The British pound didn’t take much ground back from the Greenback in 2015, only making up to the 50% Fibonacci area before sellers took back control. With sentiment on Sterling still on a sour note because of lowered expectations of a rate hike, the setup to watch in 2016 is for a break of 2015 lows around 1.4560. This could draw in sellers and if the trend holds we could see the 2010 low area around 1.4200 and 2009 low are around 1.3700 retest, making for a very nice reward-to-risk opportunity.
This setup for all you forex traders out there that think the selloff in oil and the Loonie may have run its course. In EUR/CAD, the recent bearishness has brought the pair up to an area of significant previous interest, specifically strong resistance in both 2014 and 2015. Is the third time the charm for a breakout higher if oil stays weak, or is it a simple resistance play in the works with a big reward (and carry interest) if traders reverse their oil and CAD short positions?
On AUD/CHF, I see a potential double bottom setup, albeit a pattern that doesn’t fit a textbook description of the behavior. While we don’t see a pair of symmetrical retests of major support because of the Swiss National Bank de-pegging of EUR/CHF, there are two very strong buying reactions between .6500 – .7000.
To me, that’s a sign that buyers are here to stay and with the pair now breaking back above the 200 simple moving average, retesting and holding at the 200 SMA, we could see buyers hopping back in to take advantage of a beaten down Aussie dollar, and some positive carry interest. And with the next levels of previous interest being at .7900 and .8700, the potential reward-to-risk looks mighty fine to me.
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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.