Compared to previous week, action on Monday was relatively quiet. Without unexpected, market-moving news, volatility in currencies declined considerably. Most of the majors rebounded versus the Dollar, probably only a short-term correction within main trends. That could change, of course, but so far, charts are not showing enough technical evidence to support important reversals. Still, even the small moves today presented decent trading opportunities.
Yesterday, I suggested a short-term correction in the USD-JPY, within first few hours after the open. The price made a new high for the trend but eventually formed a bearish engulfing line on the hourly chart. That was my signal for a sell (bearish reversal candlestick pattern). Actual entry was at 101.34.
Since this was supposed to be a short-term trade, expected to conclude within one day, my objective here was modest, only 50 pips. With currencies quiet, it took a better part of day for the USD-JPY to decline that much, but eventually, the target was met. Relatively simple trade, which worked out exactly as plan. Too bad, it is not always the case…
Another currency pair discussed in the last post was the AUD-USD. Here the set up was different. Using the 4H chart, I was looking for a fake bearish breakout under the latest low of 0.9035. That did not happen, the price started to recover before touching the support. We can see a bullish engulfing line on this chart, which confirmed my bullish expectations and marked entry at 0.9070. This trade produced 64 pips, with exit late in the day. For the AUD-USD to reverse even on the intermediate term bases, the price must move above the latest high of 0.9180, making it the next key level to watch.
Mike K.