Careful, Aussie bulls! AUD/JPY is nearing the top of its range visible on the 1-hour forex chart and might be able to test the resistance at the 87.00 major psychological level. Stochastic is already indicating overbought conditions, which suggests that a selloff might take place soon, possibly taking the pair back down to the bottom of the range at the 83.00 major psychological support. However, if buyers are able to stay in control of price action, an upside break might take place, especially since the 100 SMA just crossed above the 200 SMA. If that happens, AUD/JPY could climb by an additional 400 pips, which is the same height as the rectangle formation.
Reversal alert! USD/CHF might be ready to reverse from its previous climb, as a double top formation is starting to form on its 4-hour forex chart. The pair has yet to test the neckline around the .9550 minor psychological level and break below this area before confirming the potential downtrend. If dollar bears stay strong, a reversal confirmation could spur as much as 300 pips in losses for USD/CHF, which is roughly the same height as the chart pattern. However, if the neckline holds as support, a climb back to the previous highs just below the .9850 area could be seen. Note that the 100 SMA is still above the 200 SMA while stochastic is approaching the oversold zone, hinting that sellers are about to run out of steam.
Is it time for pound bulls to get back in the game? Guppy is currently testing the bottom of its long-term rising channel on the daily forex time frame, with stochastic suggesting that a bounce is in order. The 100 SMA is also above the longer-term 200 SMA, confirming that the path of least resistance is to the upside and that the climb might resume soon. If so, price could head back to the top of the channel past the 200.00 handle or at least until the middle of the channel near 195.00. On the other hand, a break below the channel support could indicate that a longer-term downtrend is underway. If you think the trend is your friend and you’re hoping catch the uptrend, don’t forget to set your stop below the previous lows near 180.50.
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To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis. Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.