Let’s start off with my favorite break-and-retest setup materializing on USD/JPY’s 4-hour forex chart. The pair recently breached the 122.50 minor psychological support then diped to a low of 120.42 before pulling up. Price is stalling around the 38.2% Fibonacci retracement level right now but it could still make a larger correction since stochastic is on the way up. In that case, USD/JPY could retrace to the broken support area, which lines up with the 61.8% Fibonacci level. Since the 100 SMA just crossed below the longer-term 200 SMA, I’m thinking that the selloff could resume sooner or later. Better review our lesson on How to Use Fibs with Support and Resistance if you’re thinking of trading this one!
Is it time for the euro bulls to come out? EUR/USD is showing signs of exhaustion from its recent downtrend, as an inverse head and shoulders pattern is forming on its 1-hour forex time frame. The pair has yet to test the neckline at the 1.1100 major psychological level but it seems to be finding resistance at the 200 SMA at the moment. A strong upside break would confirm that an uptrend is bound to take place, and this might last by around 200 pips or the same height as the chart pattern. Stochastic is still climbing, which means that buyers have enough strength to push for more gains. However, the 100 SMA is below the 200 SMA, indicating that the downtrend could stay in play.
If you’re looking for a simple short-term trend play, then this setup on GBP/USD’s 1-hour forex chart might be for you! The pair seems to be taking a break from its recent selloff, indicating that a pullback is possible. Using the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with the 1.5500 major psychological level and the descending trend line, which is also near the long-term 200 SMA. Stochastic is moving up, which means that sellers are taking a break for now. If the correction doesn’t make it all the way up to the highest Fib, the pair might turn upon hitting resistance at the lower retracement levels which are near the 1.5450 minor psychological mark and the 100 SMA.
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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.