First up, here’s my favorite break-and-retest situation goin’ on in EUR/USD’s 4-hour forex chart. The pair recently broke below support at the 1.1150 minor psychological level and dipped close to the 1.0800 handle before pulling back up. Using the handy-dandy Fib tool on the latest swing high and low shows that the 50% Fibonacci retracement level lines up with the broken support, which might now hold as resistance. Stochastic is still climbing, which means that euro bulls could still have enough energy to push for more gains, possibly until the 61.8% Fib or the 1.1200 major psychological mark. If any of these levels keep gains in check, price could head back to its previous lows again.
Reversal alert! USD/CHF could be in for a downtrend now that price has formed a head and shoulders pattern on its 1-hour forex chart. The pair has already broken below the neckline support, confirming the potential reversal, which might last by at least 200 pips or the same height as the chart formation. Stochastic is pointing up, however, suggesting that dollar bulls might take control of price action and spur a pullback to the broken neckline around the .9400 major psychological mark. If this holds as resistance, the pair could resume its drop, possibly until the .9100 to .9200 area. On the other hand, a move past the .9400 level could lead to a climb back to the previous highs at .9550.
Is that a descending trend line forming on GBP/USD’s 1-hour forex chart? The pair may have broken above its shorter-term downtrend but it looks like a larger one is about to take place. Using the Fib tool on the latest drop shows that the 50% Fibonacci retracement level lines up with the falling resistance area and the 1.5450 minor psychological level, which might act as a ceiling for any rallies. Stochastic is already on its way down though, indicating that pound bears are on top of their game and might be looking to pile on their short positions right at the 38.2% Fib. If so, GBP/USD could move back to its previous lows at the 1.5200 handle or even create new ones.
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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.