GBP/USD Is Testing the Strong Diagonal Support Trendline and There Is a Potential For Longs

The pair has been testing this support for four days now and the diagonal trendline is at the same level as the (EMA)89 on the daily time frame. At the same time it’s becoming more and more obvious that traders are in the mood to buy the GBP.

This situation is a good opportunity to start opening long positions, and in my opinion the stop loss for them should be below 1.4370, which is the low formed on Monday, 9th May. The target of the long positions should be around the 1.4640 level, which is a powerful resistance, visualized by the upper band of the Bollinger Bands and (EMA)200 (the orange line) indicators on the daily time frame.

Is This the End of the USD/JPY Move to the Downside?

When I ask this question I am referring to the global trend that began on 1st Oct 2011 or more precisely, the whole cycle of 5 impulse and three corrective waves.

If we examine the monthly time frame we will see that at the moment the pair has fallen to 38.2% Fibo of the impulse, which makes me wonder whether this is the end of Wave A of the correction. If it has ended, then the possible move to the upside will last at least until the pair reaches 118 – 119. There is another scenario where the move to the downside could continue for a little while longer, until the pair reaches 50% Fibo, which is around 108.50.

Either way, we should expect a new move to the upside, so we should be on the lookout for good entry points for long positions, since Wave B of the correction should start climbing soon.

Forex Trading and Economic News Events

Today’s poor Non-Farm Payrolls data caused a wild, if short-term reaction on the market for all USD pairs, which is typical, at least in my experience for the years I’ve spent trading.

EUR/USD moved sharply north and then returned to its old levels, USD/CAD continued its steadfast rising despite the poor data, AUD/USD didn’t even move all that much – about 60 pips – and USD/JPY almost didn’t react at all and continued its sideways consolidation, which is an indication there will be a new move to the downside.

Why am I saying all this? Because I have always been convinced that news events, with few exceptions, are capable of causing strong, but short-term changes on the market, after which every currency pair continues in its previously chosen direction. For me the charts are the most important thing – because what we see on them forms the mood and expectations of the people participating in the Forex market.

Which is why for me it’s more important to be able to analyze the charts properly, rather than be interested in the details of the economic data causing every short-term disturbance on the Forex market.

There Was a Very Clear Signal for Short Positions on the EUR/USD Chart and It Had a Predictable Result

Such a clear and obvious signal is actually pretty rare to see on the charts of any currency pair and when it does appear it should be used to the fullest of its potential. The move to the downside that followed could be used in a textbook.

EUR/USD didn’t begin a considerable correction before reaching the resistance trendline of the daily time frame around 1.1625. That said, the pair started moving to the downside before it could actually touch that trendline even though only 10 pips remained until that could happen. It formed a very clear bearish hammer and has continued falling for three days now.

Although for now it has stopped at the support visualized by (EMA)89 on the four-hour time frame at 1.1390, I am convinced it won’t hold for long. I expect for the move to the downside to continue tomorrow towards the next, stronger support at 1.1450 – 1.1430, which can be seen on the daily time frame.
What will follow next will become clear tomorrow after the Non-farm Payrolls.

 

USD/CAD Couldn’t Break below 1.2650 and Began a Correction

The support there is visualized by the middle line of the Bollinger Bands indicator on the monthly time frame and as it happens almost always, once the pair reached it a correction began. Usually during such a correction the price either lingers on the middle line of Bollinger Bands or it bounces off of it.

In this case it’s difficult to say which one of these two scenarios will be more valid, but on the daily time frame you can see that the pair has broken above the resistance at 1.2700 with ease and it is rising towards the next resistance at 1.2950.

Whether the pair will bounce off that resistance once it reaches it or it will continue moving to the upside remains to be seen. I have to see what candlestick patterns will form on that level so I can make a decision whether to open new short positions or keep my long ones open.

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EUR/USD Reached Target 1.1530, But What Will Follow Next?

Тhe pair reached the resistance at 1.1530>>>, which is vizualized by (EMA)89 and the upper band of Bollinger Bands indicators on the weekly time frame.
The question is what will follow next?
In my opinion, the pair will probably test this high at least once more, or it will possibly form a new one at 1.1550.

However, I do not think it will break above this strong resistance level right away, which is why I think there will be a retracement. It is difficult to discern how deep this retracement will be, but I think its first target would be around 1.1450.

Also, considering that the pair has been moving in a bullish channel, I think it is possible that after a small correction it will start climbing and its next target would be the resistance line of that channel, around the 1.1650 level.