NZD/CAD Tried Breaking above 0.9600 - 0.9650 for a Fourth Time

In a previous post of mine I described the interesting and rarely seen situation>>>  when there is a fourth attempt to break above a strong resistance level (on the weekly and monthly time frame), which proved in vain, at least for now.

On the daily time frame there is a high that technical analysis textbooks call “Eva” – i.e. the the high has formed over the course of several (in this case four) days, and after the last unsuccessful attempt to break above the resistance traders and investors started selling.

The situation with this pair has become even more interesting – such a high could become a double top, if the pair attempts once more to break above the historical resistance level. In the alternate scenario those attempts to break above the resistance will end and the trend will reverse.

Meanwhile let us take a look at the shorter time frames, which are usually what most traders focus on – for example the one-hour time frame. It’s quite noticeable that the pair is moving quite smoothly, the candlesticks have short shadows and long bodies and form long movements in one direction, which are great for intraday trading. That means that when the pair chooses a direction in the long-term intraday traders will have excellent opportunities to find new entry points to open new positions and profit.

In my next post I will focus on the different possible entry points which can be seen, as well as the outcomes of the trades and I will explain why such movements are very good for traders. Although these examples occurred in the past I think that from a theoretical point of view they can be very useful for many traders.

USD/JPY – Wave A of the Correction Is Possibly Over

It is not certain yet whether the trend has reversed because the pair hasn’t broken above the trendline yet, nor do we have new high or a higher low, but in my opinion it is normal for the first of the three corrective waves to fall to 50% Fibo, and in this case the pair has reached even lower – 91.81.

If I am correct we should witness a multi-month corrective move to the upside in the same direction as the impulse trend, which might reach 120.00 – 125.00. And although the supposed wave B that I have drawn on the chart is rather steep, I don’t actually expect it to be this way.

The B wave of a correction is the hardest to trade, and the traders who wish to do that should have nerves of steel, even if they’re following the signals on the daily time frame.

The BoC Rate Statement Caused a 140 Drop for USD/CAD

The Bank of Canada kept the interest rate as it was, which was expected, and that decision caused a big 140 pips drop on the USD/CAD charts. The pair even managed to fall below the strong support of the diagonal trendline that connects the last four lows since 23rd June. Eventually it reached 1.2935, but quickly retraced above the trendline again.

The drop, however, ended at the strong support at 1.2960 that can be seen on the daily, weekly and monthly time-frames, as well as at the diagonal trendline. In other words, we really need to keep this level in mind. If the pair succeeds in breaking below it and remains below 1.2950 we could expect it to continue falling towards 1.2850 -1.2800. For now it is unclear whether that will happen.

I, personally, would wait for a breakout below the diagonal trendline and a retracement back to the breakout before I open new short positions, but that is unlikely to happen today.

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The Downwards GBP/USD Trend Appears Exhausted

The huge crash of the UK currency seems over, at least for now. The move to the downside appears exhausted after the pair reached a historical low at 1.2788, but the political climate in the UK is such that investors still seem skittish to buy British pounds.

When there is such a huge drop it’s natural for a corrective move to the upside to begin, but in this case this is not happening. This is one of those rare cases that we see lately, when the fundamentals are completely in control of the currency pairs. GBP/USD is forming a tight range between 1.2850 and 1.3050 in a sideways consolidation, and on the daily time frame are forming bars that are showing that investors and traders are hesitating.

It is clear that everyone are expecting a news event to give the pair a push, regardless of its direction – be it to the downside, or finally to the upside. This news event should come from the British government which has to make the decision whether to invoke Article 50 of Treaty of the European Union or not.

All we can do is wait for that final decision before we decide to open long positions. Until then we can only trade on the smaller time frames.

NZD/CAD Is Testing the Resistance Zone Around 0.96 for a Fourth Time

The pair is at a very interesting level – it has formed a triple top and the expectation was that it would begin moving to the downside, but it has once again climbed to test the still unbroken resistance at 0.96.

There is no such thing as a quadruple top in technical analysis – or at the very least I have never read about one. The pair testing the resistance for a fourth time means that we will most likely see a breakout and a further move to the upside above the resistance level, which means that NZD/CAD will reach historical highs.

Only a strong fundamental reason could ruin this scenario. There are persistent rumours that the Reserve Bank of New Zealand could lower its interest rate, which is currently 2.25, and that will inevitably weaken the New Zealand currency.

Either way, it’s a good idea to watch this pair carefully in the coming months.

The NFP Data Caused a Market Disturbance, but Only Briefly

As usual the NFP caused a market disturbance in the first Friday of the month (although this time they were announced on the second Friday).

As analysts predicted, they were positive for the American economy, even more positive than what was expected.

While some currency pairs reacted by moving in a set direction (such as USD/CAD), others simply formed whipsaws, for example EUR/USD and AUD/USD.

AUD/USD was especially interesting for me today, because despite the strong positive data it first dropped in favour of the USD in the first minutes after the news came out, after which it immediately started climbing in favour of the Australian currency. That once again supported my conviction that the important economic data is more of a catalyst, rather than the main reason for currency pairs moving in a predefined direction.

Regarding AUD/USD  - despite the sharp drops the pair once again started moving in the direction I actually already discussed in my last post>>>, i.e. it began a corrective movement to the upside. It seems that no news about economic data can stop this predefined movement in the mid- or long-term.