I’ve got my eyes on the Greenback today, with a couple of channel patterns on NZD/USD and AUD/USD. Whoa! That’s a channel + USD + comdoll triple combo right there! How cool is that?
Okay, let me be straight with y’all. That there ain’t an ascending channel yet. You see, the pair has to push off from the would-be channel’s resistance area at 0.7040 first. After that, the pair has to reach the would-be channel’s support, which should be at or just above 0.6940. And only then will the ascending channel be validated.
Needless to say, conservative traders may wanna sit this one out until the pair tests the would-be channel’s support area. But for the gangsta traders out there who don’t mind a counter-trend play, just know that 0.7040 is a very significant price area, even on the higher time frames. Just switch to a 4-hour or daily chart and y’all will get what I mean. Moreover, stochastic is already signaling overbought conditions and all that. There’s therefore a higher-than-average chance that resistance will hold and that the pair may get pushed lower.
However, there’s also a chance that the pair may stage a downside channel breakout. After all, 0.7040 is a rather significant resistance area, which may entice a lot of bears to jump in. And if bears do stage a downside breakout, they’ll likely be gunning for 0.6850 next, so y’all keep on your toes, a’ight?
Back on May 18, the pair was close to that there descending channel’s resistance area at 0.7470, so we was lookin’ for opportunities to go short. However, the pair opted to continue trading higher instead, staging an upside channel breakout in the process.
And while the pair reached the key area at 0.7510 that I told y’all to keep an eye on, the pair ultimately failed to breach it. However, them bulls ain’t giving up just yet. And that there fresh ascending channel has formed as a result. Given all that, the pair could go both ways, so we have two major scenarios on the pair.
The first scenario is that the pair respects the fresh ascending channel and continues to trade higher. Them moving averages seem to support this scenario since they are in uptrend mode, with the 100 SMA acting as dynamic support to boot. The pair really needs to breach 0.7510 this time, though.
The second scenario, meanwhile, is that them bears invalidate the fresh ascending channel and push the pair back into the bigger and older descending channel. Stochastic appears to support this scenario since its signaling overbought conditions and all that. But just to play it safe, y’all may wanna wait until the pair smashes past 0.7420 and confirms the scenario. And as usual, just remember to practice proper risk management, m’kay?
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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.