Uh-oh, it looks like the pair is starting to rev up for another strong move down. After the the sharp drop seen last week, price has now consolidated a tight bearish flag on the 4-hour chart. A bearish flag is typically associated with breakouts and is typically considered as a continuation chart pattern. If we see a candle close below the 1.1900 handle, the pair revisiting its 2005 lows at 1.1640 will be likely. Conversely, of 1.2000 could lead to a retest of 1.2100, a previously broken support level.
Now, let’s move on to a pair I know you’ve all been waiting for – the USDJPY! I haven’t posted an update on the USDJPY in quite awhile, so I thought it was about time I took a look at it. It seems to me that a symmetrical triangle is now forming, as the pair has been posting higher lows and lower highs. With price just testing the rising support line and stochastics just climbing out of oversold territory, we could see the pair rise back up and test the falling resistance line at 92.50. My question is, how long will these lines continue to hold? If we see a break of support, we could see the pair fall and test low at 89.25. On the other hand, if the pair breaks higher, we could see the pair go for the 2010 high at 95.00.
Lastly, let’s skip on over and see the action on the pound. It looks like the pair has formed a double bottom on the 4-hour chart. With a doji forming on the second bottom, we could see the pair continue to rise. Watch out though, for the 1.4550 price area. This lines up with the 50.0% Fibonacci level, as well as former support turned resistance. However, if it fails to hold, we could see price rise all the way back up to 1.4770!