One of the more conservative ways to play a descending channel is to look for opportunities to go short near the channel’s resistance area. Today’s play is not that kind of setup, though, since we’re looking to go short way below the channel’s resistance area, so more conservative forex traders may wanna stay away from this one. For those of ya who are gangsta enough, however, just know that the pair is about to test the 1.4470 handle (dashed horizontal line), which is a price area with very significant market interest, as I highlighted above. The pair is very likely to react when it reaches that price level, especially since stochastic is about to reach overbought territory.
It’s going to be break or bounce time for AUD/JPY soon, since the pair is fast approaching the area of interest at 76.60, which I highlighted above. Price action indicates that the bulls seem to be in charge since price has been respecting a rising trend line that y’all can clearly see on the chart. Our technical indicators are more favorable to a downside bounce from 76.60, though, since stochastic is indicating overbought conditions while the moving averages are in downtrend mode, and the 100 SMA may even act as dynamic resistance.
NZD/USD is making its way higher, but it’s about to reach the 0.7140 price level, which has served as resistance just a few days before and is a price level with significant market interest to boot. Will 0.7140 serve as resistance again? Well, there’s a good chance that it may since stochastic is already signalling overbought conditions. And of 0.7140 does hold as resistance, then the bears may start gunning for the well-respected support area at 0.6080. It’s kinda worrying, however, that the price has been closing above both the 100 and 200 SMA, since that could indicate strong bullish interest. In any case, just make sure to practice proper risk management if you do find a trade, alright?
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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.