Market Commentary

Support points: 1.2675, 1.2660 and 1.2640

Resistance points: 1.2773, 1.2792, 1.2815, 1.2838

This pair broke down out of its congestion area and will likely continue the move south. It did hit the 89 ema on the daily chart and this can cause a bounce up before a retest, so be very alert around the lows today and be prepared for action either direction. Use pullbacks and retracements for initial short entries. Additional amounts can be added if prices break through today’s low near 1.2700. The move today was solid at 124 pips (even though the average is now at 71 pips) so we could see a further nice move tomorrow. The momentum bias remains short as long as the lows for today are broken. If the support at the 89 ema holds, then revert to the range trading style and smaller profit goals. The trading method below is one I use in a trending market and could work well if the move down continues.

You can use a five minute chart with a 20 ema to time entries. When the prices pull back to the 20 it is time to exit any fade trade longs, and make initial re-entries short. When the prices break prior lows can add an extra amount and then exit when the price of the current bar closes above the price of the previous bar. When the bars begin to cluster around the 20ema and close above it the move is likely tiring out and it is time to stop trading in the momentum direction until the next busy market time. For risk reasons I do not leave trades on over the weekend as the gaps on Sunday can be dangerous and all stops can become market orders with fills being past where your risk/reward parameters would have set it.

GBP/USD

Support points: 1.8666, 1.8640, 1.8690 and 1.8547

Resistance points: 1.8795, 1.8855, 1.8900 and 1.8950

The move down bounced back quickly as the prices neared 1.8700 and after three days of solid trending down the one hour chart now has a divergence on the MACD with the last move. That doesn’t mean that the move is necessarily over, but that we should definitely be more cautious about the amount we are looking for when trading short. The price action could become more choppy so look to take smaller profits more quickly using the 5 minute and 1 hour charts as gauges of the strength of the moves. My opinion is that the move will continue down to at least 1.8640 and test the 89 ema and 23% Fibonacci retracement on the daily chart and that is well within reach of the daily average move which stands at 111 for now.

USD/JPY

Support points: 116.10, 115.85, 115.65, 115.15

Resistance points: 116.50, 116.75, 117.00

This pair is still trading within the triangle formation on the daily chart. Until it breaks out one way or the other trades should be conservative in size and for small gains. From the looks of the large range bar on the news and subsequent ones it appears that the pressure could be to the downside for the future. There is a nice consolidation on the one hour chart and prices breaks below 116.25 can be traded for 10-20 pips. Since there is news early in the European session it may continue consolidating until then. The volatility on this cross is very low at 65 pips average per day.

General Remarks