Let’s start off with this simple trend play on EUR/USD’s 1-hour forex chart. A rising trend line can be drawn to connect the recent lows of price action, and the pair is currently testing this support area. The 100 SMA is safely above the 200 SMA for now, which means that the uptrend could carry on. Stochastic is already indicating oversold conditions so a bounce is likely to take place soon, allowing the current levels to hold as support. However, if euro sellers refuse to give up, a downside break might be possible, leading to a short-term reversal. If you’re thinking of going long, better wait for reversal candlesticks to form or for stochastic to move up from the oversold area to indicate a pickup in buying pressure.
Missed the breakdown on USD/JPY? Don’t fret! You might still have a chance to catch the selloff on a pullback to the broken support around the 119.25 level. This is right smack in line with the 50% Fibonacci retracement level, which might keep gains in check. The 100 SMA is moving farther away from the 200 SMA, reflecting an increase in bearish pressure, which means that dollar bears are ready to push the pair back down to the previous lows near the 118.00 major psychological mark. Stochastic is on the move up but is already in the overbought zone so buyers might need to take a break and let sellers take over. A higher retracement to the 61.8% Fib or the 119.50 minor psychological level might still be possible, as this lines up with the 100 SMA.
Reversal alert! AUD/JPY might be done with its recent climb, as the pair is forming a head and shoulders pattern on its 1-hour forex chart. Price is still above the neckline around the 86.00-86.50 levels for now and appears to be finding support around the 200 SMA as well. However, stochastic is already in the overbought zone, which means that Aussie bulls are losing strength. If Aussie bears take control of price action, they could push for a downside break of the neckline and take AUD/JPY lower by an additional 200 pips, which is roughly the same height as the chart formation. If you’re waiting for more confirmation, stay on the lookout for a potential downward crossover from the moving averages, as this would signal that a downtrend is in order.
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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.