First up is a nice and simple trend trade on USD/JPY. The pair is approaching the 101.50 minor psychological handle, which is near the 100 and 200 SMAs as well as a mid-channel resistance on the 1-hour time frame. What’s more, stochastic has also just left the overbought territory. Think the dollar is in for more losses against the yen? Shorting at current levels could get you in on the downtrend, but waiting for a retest of the channel resistance around the 102.00 area is a better idea if you want a sweeter reward-to-risk ratio.
I zoomed in on the channel that we were looking at yesterday and found that USD/CAD is right at a mid-channel support. What makes this setup more interesting is that the mid-channel line is right smack at a 50% Fib retracement and the 100 and 200 SMAs on the 4-hour time frame. The cherry on top of this bullish sundae is an oversold stochastic signal. Think the dollar is about to gain more pips on the Loonie? Watch this one closely, folks!
Last one up for this set of charts is a potential head and shoulders situation on EUR/GBP. The pair has just bounced from the .8600 major psychological area, which is looking a lot like a “shoulder” for the setup on the daily chart. Oh, and check out the overbought stochastic signal! You can short the pair at current levels if you’re one of them aggressive euro bears, but you can also wait for a test (and break) below the neckline of the setup (around the .8350 levels) if you’re not too sure about the common currency losing a lot of pips against the pound in the next couple of days.
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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.