Area pattern time! After spiking hard to the upside, GBP/AUD stalled and began consolidating into what looks like a pennant. Since the moving averages indicate that the trend is up, and because the pattern formed after the bullish spike, this pennant is therefore a bullish pennant. On the off chance that price will move to the downside and invalidate the bullish pennant, price may find potentially find support in any of the Fibonacci retracement levels, so keep an eye on those levels.
Area pattern time! Oh, did I say that already? Okay! Area pattern time! GBP/USD spiked upwards and then stalled, just like GBP/AUD. The only difference is that price has consolidated into a bullish flag pattern instead of a bullish pennant. Both area patterns point to further upside moves, so there’s really no major difference. And just like GBP/AUD, there’s a slight chance that price will retrace first before going back up. If such a scenario occurs, then forex traders may want to take a look at the Fibonacci retracement levels.
Based on the 1-hour forex chart, price has the greatest probability of finding support at the 50% level since it lines up quite nicely with the 1.5650 minor psychological level and has been a price area of significant market interest in the past. Of course, there’s no guarantee that support will form at the 50% level. There’s a possibility that support will form at the 38.2% level or support will not form at all. This is the forex market after all.
Must… resist… the urge… Area pattern time! Phew! Now that I’ve got that out of my system, the 1-hour forex chart for GBP/JPY looks very similar to the 1-hour forex charts for GBP/USD and GBP/AUD. The moving averages are also in uptrend mode and an area pattern has also formed after price spiked hard to the upside. Like the setup for GBP/USD, we are looking at a potential flag. And also similar to GBP/USD is the possibility that price will invalidate the area pattern by retracing first before moving back up again. This time, the most likely retracement level where support may form is the 61.8% Fibonacci retracement level since it is close to a price area of significant market interest in the recent past.
Again, there is no guarantee that price will find support in any of these Fibonacci retracement levels, so make sure to practice proper risk management should you find a trade based on any of these charts.
Forex Chart Settings:
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.