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.

About Trendlines and Their Importance in Technical Analysis (Part 3)

Later today we can expect the announcement of the FED interest rate, as well as a speech from FED Chair Janet Yellen.

Although such news usually cause tension and the market volatility drops until it comes out, I want to share what I expect and what my positions are beforehand. I made my decisions based on important trendlines and the pin bars that formed on the four-hour time frames.

EUR/USD: I expect that the most traded currency pair will move in favour of the EUR. The pair is at a support level at 1.1123 and on the four-hour time frame there is a bullish pin bar. I expect a move to the upside, towards the resistance trendline that has been framing the figure that the pair has been forming since 8th August this year.

GBP/USD is also at an important support level (the red line). What is more, in the past 24 hours the pair formed a double bottom on the four-hour time frame, not to mention that the two bars there are bullish pin bars. I expect a move to the upside towards the resistance trendline (the blue line) around 1.2090 – 1.3100. Once the pair reaches that level I think there will be a renewal of the move to the downside.

About Trendlines and Their Importance in Technical Analysis (Part 2)

Today the GBP/USD pair was retracing after the 250 pips drop last Friday, but despite that there was an opportunity to profit. One look at the charts was enough to notice the price channel in which the pair had been moving since the market opened during the night. The pair rose with 95 pips between the parallel lines of the price channel.

Since I know that after such a 250 pips drop a correction is all but mandatory, I used the smallest possible time frame (in this case the fifteen-minute one) and I opened a long position after noticing a divergence between the chart and the RSI indicator, placing a stop loss a few pips below the support at 1.2996.

After GBP/USD formed a pair of higher lows (the red 1 and 2) I drew the first trendline (the darker blue one). After that I drew the parallel trendline through the first high (the lighter blue line). That way the price channel was visible and I could trade from a high to another high, watching the price closely and closing my position – and profiting – every time the pair reached the resistance trendline.

The Bollinger Bands indicator also helped when the pair reached high 5 (in blue) at the upper band of the indicator on the one-hour time frame, which was a signal that the move to the upside had most likely ended for the moment. I was right about that and the pair started dropping, which gave me an opportunity to open a profitable short position. Meanwhile the pair not only reached the support trendline (the dark blue one) but it also broke below it.

This correction probably isn’t over, but I have closed my position and I am waiting for further development before I make any new decisions.

About Trendlines and Their Importance in Technical Analysis

Many newbie traders and some more experienced ones don’t realize how important trendlines are in technical analysis and how one can use them to improve their trading skills.

I know from personal experience that the moment I learned to draw the correct trendlines the chart essentially started “talking” to me in a clear language.

Unfortunately, many technical analysts often somewhat ignore trendlines and count more on indicators, candlesticks, waves and other approaches that can complicate a trader’s understanding of the logic of the forex market.

In the next few posts I will try to show how trading can be made easier by knowing how to draw the correct trendlines on every given chart and how much can all traders learn from them regardless of their level of experience.

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