Euro bears, listen up! The descending channel on the 1-hour forex chart for EUR/CHF still seems to be intact after price gapped during the weekend, causing a false breakout. The conservative way to play a descending channel is to look for resistance near the channel’s top, but recent price action shows that price is already finding resistance just above the channel’s median. And if we apply a horizontal line, we can see the reason why – the current price zone around the 1.0450 minor psychological level has been a price area of very significant market interest, as highlighted by the rectangle. Also, stochastic is moving down from overbought territory, so forex traders bullish on the pair may potentially be exhausted already.
Anybody up for a countertrend play? CHF/JPY has been respecting a descending channel on the 1-hour forex chart. The only time price violated the channel was when price gapped during the weekend, but price was quickly pushed back into the forex chart pattern.
For today’s play, we are looking for support to form since price is close to the bottom of the channel. If we apply a horizontal line, we can also see that price is currently testing the 130.50 minor psychological level, a price area of prior market interest. In addition, stochastic is approaching oversold territory, so forex traders bearish on the pair may potentially be exhausted soon. Again, this is a countertrend play, so make sure to practice proper risk management should you find a trade based on this chart.
This ascending channel setup is built upon the descending channel setup that we identified on the 1-hour forex chart for GBP/CAD two days ago. As I mentioned then, there was a possibility that price will attempt a topside breakout since bullish momentum was rather strong. Apparently, I was right since price brokeout to the upside and then formed the ascending channel that you see now.
As usual, the conservative way to play an ascending channel is to look for support near the bottom of the channel. But do be careful since the ascending channel is still relatively new, which means that there is also a small chance that a downside breakout will occur. I don’t think it’s likely, though, given that the bullish momentum seems to be rather healthy.
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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.