Aha! Looks like Cable is ready to test its channel resistance! If you’re a fan of forex trend setups, then you definitely gotta keep close tabs on this one. The pair was able to move past the mid-channel area of interest and is currently making its way towards the top of the descending range around the 1.5500 major psychological level. Stochastic is already indicating overbought conditions while the 100 SMA is safely below the longer-term 200 SMA, suggesting that the selloff is bound to resume. If the top of the channel holds as resistance, price could make its way back to the bottom near the 1.5000 major psychological level or at least until the middle around the 1.5200-1.5250 area.
Fancy trading chart patterns? Then you might find this rising wedge formation on EUR/GBP’s 4-hour forex time frame worth watching. The pair just bounced off the wedge resistance and might be ready to make another test of support near the .7400 major psychological level and moving averages. The 100 SMA is still above the 200 SMA for now while stochastic is nearing the oversold zone, hinting that a bounce is still possible. However, if euro bears are feeling pumped, they could have enough strength to push for a break below the wedge support and trigger a longer-term selloff. The chart pattern is approximately 400 pips tall so the resulting downtrend could last by the same number of pips. Better wait for the moving averages to make a downward crossover if you’re planning on shorting on a breakdown!
As always, I’ve got my favorite break-and-retest play on today’s canvas with this pullback on GBP/AUD’s 4-hour forex chart. The pair is currently testing the resistance around the 38.2% Fibonacci retracement level and is showing a bearish divergence, as stochastic made higher highs while price made lower highs. A higher pullback to the 50% Fib near the broken support at the 2.1400 major psychological level and the 100 SMA might still be possible but if the pair is ready to resume its drop from the current levels, another move towards the previous lows at 2.0800 might be seen. The 100 SMA is below the 200 SMA anyway, which means that a downtrend is in play. Better check if this setup meets the 9 Rules for Trading Divergences before jumping in!
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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.