Hello Forex Traders!
Yesterday’s quiet market date came as expected due to the bank holiday in the U.K. However, things become more lively later in the day (evening of New York time) when the AUDUSD, GBPAUD, and EURAUD broke their corrections and have made massive gains so far. Oh and by the way, our own trading room Forex traders knew exactly how to enter those trade setups and capitalize on these corrections and breaks. Make sure to join us today! Anyhow, let us see if today the market could continue to loosen up…
I started my daily pre screening and almost immediately bumped into the GBPNZD pair, which I thought had an interesting setup evolving. I know that I talked about this currency pair not so long ago in Thursday’s article but last week’s candle surely changed the perspective (more info down below).
Before I dive into all of the details, I wanted to make sure that you see Nathan’s trade ideas on the EURUSD, USDCAD, EURGBP, and EURJPY. My own article yesterday discussed GBPUSD, USDJPY, EURCAD, and EURGBP as well.
The main and major difference between today and last week is the fact that last week’s weekly candle closed in a very bullish fashion. First the numbers regarding last week’s high and low:
1) The candle open is at 1.9278
2) The candle close is at 1.9937
3) The candle high is at 2.0075
4) The candle low is at 1.9154
5) Therefore, candle body is 921 pips
6) Candle wick is 138 pips or approximately 15% of the candle
I will share with you my thoughts of the above mentioned data:
1 The close of the candle is very near the high. This means there is only a small wick at the top of the candle. A candle which closes 15% off of the high or low is quite dominant in its direction, in this case bullish dominance. There was very little selling pressure towards the end of the week and buyers felt comfortable enough to stay in longs over the weekend.
- As an extra information / explanation: in general the closer a candle closes to 0% (no wick) or 100% (all wick), the more dominant that particular direction (bullish or bearish) has been within that candle. A figure closer to 50% indicates that there is no real control of either side.
2 The candle is massive! The size of the candle is 921 pips and that is, simply put, a very big weekly candle. This means that the dominance mentioned in point 1 (just above) has not taken place in some small little candle hanging around pointlessly between a couple of bigger candles. NO, it is a massive candle. The EURUSD for example had a weekly range of 170 pips. That is 5.5 times as large.
Translation of the above information: very bullish.
Does that mean we can go long immediately? No.
The weekly candle high did break through the 2.00 resistance but could not break the 2.0050 weekly top. Not only is there a horizontal resistance to be aware of but also a down trend channel. Price is right at both of those levels. And we all know that it is a bad practice to go long just before a resistance, as it is a bad practice to go short just before a major support.
A break of the resistance line (red) however would change the scenario and leave us Forex traders with a -0.272 target at 2.07. Clearly we can see that the currency has bounced off of the 500 Fibonacci retracement level which leaves us a clear goal once the resistance is behind us.
The same is valid for other NZD crosses. Let us make a quick summary of all of them:
1) The NZDUSD for example has a very similar weekly candle as the GBPNZD and it closed right in front of a major support and a weekly trend line. Here too it will be interesting to see if the USD can crack the support.
2) The EURNZD has almost an identical candle as the GBPNZD as well.
All of these pairs are relatively very similar in their position. It would be wise to check what is going on between the EUR, GBP and USD to see which 1 or 2 of the pairs (EURNZD, NZDUSD, GBPNZD) is best to trade when the break does occur.
Please let me know your thoughts of the NZD? Are you looking to trade the break as well? Do you think it will break, or is it going to bounce? Which currency pairs are you watching this week?
Hope you enjoyed the analysis. Last week we caught great trades on the AUD and CAD weakness. The CAD weakness was predicted already in an article of August 7, take a look here. Lets see if the NZD weakness plays out as well upon the break of S&R.
Wish you as always Good Trading and thanks for reading and sharing!
Latest posts by Chris Svorcik (see all)
- How to Remove Bias from Trading - October 22, 2014
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- The Number One Handbook on Trend Lines in Forex Part 4 - October 19, 2014
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