Let’s start off with a textbook break-and-retest setup on AUD/USD’s 1-hour forex chart. The pair recently broke above the descending trend line connecting the recent highs of price action, hinting that a reversal is in the cards. Before all that happens though, price could still retest the broken resistance area to gather more buyers to the fold. Using the handy-dandy Fib tool on the latest swing low and high shows that the 61.8% retracement level is closest to the trend line. This also lines up with the .7100 major psychological mark, making it a potentially strong support area. Price appears to have bounce off the 38.2% Fib and 100 SMA but a larger correction to the 50% Fib or 200 SMA might still be possible.
Gutsy enough to take a countertrend trade? Then you might like this descending channel bounce on EUR/JPY’s 1-hour forex time frame. The pair is currently testing the channel support near the 130.50 minor psychological mark and might be due for a move back up to the resistance around 131.50 and the moving averages. To sweeten the deal for buyers, a bullish divergence can be seen, with price making lower lows and stochastic drawing higher lows. If the bounce is just a weak one, EUR/JPY might find resistance at the mid-channel area of interest at the 131.00 major psychological level. Keep in mind that the 100 SMA is below the 200 SMA, suggesting that the path of least resistance is to the downside.
If you’d rather go with the flow and follow trends, then this rising channel setup on GBP/JPY’s 4-hour forex chart might be better for you. The pair has been gradually trending higher and is currently testing the channel support at the 186.00 major psychological level. This lines up with the longer-term 200 SMA, which has held as a dynamic support area in the past. At the same time, stochastic is already in the oversold region, showing that the recent selloff is overdone and that buyers might take over. In that case, GBP/JPY could climb back to the channel resistance at the 189.00 mark or at least until the middle at 187.50 to 188.00. The 100 SMA is above the 200 SMA anyway so the uptrend might be able to 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.