I’ve got my one good eye locked on these short-term reversal formations this week, and it ain’t lookin’ good for the commodity currencies!
First up is this sketchy looking head and shoulders pattern on the 1-hour time frame of CAD/JPY. This is a classic reversal formation, but the pair has yet to break below the neckline around 83.50-83.75 to confirm the downtrend.
Stochastic is already indicating oversold conditions, which means that Loonie bears are tired and may let buyers take over to spur a bounce. If a breakdown happens, though, the pair could tumble by roughly 350 pips or the same height as the chart pattern.
Better keep close tabs on the upcoming OPEC meetings if you’re planning on trading this one!
Here’s another neckline break that’s waiting to happen! CHF/JPY has failed in its last couple of attempts to break past the 112.00 handle, creating a double top pattern on this short-term chart.
Price is still consolidating above the neckline around 110.75, but a breakdown could send it lower by at least 125 pips or the same size as the reversal formation.
Stochastic is pointing down to signal that sellers are eager to return without even seeing overbought conditions. That tiny consolidation above support seems like a continuation signal, but it could also mean that franc bulls are set on defending that level.
Don’t look now, but this one is already starting to break below its double top neckline! This means that Kiwi sellers are pouring in and ready to take NZD/JPY down by at least 150 pips or the same size as the chart pattern.
However, stochastic has been hanging out around the oversold area for quite some time, signaling that bears have been feeling exhausted. Turning back up could draw buyers in and push the pair back above support.
Just make sure you practice proper risk management when you’re taking any trades, fellas!
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