Let’s start off with this simple forex range forming on USD/JPY’s short-term chart. The pair bounced a couple of times off support around 122.25 and found resistance at 123.60. Price seems to be on its way to test the top of the range once more, but the moving averages are acting as near-term resistance levels. At the same time, stochastic is moving down from the overbought area, indicating that sellers are taking the upper hand. The 100 SMA is below the longer-term 200 SMA too, so the path of least resistance might be to the downside. In that case, another test of support might take place or perhaps even a breakdown, potentially taking USD/JPY lower by more than a hundred pips or the same height as the rectangle formation.
Next up is my all-time favorite break-and-retest situation showin’ up on USD/CHF’s 1-hour forex time frame. The pair recently broke past the ceiling around 1.0215 then zoomed up to a high of 1.0260 before pulling back. Using the handy-dandy Fib tool on the latest swing low and high shows that the 38.2% retracement level lines up with the broken resistance, which might hold as support from now on. After all, the 100 SMA is above the 200 SMA so it’s likely that the uptrend could carry. However, stochastic is still heading south, which means that USD/CHF could follow suit. In that case, a larger retracement to the 50% Fib near the 1.0200 handle or the 61.8% Fib at 1.0188 could be possible.
Still holdin’ like a boss! Just when it seemed like EUR/GBP was prime for a breakdown of its long-term support at the .7000 major psychological mark, the pair made a quick turnaround to show that not all hope is lost for the euro bulls. Stochastic is starting to make its way out of the oversold region, hinting that more buyers could get in the game and push price back up to the top of the range near the .7400 major psychological mark. The 100 SMA also looks ready to make an upward crossover from the 200 SMA to show that the selloff ain’t going further from here. But if buyers aren’t strong enough to sustain a climb to the very top, the pair could at least reach the middle of the range at the .7200 area of interest.
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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.