Time for a reversal on USD/JPY? A head and shoulders forex chart pattern seems to be forming on its 1-hour forex chart, hinting that the recent uptrend might soon turn. The pair has yet to form the right shoulder of the pattern then break below the formation’s neckline around the 118.50 minor psychological support before confirming the potential selloff. Stochastic is making its way down from the overbought area, which means that dollar bears are ready to take control and push USD/JPY lower. If the pair manages to extend its rallies, it could go up to the previous highs near 120.50 and beyond!
Divergence alert! EUR/JPY has just formed lower highs while stochastic created higher highs, showing a bearish divergence on its 1-hour forex chart. This could mean that euro bears might be able to force the pair to return some of its recent gains and possibly head south to the rising channel support at the 134.00 minor psychological level. Before that, EUR/JPY might still be able to test the top of the channel near the 137.00 major psychological handle. Just make sure this setup meets the 9 Rules for Trading Divergences if you’re looking to short.
If you’d rather trade retracements, then you might like this potential pullback play on CAD/JPY’s 1-hour forex chart. The pair just made a break past the resistance around the 95.50 minor psychological level then zoomed up close to 96.50, before showing signs of retreating. Stochastic is indicating overbought conditions, which means that Loonie bulls need to take a break. CAD/JPY could retrace to the 50% Fibonacci level, which lines up with the broken resistance area, then bounce right back up 96.50 or higher. Better set your stop below the lowest Fib if you’re planning on going long.
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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.