Reversal alert! Guppy already made a sharp selloff recently but could be in for more losses, as a double top can be seen on its 4-hour forex time frame. The pair is currently testing the neckline around the 186.00 major psychological support, and a breakdown could confirm that a longer-term downtrend might take place. Note that the chart formation is approximately 1,000 pips in height so the resulting selloff could be of the same size. Wouldn’t want to miss out on that one, would ya? Stochastic is still pointing down, indicating that there may be enough bearish momentum left for a downside break. If you’re hoping to trade this setup, make sure you review our lesson on How to Trade Double Top Patterns first!
Finally some signs of a pullback on GBP/AUD! The pair recently made a strong upside break from the key resistance at the 2.1500 major psychological level and zoomed all the way up to the 2.2400 area. Just when it seemed like price was never looking back, the pair retreated from its highs and is now testing support at the 50% Fibonacci retracement level. Stochastic is already indicating oversold conditions, which means that a bounce might take place sooner or later. A larger pullback to the 61.8% Fib, which lines up with the broken resistance at 2.1500 and the 200 SMA, might still be possible before the pair resumes its climb up to the previous highs and beyond. If you’re bullish on this one, the moving averages say that the odds are in your favor since the 100 SMA is above the 200 SMA.
Here’s another potential retracement setup that’s a little more complex compared to the earlier one. EUR/AUD made a strong upside break past the ascending channel visible on its 4-hour forex chart then climbed to a high of 1.6600 before pulling back. Using the Fib tool on the breakout move shows that the 61.8% Fibonacci retracement level coincides with the broken channel resistance at the 1.5600 major psychological mark, which might now hold as support. Stochastic is still on the way down so euro bears are still in control of price action at the moment and a larger correction could be seen. But with the 100 SMA treading above the longer-term 200 SMA, there’s a strong chance that the ongoing uptrend will carry on.
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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.