Hello Forex Traders!!
The Euro and Pound currencies seem to be an interesting spot versus the New Zeeland and Australian pairs. Before we review these currency pairs, I want to make double sure that you are aware of the following trade ideas, analysis, videos and articles.
3) Nathan’s video analysis on how to trade consolidation
The first cross to be cross examined is the Euro versus Kiwi. Last week was a pretty hefty bearish weekly candle stick, after interestingly enough there was a gap to the upside of some 200 pips. Not a usual event. The currency seems back at support when looking at the daily chart.
When connecting the tops and bottoms, the chartist is able to a see the typical chart patterns of either triple and/or an ascending wedge.
1) Triple top: this pattern occurs when three tops are similar in price. This is often a reversal signal for the market.
2) Ascending wedge: this particular chart pattern occurs when the tops are equal to each other, BUT there is also a rising trend line connecting the bottoms. This is known as a continuation pattern.
3) Of course it is all about percentages and nothing in the Forex market is certain. All movements are probabilities.
4) The oscillator has a strong reading, confirming the statistical edge that a break to the north has higher chances. (purple)
With that said, a break of the tops (red) would be the signal of likely upside continuation. Personally I am waiting for a break, BUT also a pullback and continuation / 2nd break on a smaller time frame to measure whether the break is sustainable.
A break of the rising trend line (green) would be the first indication of a downside break materializing. Be careful of the daily support level at 1.64 though.
What do you think of the EURNZD?
The GBPNZD is exhibiting a different formation: a triangle (top and bottom purple). A triangle usually is a continuation signal as well for the market.
The continuation, just like the EURNZD, would mean an upside movement. A break of this particular triangle, however, is complicated by several factors:
1) The sheer size of it: more than 2 months in size.
2) But also because it is occurring right at weekly resistance lines (light and dark green, depending how a trader chooses to draw the trend lines).
3) The psychological price level and round number of 2.00.
We spoke about this resistance trend line already two (!) months ago and the currency is still respecting this wall. Some more observations:
a) Here too though, the oscillator is indicating a break of the top at 2.0050 is statistical very likely.
b) In the meantime there could be many bounces off of the top and bottom of the triangle, but currently price is not at either of the extremes.
c) Both a break of the bottom and the top are interesting to trade.
d) Upon the break, be aware of the resistance level at 2.00 and the support level at 1.90.
e) I will use the same method for trading as discussed in the EURNZD.
The uptrend has been most prevalent on this currency pair, which shows no sign at all of a triangle, wedge or flag. The only patterns we see on this chart are clear higher highs and higher lows.
The EURAUD obviously is trending. But is it bending?
Usual signals of weakness in a trend are among others:
2) Head and shoulders patterns
3) Rising or falling wedges
4) Major resistance or support levels
5) Major Fib targets an Fib retracements
I do not see many of those signals in place, except the fact that the -0.272 has been taking out. The odds of the current move down (from 1.50 to 1.45) turning out to be a retracement, despite the 500 pip fall are still decent.
1) The -0.272 was hit after the currency had corrected to a very shallow Fib: the 236 retracement Fib.
2) This means that the currency could either continue to the next target immediately to -0.618 at 1.57.
3) Or there is the vulnerability that it could retrace deep, all the way back to the lower Fib retracement level of 1.3575.
4) Effectively there could be a 1000 pip fall or 1000 pip rise from here.
From a daily perspective, the upside seems most interesting as price is above support levels such as:
a) The broken tops and resistance and now the currency could use those levels as support (red)
b) The weekly up trend line (green)
TRADING THE FALL OR RISE
Despite the upside bias I do have, I will be only trading it when I get a confirmation signal of upside continuation. For me that upside continuation signal is a break of a 4 hour top / fractal.
The downside would only be interesting for me upon the break of daily support (red and green).
The potential reward for both sides is marked by the boxes and targets. Blue for the upside potential space, and black for the downside potential.
On the 4 hour chart, the first newest 4 hour top would be the key level for the bulls and bears. A break of that top would indicate the first higher high on the 4 hour world, and a move back up is likely, even if the currency were only to move up to the resistance levels at 1.4850 or 1.50. Plus there is always that chance that the currency could continue to the -0.618 target at 1.57.
What do you think of the EURAUD trading plan? Write down your thoughts down below in the comment section!
Thank you for sharing this article – it is greatly appreciated!
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