Welcome traders,
Hope you had a great weekend!
As usual, on Monday’s article I will be scanning and analyzing long-term Forex charts to see if we are able to find a directional bias for the entire week.
But before kicking off this article, I am curios and would like to ask what currencies are you looking to trade this week? Tweet us your answer and reason and we will give you our feedback!
In any case, today’s article will be focusing on Forex analysis on the majors: USD, YEN, and EURO.
USDJPY
It was exactly one week ago when the USDJPY made an enormous crash. Last week’s open saw the UJ’s price gap up and then fall 400 pips in a very impulsive manner.
The bearish move, however, has not been met with any follow through. The UJ has seen support ever since and the weekly candle actually noted a slightly bullish close.
The strong move down almost begged for continuation but the bears have not managed to wrestle back control… so far.
The currency pair is now approaching the top and it is very close to the 786 retracement level of that swing high swing low to the downside. This begs the question: “how to trade the USDJPY”?
The current area is definitely an area where potential resistance might stop the bulls… at least for the moment.
Don’t forget that this week there are economic announcements on the Euro interest rates, British Pound interest rates, Yen monetary statements and U.S. Dollar NFP figures.
But despite the busy schedule, I do think there are a couple of likely scenarios which will unfold. Continue reading to gain a perspective how to trade the USDJPY.
Potential scenarios
In my Forex trading plan I will be closely following price action behavior in this region and be looking for clues of major resistance or a break of the top and continuation. The following is the best Forex advice I can give in this difficult spot for the UJ:
1) From a technical analysis point of view, the currency could definitely show reversal signs anywhere between the 786 Fib and the top for one more correction down. The currency in that case would complete a third impulsive move down, thereby completing a bigger ABC correction for a wave 4. A break of the bottom would be the biggest confirmation.
2) However considering the strength of the uptrend, last week Monday’s 400 pip drop might be all the correcting the UJ does. Only a clear break of the top however would convince me that the long-term uptrend is back in full force.
3) Another scenario could be a prolonged sideways range in which the UJ bounces back up and down between the tops and bottoms. If it were to make a bigger consolidation zone, then at some point in the future the UJ most likely will break to the upside.
Depending on which of the 2 scenarios unfold in the upcoming weeks, I am looking for the following targets.
Targets
If the UJ does correct deeper, then a nice area of confluence would be the -0.618 target. This target nicely lines up with the 382 retracement Fibonacci level for a great confluence. It is my current expectations that at this point the UJ will continue with the bigger uptrend.
If the UJ however continues to the upside without giving a bigger pullback, then the next target to the upside is in my opinion the 100 level, which is the 500 Fib retracement level on the week chart.
I am definitively incorporating these targets into my Forex trading plan.
EURUSD
The EURUSD had a bearish day on Friday with another push lower, which broke the 1.30 support level.
The move down would normal signal an impulsive move down towards lower levels but Friday’s day candle finished with a decent size wick at the bottom. There is also divergence on the 4 hour chart and multiple divergences on the 1 hour chart. Divergences on multiple time frames should always warn traders that a potential retracement could be around the corner. So for the EURUSD I am neutral in my Forex trading strategy unless we break the bottom or top on the 4 hour chart.
Thank you so much for all the sharing – it really is great when you share this info with other traders.
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