Yesterday, I showed you an hourly chart of GBP/JPY and how it has been trading inside a descending channel. Now, let’s zoom out a little and examine how the daily chart is also hinting at a downward move. As you can clearly see, the pair has formed a head and shoulders pattern, which is a very bearish chart formation. If the pattern is valid, watch the 147.50 level carefully. Not only is it a resistance-turned-support, but it also lines up nicely with the neckline of the pattern. A break of this level could result in a sharp sell-off and a retest of support at the 139.00 area.
Speaking of breakouts, EUR/USD is also showing some signs of blowing up. After staging a massive 400-pip rally, the pair is now consolidating heavily above the 1.3100 major psychological level. It has formed a bullish pennant, which is considered as a continuation pattern. If you have a bullish bias on the pair, it could be a good idea to jump in long when the pair breaks out of its consolidation.
I don’t want to leave the retracement traders hanging, so here’s a short setup brewing on NZD/USD’s daily chart. Price just found support at the .7700 level and is slowly climbing higher. If price pulls back, keep a close eye on the 38.2% and 50.0% Fibonacci retracement levels. They could serve as good levels to scale in short and go with the overall downtrend.
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.