Let’s start off with my all-time favorite forex play: the break-and-retest setup! As you can see from GBP/JPY’s 4-hour chart above, the pair is in the middle of a correction, with price pulling up to an area of interest. The 38.2% Fibonacci retracement level, which lines up with the 180.00 major psychological handle, seems to be holding as resistance for now but a higher pullback might still be possible. If so, GBP/JPY could still retrace to the 50% Fib, which coincides with a broken support level. Stochastic is already indicating overbought conditions and pound bears might be ready to hop in soon!
Bounce or break? NZD/USD is currently sitting at the bottom of the range visible on its 4-hour forex time frame, still deciding whether to climb back to the top or head further south. Stochastic is already in the oversold zone, suggesting that support around the .7650 minor psychological level might hold for now. In that case, the pair could climb back to the range resistance at the .7850 minor psychological level or at least until the mid-range area of interest at .7750. If you’re bearish on the Kiwi, better review our lesson on How to Trade Breakouts before shorting.
Reversal alert! GBP/NZD has formed a double bottom pattern on its 4-hour forex time frame, suggesting that a long-term rally might be in the cards. Price appears to be breaking past the neckline around the 1.9850 minor psychological level and could be in for as much as 500 pips in gains, which is roughly the same height as the chart pattern. Stochastic is giving the overbought signal though and may be due to cross down, indicating that buyers might need to take a break and that sellers might take over.
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.