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ICYMI, we’re trading the last full week of the year!

Let’s start the week off on a strong note with solid setups to play the longer-term downtrend in the U.S. dollar.

Think you can make pips from GBP/USD and USD/JPY charts today?

GBP/USD: 4-hour

GBP/USD 4-Hour Forex Chart
GBP/USD 4-Hour Forex Chart

GBP/USD bulls took a step back at the end of last week’s holiday trade, after resistance at the previous swing high around the 1.3600 handle. This brought the pair to the rising moving averages (100 & 200), which, in the last two months, were short-term buying opportunities, especially the 100 SMA.

So, this retest of the 100 SMA today could be another opportunity for the bulls, especially with the stochastic indicator showing short-term oversold conditions.

But do be aware that we saw the market move beyond the 200 SMA a couple of times in that same time period before buyers took back control, so it may be a good idea to get price confirmation of a bullish reversal before making plans to play the longer-term uptrend.

If you’re a bear on the pair, possibly on a shift in over risk sentiment if we get a negative global catalyst, then a break below the SMA’s is likely the signal that would draw in momentum bears, creating a swing trade opportunity that could see the market drop back to September and October support around the 1.2800 handle.

USD/JPY: 4-hour

USD/JPY 4-Hour Forex Chart
USD/JPY 4-Hour Forex Chart

USD/JPY bulls have been pretty resilient over the past week, resisting continued bearish pressure by hanging around the 103.50 – 104.00 area, an area with multiple bearish technical arguments: broken previous support, Fibonacci retracement, and falling moving averages.

The market is retesting that around once again in today’s session, so will it be another failure of the bulls to break higher, or will they manage to find a way turn around the longer-term Dollar bearish trend?

Well, the odds are more in favor of USD/JPY bears, so its likely we’ll see them use this retest as another opportunity to short. But if the pair can managed to break the rising ‘lows’ pattern leading to today’s pop higher, that could draw in both longer-term sellers, and short-term bulls looking to sell looking reverse their long positions and limit their losses.

Of course, if the recent pop higher moves on through the moving averages and Fibonacci retracement area, that could be the start of a new bullish move in the Greenback. If there is a strong catalyst for that reaction and/or your conviction is strong that will continue to be the case, look for bullish patterns around the 104.00 handle before considering a swing long position on the pair.