).

Obviously 110.00 is a strong support level, and we could very well see the daily bar closing as a very telling doji, which would mean that bulls and the bears have become equal and there is uncertainty on the on the market. So, what follows next?

On the H1 time frame this uncertainty is even clearer, as the pattern that is forming there is hinting at the formation of a head and shoulders figure. I am saying “is hinting at” because so far there is no complete and clear figure.

Regardless, in order to bring some clarity to the situation we need to follow very carefully what figure the pair will form in this support zone. And we should also follow the development of the scandal around President Trump and his possible connection to Moscow.

Tuesday, May 16, 2017

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Monday, May 15, 2017

EUR/AUD Is At A Strong Resistance Level

The EUR/AUD situation seems to be becoming clearer and clearer.

It is obvious that the pair is forming a flat correction in the zone of the weekly and monthly resistance around 1.49.

On the H4 time frame one can clearly see this corrective movement that interrupted the upward trend from 1.39816 (17th April 2017)  to 1.49099 (4th May 2017).

The correction looks like a pennant and there has been a breakout, with its limit being at 1.4955.

Considering the strong resistance above which the pair needs to break out, however, that expectation for a rally may prove incorrect and there could be a new drop toward 1.46.

However, even if there is a drop, I think that the correction remains valid, which hints that after it ends the pair may continue rising to 1.53 – 1.54.

Friday, May 12, 2017

EUR/AUD Is Preparing For A Rally to 1.4870 In The Short Term, In The Medium Term There Will Be A Possible Correction To The Downside

One can see very clearly on the H4 and H1 time frames that the pair has broken above a flag with a limit of about 120 pips, starting from the breakout level at 1.4751. If it reaches said limit, we could expect a rally to 1.4870 or 1.4900.

Still, before it continues rallying it is very possible for the pair to retrace back to test the resistance trend line it broke out above, not to mention that on the H1 time frame the pair has reached a resistance level and it has begun a pullback. The test appears logical, considering that in a few hours the market will close and the volatility is disappearing, there is simply no momentum left for another rally.

We should also follow the weekly time frame – we can clearly see that the pair is at a resistance level there, and the bearish bar, which should close in a few hours, is a signal for a reversal.

So the potential move to the upside could turn out to simply be a double top, after which there might be a correction to the downside.

EUR/USD Could Not Break Out Above The Resistance At 1.10. What Follows Next?

EUR/USD was moving to the upside very slowly, but it met a strong resistance at 1.10, which is visible on all the larger time frames:

the monthly one: 

the weekly one:

and the daily one, and it began a correction to the downside.

On the daily time frame so far the pair is moving within a clear trend channel.

Here there are several scenarios for the medium term: a slow move to the downside toward the support trend line of the channel and then a new rally or a period of consolidation and then a break out above the resistance trend line and a rally toward 1.15.

There is, also, a third scenario: a drop toward the support trend line, a breakout below it and then a drop back to the support at 1.04. In my opinion, the last scenario is the least probable one.

Thursday, May 11, 2017

It Appears That NZD/JPY Is Renewing Its Move To The Downside

The Reserve Bank of New Zealand interest rate remained unchanged, but the news alone about that were a powerful catalyst for a strong drop of the NZD against all other currencies.

After dropping for about 170 pips NZD/JPY reached a level which could technically be viewed as a diagonal support, and it could temporarily halt its descent.

If the pair breaks out below that trend line, however, the next support zone for the New Zealand currency is at 77.20 – 77.00.

Today is only Thursday, but we have to watch how the weekly bar will close – if the now forming bearish hammer is confirmed, we could expect the pair to continue its depreciation toward the local low at 75.50 in the medium term.

Wednesday, May 10, 2017

GBP/USD Stopped At A Strong Resistance Level Before The Snap Election

The zone around 1.2900 – 1.2990 logically turned out to be a pretty strong resistance for GBP/USD after it was a quite strong support zone too, in the period July-September 2016, which the pair broke out below only after testing it twice. Usually such zones have an effect on the way the price develops over time, and this is the case now too.

My expectation that the pair will continue rising to test the resistance trend line of the downward trend from 6th July 2014 to 2nd October 2016 remains valid.

The last bullish bar from last week is a pin bar, which formed above the bar before it, which in itself is a signal for strong bulls. Despite that, considering the strong resistance level, we could see a correction to the downside to 1.2880 – 1.2750, before the pair continues rising.

We should not forget that that in a month there will be snap general elections in the UK, which may help the Prime Minister Theresa May find more support from the parliament in the impending talks with the EU regarding Brexit. So I think that is possible for the pair to remain range-bound around the above-mentioned level in expectation of the election results.

Tuesday, May 09, 2017

The USD/JPY Rally Still Continues

USD/JPY broke out above the resistance trend line in a very convincing manner, with two bullish bars. The first is a clear pin bar, the second could also be interpreted as one (the body is quite large compared to the wick), but it also is very telling of the strength of the bulls for the moment, not to mention that it opened and closed the daily session above the daily time frame it broke out above.

I have deliberately marked the possible movement of the correction from the previous assessment, because that way I could compare how deep it reached to where I thought it would go. As you can see, the correction was much more shallow than my assessment, which is another sign of the bulls’ strength.

In my opinion, the first serious resistance will be in the zone around 115.00 – 115.50.

I think that to the downside the pair could test the trend line it broke out above, but if that happens it will be a good opportunity to look for entries to open new long positions.

Friday, May 05, 2017

USD/CAD Renewed Its Rally

Despite the breakout below the support trend line and my expectation that there will be a move to the downside, USD/CAD renewed its rally, and not only did it do that, but it also formed a new high at 1.37931.

At this stage there are two possible scenarios:

To the upside the target is at 1.3950 – 1.4000.

I still think there is a possibility for a move to the downside and the first target is around 1.3550.

We should not forget that that this pair is largely dependent on the price of oil and said price continues falling. I think that at this stage we need to be very cautious and in my opinion, it’s best to use intraday trading approach.

EUR/AUD Will Continue Rallying, Especially If Emmanuel Macron Wins

EUR/AUD did not reach the limit of its divergence and close the gap as I thought it would. Actually the correction was pretty shallow – only 200 pips, after which the pair continued moving north, climbing with another 400 pips, from 1.45013 to 1.49104.

On Sunday is the run-off election between Emmanuel Macron and Marine Le Pen in France, which will likely be won by the former as the EU hopes, and that will likely give the required fundamental push to the EUR so I think we will see this pair rally again. On the other hand, if Marine Le Pen wins despite the polls that predict that she won’t, we could see the EUR drop in an unprecedented manner.

What is the technical analysis picture?

On the monthly time frame there is a strong resistance, and on the daily one we can see a pennant that the pair has broken out above and there is about another 500 pips until it reaches its limit. If it breaks out above 1.4850 – 1.4900, I think we could expect a rally to 1.5300 or even higher than that.

On the monthly time frame we can also see an inverted hammer bar right below the support at 1.40. Such a formation is a signal for a long-term rally, which also supports my analysis.
So from a technical analysis point of view the move north appears more likely.

Thursday, May 04, 2017

I Expect A USD/JPY Rally To 119.00

USD/JPY has been rallying smoothly with almost no serious correction and reached the resistance trend line of the channel. Within the channel it formed a corrective flag that reached the trend lines four times that I can call an A-B-C correction without a doubt. The last above-mentioned move to the upside from 108.128 (from  17th April 2017) could be interpreted as an impulse to the upside.

That could mean that the correction is over at this stage and we could expect a breakout above the resistance trend line.

If that assessment is valid there could be a rally toward  119.00 at least, i.e. another 600 pips to the upside, where is the limit of the flag.

In the alternate scenario there will be a new move to the downside to the support trend line, but I think that is not very likely.

Tuesday, May 02, 2017

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Monday, May 01, 2017

USD/JPY Has Possibly Ended The Corrective Drop And Is Renewing The Rally

The way the bar on the monthly time frame closed tells me that that the expectations for a new drop should be forgotten at this stage. The bullish doji bar that has formed on the chart is a signal for a serious renewal of the move to the upside.

On the daily time frame the pair is obviously moving toward the resistance trend line of the channel and there is no doubt anymore that it will reach it.

If the pair breaks out above the trend line we could accept that the A-B-C correction to the downside is over and we could expect a serious rally, perhaps to 123.00 – 124.00.

In the alternate scenario the pair will reach the trend line and begin to fall again, but I think that is less likely to happen.