In yesterday’s intraday charts update, I told y’all that them bears appear to be well entrenched at 114.90. As such, there’s a chance that them bears would attempt a downside channel breakout. Well, that turned out to be good advice, since the pair did stage a downside breakout. Even better, the pair easily cleared the key area of interest at 113.90, thereby confirming the breakout. If you jumped in at or around the breakout point, then congrats, since you have about 130 pips right about now, assuming your short bets are still open. Aww, yea! Not bad for a 24 hour operation, huh? If you were the more conservative type and waited for a break past 113.90, then you still got about 60 pips, which ain’t so bad.
Anyhow, if you missed the breakout move, or you already bailed from your shorts, or maybe you wanna add to your shorts, then I’ve got two setups for y’all today. Our first setup is a simple bearish flag pattern. As y’all can see, the pair recoiled when it reached the area of interest at 112.90. The pair then began trading sideways in a tight range. In the process, a bearish flag has formed. Should the pair break lower, then the pair could potentially move lower for about 140 pips, which should be just below the area of interest at 111.90. Do keep an eye on how the pair reacts to 112.90, though. The pair did get violently rejected after all.
Moving on, our second setup is a classic Fibonacci retracement setup. All retracement levels look like valid pullback areas. However, the 38.2% retracement level is the key area to watch, since it lines up with the area of interest at 113.90. The bearish flag scenario currently looks more viable, given that stochastic is already indicating overbought conditions and all that. In any case, just make sure to practice proper risk management, a’ight? Also, just note that all bets are off should the pair go back all the way to 114.90, especially if on strong bullish momentum.
Back on Tuesday, the pair was testing that there channel’s resistance area. More conservative traders advised to sit that one out until the pair reached the channel’s support area. But for the more gangsta traders, we was lookin’ to short and hold until the pair reaches the channel’s support area. And as y’all can see, the pair did move lower and tested the channel’s support area. Also, the channel held, so we be lookin’ to go long again.
More conservative forex traders may wanna think twice before going long, though. One reason is that the pair is already approaching the mid-channel area. Another reason is that stochastic is already signaling overbought conditions and all that. Yet another reason is that bears seem well entrenched at 113.70. As such, there’s currently a higher-than-average chance for a downside channel breakout. And should a downside channel breakout occur, then them bears would likely be gunning got 112.30 first. If the pair smashes past that, then the breakout is confirmed, so the pair could potentially go lower still.
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.