USD/CAD Finally Started Falling

The impractical thing about trading on the large time frames is that everything develops very slowly and one needs to be very patient.

Despite that, one feels satisfaction when their prognosis comes true and the expected movement does occur, the way it happened with USD/CAD.

I think that the barbed wire pattern finally developed fully and the last bearish bar from yesterday 29th March 2017 completely engulfed the bodies of the last ten daily bars before it. In my opinion, that is the beginning of the expected move to the downside.

Since in this case I am examining the movement on the daily time frame, I think that the first target to the downside is 1.3250, but that is a support that shouldn’t be too difficult for the bears to break out below on their way down.

I think that the target after that is around 1.3160 – 1.3150.

Let me also remind you of my expectation that the limit of the flag on the weekly time frame is around 1.2450.

Of course, these are 900 pips and obviously this is at least a medium-term target.

Article 50 Was Triggerred Or Much Ado About Nothing

 Despite my expectations that the news about the triggering of Article 50 would cause a new sharp move to the downside for the British currency, and despite most people’s expectations that I read about – said news did not have any particularly impressive effect on the movement of the GBP.

GBP/USD and EUR/GBP practically remained range-bound, which means that the news has already been traded.

Under such circumstances we could only turn to technical analysis.

Regarding GBP/USD – the pair I prefer trading, I think that there will be a drop to 1.2250 – 1.2200.
I also think it is possible for the drop to deepen and for the pair to continue toward 1.2000 – 1.1970, i.e. toward the support marked by the red trend line.

For now it seems that the range will continue for a little while longer, until the market picks a direction.

The Expectations For A GBP Drop Remain Valid

Despite the expectations that the GBP/USD pair would drop, it continued rising with no significant correction and rallied for about 500 pips.

From a technical analysis point of view, however, the 126.00 level is a strong resistance both on the daily and the weekly time frames.

And since this is a currency pair that could be considered “illogical”, which in recent months strongly depends on politics, we cannot overlook the fact that that the expectations for a drop grow due to the fundamental conditions too – it has been confirmed that tomorrow, 29th March, the British Prime Minister Theresa May will trigger Article 50 for the UK to leave the EU. Under such circumstances it would be illogical to believe that the GBP will continue rising. I think we could rather expect a move to the downside.

So in my opinion, for the moment the expectations for a GBP drop remain valid.

USD/JPY Could Begin A Correction

USD/JPY picked the scenario where it fell directly after the breakout below the support zones marked by the blue rectangles on the screenshot, with the correction to the upside being insignificant and barely testing the resistance zone after which it fell with over 130 pips.

Despite all that I think that a correction to the upside is possible. These are my reasons why:

-On the H4 time frame the pair reached a support at 110.10.
-The bars that have formed are a signal for a possible move to the upside.
-The volumes of the long positions of the bullish bars above the support are increasing.
-And last but not least, there is a RSI divergence between the last two lows on this time frame.

I think that in case the pair does begin a correction it could reach 113.00 – 113.50.

On the other hand, if USD/JPY continues falling, I think it will aim for 109.50 – 109.00. In that case we should watch out for new, higher lows of the RSI indicator compared to the currency pair – i.e. signs that the divergence is deepening.

USD/JPY Today

USD/JPY managed to break out below both support zones I spoke about in my previous assessment of that pair and fell to 110.625, but apparently the next strong support is at that level, because the pair has stalled there for forty hours now.

I do think, however, that USD/JPY could fall even lower, toward 108.80 – 108.50.
In my opinion, there are two most likely scenarios:

The pair will either test and break out below the support at 110.60, or, after it tests this level, it will rebound from it and move to the upside to test the previous support in the zone around 111.60 – 111.90, after which it will move to the downside again.

 I also think that it will become clear quite soon which scenario the market will pick.

I Expect USD/CAD To Begin Falling

During the past eleven months we witnessed what looked like an endlessly developing flag on the USD/CAD charts.

In my opinion, that flag has fully developed now, with all necessary characteristics to be defined as such a pattern:
-Slightly converging trend lines.
-Four points at which the pair has reached them and a breakout at the fifth.
-A retracement to test the trend line the pair broke out below.

On the daily time frame, right below the broken through trend line there is also a well-developed barbed wire pattern.

At the moment the pair is consolidating right under the support trend line and if one is having a more aggressive trading approach now would be time to open short positions, but if they’re more conservative they could wait for the beginning of a move south in order to open such positions.

If the pair does begin falling the short positions could be opened from 200 pips higher than the initial breakout at 1.3175.

If it does move to the upside, then the target would be at 1.36, but I think such a scenario is not very likely.

The GBP/USD RSI Divergence Hints At A Move To The Downside

The move to the downside is logical, because the pair rallied with almost 400 pips without any significant correction, and we can count on the chart not seven, not nine, but thirteen waves to the upside. That is a quite the rare case, usually after nine sub-waves there is a deeper correction than the one we witnessed here, but now we could expect said deeper correction to occur.

The RSI divergence is present on the M15, H1 and H4 time frames.

On the H4 time frame the limit of the divergence is around 1.2250.

Of course, we should not overlook the possibility for a new move to the upside, after the correction is over. I think that  the target to the upside is at 1.2550 – 1.2600.