This week, we are going to look at the most liquid currency pair. Right away looking left, it’s clear price has been trending strongly bullish. Bulls got exhausted at the top and bears took over and have been successful driving the market bearish. Price has been consolidating in the form of a falling wedge in this bear dominated stage of the market. In addition to that, a few weeks ago, we were trading within an ascending channel. The market broke below the ascending channel and pushed upwards to the lower boundary of the channel for a retest. At the same time we have a level that has acted both as support and resistance. Ladies and gentlemen this is what we call a trading confluence or an A plus setup. Trading confluences are explained in detail in our course, but briefly they are described as when we have more than one occurrence happening at the same time giving us a high probability that something will happen. In this case we have 3 occurrences. Currently price has been resisted by the upper boundary of the falling wedge. The retest on the ascending channel has held at least for this week as price has not been to return to the channel. Finally the level has also held its own and acted as resistance.
Following the resistance of the various patterns on price, we have a bearish bias. However waiting for a confirmation is paramount to opening any sell positions. Since we are well aware that price might as well, rally bullish and break out of the wedge, pierce through the level and return back to the channel.
On the gold this week, we are keen to notice that price has been on a strong bullish trend since 2016.Price reached the major level got resisted and sellers took over the market. Bears got exhausted around September 2018 and there was resumption of the bullish take over. Last week price formed a pinbar then followed by a strong bearish confirmation this week. Moreover this week’s candle has engulfed the previous 4 candlesticks and closed below the near term level.
Patience of a saint will be needed. The combination of the pinbar and confirmation could be a test of the previous break of the near term level by the bulls in order to see whether it’ll now act as a support zone. Price may rally even though we have seen a break of the near term level. Alternatively it could be a total reversal of the uptrend and the beginning of a new downtrend. In order to validate the latter we need a confirmation of the bear power by a retest. Further price action will guide us on which path to follow.
On this pair we are also going to follow up on what we observed two weeks ago. Price was on a long term ascending channel. There was a bearish move to the lower boundary of the channel. Right at the lower boundary, formed a bullish engulfing candle. Later the following week a doji was spotted succeeded by a bearish candle. A candle stick pattern known as an evening star.
During the analysis of the pair we concluded that we had to wait for a bullish confirmation after the bullish engulfing formation. Here we have another perfect example of how waiting for a confirmation is paramount in trading profitably consistently. It eliminates the chances of getting faked out or caught up in false moves. Price formed a doji there after, showing indecision of the bulls then a bear candle pushing prices further bearish. At this point we’re back playing the waiting game. Additional guidance is needed with either more bear dominance to break and close below the channel or a resistance of the lower boundary of the channel.
This week’s analysis will consist of a follow up of the previous week’s work. In the past 5 trading days on the pair, price broke and closed below the neckline momentarily. Which was then followed by a rejection of much lower prices and price pushed further up. The recent bullish move is seen to have reached on the level of the left shoulder of the head and shoulder chart pattern.
Remember we mentioned previously that in order to trade the head and shoulder pattern we have to be patient for a break and close below then followed by a confirmation. Basically the pattern is only complete if the latter happens. However our pattern was not completed, buyers took over the market and bid for higher prices.It should be clear how waiting for a confirmation prevented one to be faked out by the close below of the neckline. Currently price has formed an inside bar. We’ll again have to wait for a confirmation from price whether price will continue bullish with a close above the mother candle or reverse and close below it.
This week we are going to look at the GBPNZD on the daily timeframe. This is one of the most volatile pairs in the forex markets. It is quite clear when we look left, prices have been on a very steep downtrend. We can confirm the steepness from the gradient of the trend. Price later reached a near-term support then rallied up momentarily. Following the rally, there was a consolidation in form of a chart pattern. The pattern is known as a head and shoulder pattern as illustrated on the chart.
Consolidation is an indication of indecision between the buyers and sellers. Price was supported twice on the neckline of the pattern but eventually broke and closed a few pips below the neckline. At this point, we will hold on for prices to confirm the breakout from the neckline, as we know it is possible for prices to gain some bullish momentum and rally back up to the level of the left shoulder. Therefore to confirm bear power a pullback/retest is important to verify that the neckline will resist price from rallying back up past the neckline and push downwards.
Today we shall approach the analysis on this pair from the weekly timeframe. We establish that prices on the pair has been ranging for some years since 2014. The market has been on a major consolidation, and currently, price is ranging in the form of an ascending triangle. In addition, the flat side of the ascending triangle, lies on a major level that has acted both as a support and resistance level in the past.
In as much as we have an ascending triangle, it is not obvious that we should now open long positions. Instead, to go long we have to wait for a breakout from the triangle and the resistance line, i.e. a retest and a confirmation before open a position. Price could also be resisted at the major support level/the flat side of the triangle and push downwards. Therefore at this point, we should sit on our hands and wait for the market to guide us on the next course of action.
We approach the analysis of this pair based on the weekly timeframe. In this pair we see that price has been trading on an uptrend for two years. On the lower boundary of the channel, prices have formed a bullish engulfing candle. This week’s candle has engulfed the previous three weeks candle, indicating a strong bullish push on the pair in line with the upward price channel.
The formation of the bullish engulfing candle shows that there’s a strong bullish momentum after the bearish retracement. This implies rejection of the previous bearish move. We will be analyzing for buy price action signals in the lower time frames of the daily and the 4-hour as long as the bulls can sustain their upward push. Waiting for price confirmation is paramount as they help us not to get faked out.
This currency pair has been caught up in a ranging market. A series of pin bars and dojis mark a lower high and the inside bars illustrate that there are weakness in the buyers.
Are we headed to the support zone or will the investor sentiment change? This is a perfect illustration of the market speaking to a price action trader. Remember that the price always guide us on where the market is headed.
USDJPY Currency Pair 4th – 8th Feb, 2019: Today we are going to look at the USDJPY pair and we are going to show analysis on a different timeframe, the Monthly. Remember in our price action course we emphasize the TOP DOWN APPROACH when analyzing the market. If we spot candlestick formations in the monthly, this provide a higher probability trade setup than the lower timeframe.
Now we may notice the main trend is up and the currency has been trapped in consolidation in form of a symmetrical triangle.
The pair has recently hit a zone of a support and we a monthly pin bar forming in that zone.
Will the bullish trend continue? Which direction will the pair break out of the consolidation? We will keep a keen eye on this pair amid confirmation of the direction this pair will head. As always we wait for the price to guide us on the investor sentiment.