Price Action is a theory of market behaviour based on the psychology of the traders, market makers, and the market itself. It attempts to explain the volatility of the market without news, indicators and other external factors.
EURUSD
EURUSD has been in a long-term down trend dating back to 2008, a period of twelve years. The long intermediate and short term trend is bearish.
We will be reviewing the daily and monthly timely time frames.
Daily time frame
The EURUSD has traded in a descending channel dating back to October of 2018. The market produced two false breaks on the 9th and 19th of March to the upside and downside respectively and since then appears to be respecting the channel.
From the diagram above we can see that the market is yet to make a second lower high from channel resistance since the false break which will confirm that the channel is still effective. However there are no guarantees in the markets for more clues we look to the monthly time frame.
Monthly time frame
The monthly price action as can be seen is playing out within an all-time multiyear narrowing wedge. This is a terminal pattern and it is certainly coming to and after taking years to set up. A confirmed breakout from this pattern has an objective of 7,840 pips which will take months and years to play out.
- Read also: Barr. Amaka discusses Nigeria’s Business Laws and Tax System: What every Business Owner should Know: Part 1
- A Viable Alternative to get Capital for your Business – The International Finance Corporation (IFC)
Whether this will break to the upside or downside is anyone’s guess, I prefer not to make such guess instead I will patiently let the price action play out. We can see the repeated testing of wedge support for the past three months. Such repeated retest usually signals an imminent breakout however a move to retest the wedge resistance is also a possibility given the pin bars from February and April.
Keep in mind that a breakout from the wedge will be directing the price action for years to come note also that only a monthly close will confirm such a break.
APPROACH
The pair is currently trading short of 1.0990 resistance. I think the best approach will be to wait for a close above 1.0990/12 (that is to say if you are not long already from that bounce off support at 1.0725 confluence of support) for a move to channel resistance in the region of 1.1090. If the markets open above 1.0990 at 5 pm EST that will signal more strength, keep an eye on the channel resistance for I believe the future of the short term trend will depend on what happens there.
A close above 1.0990/12 will expose 1.1050 followed by the channel top. If we get a close above the channel resistance that will expose 1.1110 followed by 1.1210 and 1.1300 in the coming days and weeks.
On the other hand if we get a price rejection from the channel top that will send the pair back towards the wedge support around 1.0725 key levels on the way down are 1.0990, 1.090 and 1.0825.
AUDUSD
The prevailing trend in the Aussie is a downtrend (intermediate and long term). The short term trend is up trend which I believe just came to an end with a breakout from a rising wedge (bear flag) with the Fridays close below the 0.6445 confluence of support. Whether we will get a retest is hard to say however wedges hardly produce a retest most of the times.
APPROACH
This as a rising wedge is associated with breaks to the downside and furthermore the prevailing trend is in favor. The short term up trend was probably the much needed correctional move as traders booked profits before next leg lower could materialize.
- Read more: Victor Nnadi discusses Trading CFDs: Forex, Indices and Commodities
- How Much is the Business Worth: An Introduction to Financial Statements
The key levels on the move down are 0.6228 followed by 0.5970 and 0.5670. Alternatively if we see the pair close back above the wedge support now resistance that will negate the bearish outlook and expose 0.6590 followed by 0.6670 and 0.6750.
AUDJPY
This pair is similar to the AUDUSD discussed above. The rising wedge that broke out on Friday signals the end of the correctional move and a continuation of the down trend. The rising wedge breakout pattern on the top left hand corner of the annotated chart below is a testimony and proves how rewarding wedges can be if traded with patience.
The breakout is supported more by the bearish engulfing candle that formed with Thursdays’ close with Thursday candle being a hang man. Levels on the way down are 67.30, 65.020 and 61.740.
Alternatively if we get a close above the wedge support no acting as resistance with a break of Thursday’s high that will negate the bearish outlook and expose higher levels.
XAUUSD
Gold spot is consolidating in a range between 1670 and 1740 after a big run from 1450 to 1740. Gold confirmed what appears to be a head and shoulders pattern but since then it’s been caught in a sideways consolidation move which is actually a good thing.
Gold has seen some impressive runs since August 2018 and that does not seem to be ending soon at least going buy the current price action.
The head and shoulders combined with the strong up trend and the current range bound consolidation points to higher levels for Gold. The head and shoulders has a measured objective of 2,480 pips. This means that gold could be gearing up for a move to 1925 in the coming days and weeks. It is important to keep in mind that gold need to break out of this range to the upside before we will see any momentum.
If we get that break gold will be heading for a multiyear level at 1800 resistance followed by the measured objective at 1925.
Alternatively if see gold break to the down side of the range sellers will have the confluence of resistance 1640 (intersection of the h ad and shoulders neckline and horizontal level) to deal with before can see more weakness.
Written by:
Chijioke Maduakor
Analyst at Hybreed Forex Price Action
Disclaimer: Any person accessing this information and considering potential investment opportunities featured here should make their own commercial assessment of an investment opportunity after seeking the advice of an appropriately authorized or regulated financial advisor. This information should not be construed as advice or a personal recommendation to any prospective investor.
