Think the trend is your friend? Then you gotta keep close tabs on this rising channel setup on USD/CAD’s 1-hour forex chart. The pair is currently stalling around the mid-channel area of interest and may be headed further south, as stochastic is making its way towards the oversold zone. A test of the channel support around the 1.3150 minor psychological level might take place before price climbs back up to the channel resistance at the 1.3400-1.3450 levels. Note that the 100 SMA is safely above the longer-term 200 SMA, confirming that the uptrend is likely to carry on. However, a strong downside break below the bottom of the channel might be an early signal for a reversal.
If you dig retracement setups like I do, then this one’s for you! AUD/USD recently made a strong break below support around the .7350 minor psychological mark then dipped to the .7050 handle before pulling back up. Using the Fib tool on the latest swing high and low shows that the 50% retracement level is right smack in line with the broken support area and the 200 SMA, which might keep gains in check. Stochastic is still edging higher, indicating that Aussie bulls are charging for now, but the 100 SMA is below the 200 SMA so the path of least resistance is to the downside.
If you’re waiting for a larger retracement on an Aussie pair, then you might like this setup on AUD/JPY’s 4-hour forex time frame much better. Price also made a strong break below a key support area then sank all the way down to a low of 82.20 before recovering. The Fibonacci retracement levels on the latest swing high and low might hold as resistance, but an even stronger correction could last until the broken support at 89.30, which is closer to the moving averages. However, stochastic is already indicating overbought conditions and is starting to turn lower, hinting that Aussie bears might be ready to step in and push for a move back to the previous lows.
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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.