Welcome to the middle of the week, brothas!
Let’s take a break from the currency cross parade and look at major dollar pairs this time. What do you think of EUR/USD and USD/JPY’s swing trade setups?
If you’re still looking at the descending triangle setup that we identified a couple of days back, then you’ll know that EUR/USD has already broken above the trend line on the 4-hour chart.
What makes the setup interesting today is that the pair seems to be heading towards the 1.1200 handle. As you can see, the level is not only in line with the broken trend line, but is also around a 50% Fibonacci retracement and the 100 and 200 SMAs on the chart.
Are we about to see a break-and-retest situation over here? Buying at the 50% Fib would gain you a good reward-to-risk ratio especially if this upside breakout is legit and EUR/USD ends up retesting the 1.1400 – 1.1500 previous highs.
Take note that the pair might not hit 1.1200 at all before it shoots back up (if it does). That means you gotta stay ready in case the bulls attack without waiting for EUR/USD to hit a neat support level!
Fancy schmancy patterns not your thing? Here’s an easy peasy one for ya!
USD/JPY is having trouble making new lows below 108.00, which isn’t surprising since the level has supported the pair at least once or twice in the past couple of months.
Should you be getting ready for a bounce? Stochastic is poppin’ up a potential divergence, so you can bet your pips (with proper risk management, of course) that other bulls are already waiting in the sidelines for some action.
If you’d rather short USD/JPY, though, then you might want to wait for a convincing candle below the 108.00 handle that we’re eyeing. The next major support is at 105.00 anyway, so you’ll have your chance to jump in if or when this pair breaks the 108.00 support.
Whichever bias you’re trading, make sure to use wide stops, ya hear? Longer time frames – especially for yen pairs – tend to see tons of volatility, so you gotta make sure you’re protecting your trade bias by not choking it with tight stops!