Is that a bearish engulfing candlestick pattern I see on GBP/USD’s 4-hour chart? Ah, I think it is! The pair, after a strong rally up, seems to have run out of steam. In addition to the reversal candlestick pattern, the Stochastic is also pointing down and moving out of the overbought territory. If this continues, we may see the pair pullback to the Fibonacci retracement levels that I drew.
If you’re looking to sell EUR/GBP, then this setup is for you! As you can see, the pair is hanging around a former swing high on the daily chart. Not only that, but a bearish divergence has also appeared. If the resistance at the .8150 area continues to hold, we might see the bears take over again and take the pair lower to .8000.
Will you look at the beautiful range on AUD/JPY’s weekly chart? Man, it can’t get any clearer than that. What makes this horizontal channel even more important is that price has been trading within it for more than three years! This means that the pair is currently trading at a very STRONG resistance level, which suggests that price could soon reverse. The overbought Stochastic gives us additional confirmation that the move up could be exhausted. Then again, nothing is certain in the forex market, so still be careful when jumping in short!
To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis.