USD/JPY has been consolidating while tapering to a point, giving us a symmetrical-ish triangle to play with. A symmetrical triangle pattern means that bulls and bears are duking it out but neither side is really winning, so the pair could break out in either direction. And if a breakout does occur, then the resulting rally or selloff could potentially last for 140 pips, based on the height of the forex chart pattern. The previous trend before consolidating was an uptrend, though, and stochastic is already indicating oversold conditions, so the path of least resistance seems to be the upside.
One of the more conservative ways to play an ascending channel is to look for buying opportunities near the channel’s support area. And since the pair is moving lower after respecting that channel’s resistance area, more conservative forex traders may wanna sit this one out for now. For the more aggressive traders out there, price seems to be hesitating at the mid-channel area, and the 100 SMA seems to be acting as dynamic support, so there’s a chance that price will move back up again without testing the channel’s support area. Do note, however, that stochastic is still pointing down and is some distance away from oversold territory, so the bears may not be out of steam just yet.
After a strong bullish run, USF/CHF started trading sideways while respecting resistance at 0.9920 and support at 0.9880, giving us a rather tight 40-pip trading range or rectangle pattern in the process, although it also looks kinda like a bullish flag in the higher time frames. Presently, the pair is making its way higher for a potential test of the rectangle’s resistance area, so get ready if you’re planning to trade within the range, especially since stochastic is already indicating overbought conditions. However, if we’re looking at a bullish flag, then there’s a chance that the pair will break higher for about 250 pips, based on the height of the flag and its pole.
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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.