GBP/USD has been respecting a descending channel for the past few days, but the downward momentum has stalled now that it has reached the minor psychological level at 1.5550, a price area of significant market interest. And if we apply the Fibonacci tool, we can also see that the current price area sits right on top of the 50% Fibonacci retracement level. In my opinion, there are two major scenarios here: (1) price moves back to the top of the channel and respects it, or (2) price attempts an upside breakout. If forex traders bullish on the pair attempt an upside breakout, they will first have to contend with the 1.5690 handle since that price level has seen recent interest and may act as resistance. There is also a possibility of a downside breakout but price action indicates and the current price levels don’t really support such a scenario.
Up next, we got us a break-and-retest setup on the 1-hour forex chart for AUD/CHF. If you think this chart looks familiar, that’s because it is based on last week’s trading range setup. Back on topic, price broke through the trading range’s floor at the 0.7100 major psychological level before being rejected by the 0.7020 handle. Now, price has been forced back to the 0.7100 level, giving us a break-and-retest setup in the process. Also, stochastic is in our favor since it is currently in overbought territory, indicating that forex traders bullish on the pair may potentially be exhausted already, clearing the way for sellers to start nibbling. Although there’s also chance that price will get back inside the trading range, invalidating the breakout.
Finally, we got a rectangle setup for GBP/CAD. Price has been consolidating inside a rectangle with a trading range between the 1.9330 handle and the 1.9500 major psychological level. Last week, price broke out of the rectangle and promptly formed a new rectangle between the former resistance area at the 1.9500 major psychological level and the 1.9680 handle. The basic way to play a rectangle is to wait for a breakout. In this case, the moving averages are still in uptrend mode, so out directional bias is to the upside. But as with any forex chart pattern, a breakout in the opposite direction is a possibility too. Another way to play this rectangle is to play within the range, but that’s up to you.
As usual, make sure to practice proper risk management should you find a trade based on any of these charts.
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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.