Technical Report – Trade Idea update (600+ pips in 2 days?) and Levels to watch
This report will update the setups discussed in the ‘FX Technical Report – Week Ahead’ published on the 2020/09/05 and look at key levels in the market. There are no new trade ideas today, on the basis of fairly volatile market conditions.
Summary of previous positions and if target has been met
- CAD/JPY – Short Bias , Target met? Yes (+40 pips)
- GBP/JPY – Short Bias , Target met? Yes (+100 pips)
As illustrated above, GBP/JPY rejected from the upper trendline support of the channel structure , reaching the primary target which was the bottom trendline support of the channel. Prices experienced a huge further surge in selling pressure, resulting in another 400-500 pips. This comes as Boris Johnson threatened to walk away from the Brexit divorce agreement signed last year , placing the UK under question by the European Union and the supreme court.
CAD/JPY successfully rejected from the upper trendline resistance of the pendulum structure, successfully reaching the lower trendline support, in line with our predictions. Prices continued to push lower on the back end of Japanese yen strength and ahead of the Bank of Canada Interest rate decision this week.
Key levels to watch – 09/08/2020
Prices on EUR/USD has broken out of an upper channel structure as the dollar index has gained recent momentum over US and China tensions and positive US economic data. Though it is important to remember, the dollar will be under pressure in the months to come due to the lasting implications of a low interest rate environment. Currently prices are about to test the lower broken support trendline, there are two scenario that can play out here:
- Prices reject following the retest of the broken support trendline, this would make it a new resistance for the pair. A more conservative entry would be at the break of the previous intraday low at 1.17644, breaking this low could see 1.17200 being met swiftly after.
- Prices close back within the upwards channel structure. Traders should bear in mind simply breaking and closing back within the structure does not make it valid, prices need to clearly test and reject from the trendline, to the upside, in order for the structure to be valid once again. Should this be the case, prices could reach 1.18650 and 1.19000 respectively.
CHF/JPY has been trading in a sideways range on the monthly timeframe between 118-109 (approximately). Prices have rejected the monthly resistance at 118 and we can see on the daily frame prices have been making higher highs and higher lows up until the 118 resistance. However the previous candles failed to establish a new higher high and instead formed a double top indicating an exhaustion in bullish momentum.
Looking at the most recent daily candle, we have now created a new lower low following the double top structure, it is now likely prices will retrace to form a new lower high and begin a new down trend. As geo-politcal tensions between the US and China increase, the Japanese yen is looking attractive. Not to mention, the CHF , which is also a safe heaven currency, has done most of the heavy lifting this year thus investors may shift flows towards the Yen instead from a value hunting perspective.