Today on USDJPY – Daily and H4 charts support Short trades, but...

On the Daily chart above, yesterday, after price broke below the major Weekly chart swing low that is also visible on the Daily chart as a major support level @ 93.85 (which we’ve highlighted using the blue broken line), price seems set to continue its downward move. The 93.85 level – since it was broken downward – has automatically turned to a strong resistance level, and as long as price stays below it, we should consider our downward move bias intact. However, as we could see, price is also at the base of a downward channel. This is a critical support area that we should be mindful of. Hence, we might want to see price break below Wednesday’s low @ 91.79 to buttress our downward move bias.

On the H4 chart above, from a day-trade perspective, we still have a bearish (downward) bias for this pair. However there are two critical support levels that we would like price to break downward to confirm our day-trade bearish bias: the most recent H4 swing low @ 92.50 (which we’ve highlighted using the upper blue broken line), and the Wednesday’s low @ 91.79 that we referred to on the Daily chart above (we’ve highlighted this using the lower blue broken line).

The more aggressive ones among us should consider looking for a short trade set-up on the hourly if the most recent H4 swing low @ 92.50 is broken – but keep close eye on Wednesday’s low @ 91.79. The conservative ones among us should wait till price breaks below Wednesday’s low @ 91.79 – in addition to H4 most recent swing low that would have, by then, be broken.

Please, always remember that we need our hourly charts – using Fibonacci retracement levels and important resistance levels – to seek promising areas to take our short positions. Price pattern on the hourly must also be forming lower highs and lower lows; and note that our aim is to sell a rally in today’s down trend.

Also, PATIENCE is the key here: we need to patiently wait for the appropriate price patterns and movements. They might happen, and they might not.

P.S.:

As at the time of this posting @ 07:40 GMT on Fri. July 10, 2009, the EURUSD, GBPUSD and USDCHF pairs are firmly embedded in no-trade zones according to our day-trade parameters.

Long Trade set-up on EURUSD hourly.

On the H4 chart above, price recently broke the most recent swing high @ 1.3938. This shifts our bias for the day to an upward price move. Please NOTE: the Daily chart, to me, isn’t having any distinct pattern at the moment that could offer us good clues about today’s direction for price. A previous Daily swing low is holding well as a support @ 1.3826, but price is also moving close (again) to the base of the upward channel that we’ve talked about throughout this week. Based on your risk tolerance, you might want to consider this observation unclear enough to refrain from taking a trade, or reduce your risk exposure.

The Hourly chart above is currently forming a tradable pattern. Price seems to have topped temporarily @ 1.3985. Hence, we expect price to retrace to the area between 1.3922 and 1.3858 (which is the area between the 50% and 100% fib. retracement levels – drawn from the most recent hourly swing low to the current price-top). Let’s seek to buy around this area. If price exceeds the 1.3858 level downward, our bullish bias is no more valid and we enter a no-trading zone. Our primary profit target is @ 1.4018 (the 127% fib. ext.).

Also, if price breaks above 1.3985 before retracing to the buy-area, we’ll have to redraw our Fibonacci tools using a new top & the most recent hourly swing low to determine new potential areas to buy.

The 15min. chart above gives us a clearer view of the hourly price action and the potential areas to buy (please note it’s advisable to set a Limit order ahead of time as price could move down to these level and reverse sharply in our favor)
This chart is rather cluttered but if we look closely, there are a couple of potential reversal levels available. You choose your preferred level based on your personality.

fib 61.8% ret. @ 1.3907;
fib 78.6% ret. @ 1.3885.

Initial Stop Loss @ 1.3856; primary Profit target @ 1.4018 (Please remember to factor in your broker’s pip-spread).

Please note that all these Fibonacci (fib.) levels have other pivots, overlapping fibs or previous highs/lows supporting them (they are the cause of this cluttered chart). As such, price could reverse at any of the points. The issue here is that the deeper the fib level you choose to buy from, the smaller the pips you’ll risk and the more your pip-profit; BUT, also the more the likelihood of you missing the trade as price might not retrace that deep before moving back upward.
You need your own discretion here.

Please keep your risk low. Don’t risk more than 2% of your capital. Personally, I risk about 0.5% per trade; and each trade has a potential profit target of 1% or more – based on my exit levels.

P.S.:
Similar Short trade and Long trade set-ups are forming on the USDCHF and GBPUSD pairs respectively.
Also, keep in mind the Official Bank Rate at 11:00 GMT – specifically regarding the GBPUSD pair. Be wary of possible price volatility during this period.

Today on USDJPY – Daily and H4 charts support Short trades.

On the Daily chart above, the downtrend is simply so visible. Since yesterday, after price broke the major Weekly chart swing low that is also visible on the Daily chart as a major support level @ 93.85 (which we’ve highlighted using the blue broken line), price has been in a free fall.

On the H4 chart above, from a day-trade perspective, we are still very much in a nice downtrend: price keeps forming lower highs and lower lows. Downtrend pattern doesn’t get more beautiful than this. The white horizontal line @ 95.44 highlights the most recent swing high – that has been maintained since yesterday – and as long as price stays below it, our downward bias remains intact.

However, we still need our hourly charts – using Fibonacci retracement levels and important resistance levels – to seek promising areas to take our short positions, and sell a rally in today’s down trend. Price pattern on the hourly must also be forming lower highs and lower lows.
Please NOTE: the most recent hourly swing high has just been broken upward; so, we might have to wait for some time to get the hourly chart to align with our downward move bias – it might take the whole day.

Failed Short Trade set-up on EURUSD hourly.

Yesterday, as seen on the Daily chart, price rallied upward only for it to be strongly halted (once again) by the base of a previous channel that was broken late last week. As a result of this strong upward price rejection, price turned downward and proceeded to break both lows of Monday and Tuesday (you might have to squint to see this).
NOTE: I lost a Long trade I took yesterday as result of this price move. Though, the H4 and Hourly parameters were in place, I had envisaged the possibility of the above scenario, and as such, risked only about 0.25% of my capital.

On the H4 chart the price movement described above resulted in price breaking the most recent swing low @ 1.3875, which automatically gave us a bearish bias; in other words, a bias for downward price movement.

On the Hourly chart, however, price recently broke above the most recent swing high @ 1.3926, and based on our trading method, that automatically nullifies any previous trade set-up we were anticipating.
Prior to price breaking the most recent swing high, the positive MACD divergence should have warned us of the imminent price reversal upward. Personally, this kept me from seeking a Short trade.

However, please note that MACD divergence – just like any other indicator – doesn’t always result in a valid warning. That’s one of the uncertainties we have to deal with when trading; we just have to stick to a particular approach for consistency on our part. NO ONE METHOD IS ERROR-PROOF.

Today on USDJPY – Daily and H4 charts support Short trades.

On the Daily chart above, late last week, price re-tested the symmetrical triangle that was broken downward in late June, and, since then, it has moved consistently downward. Hence, our bias for a downward price move is maintained. However, let’s keep in mind a major Weekly chart swing low, which is also clearly reflected on the Daily chart as a major support level @ 93.85. It might halt the downward price move.

On the H4 chart above, from a day-trade perspective, we are still very much in a nice downtrend: price keeps forming lower highs and lower lows. The white horizontal line @ 95.44 highlights the most recent swing high, and as long as price stays below it, our downward bias remains intact. This is another good sign supporting a short trade.

However, we still need our hourly charts – using Fibonacci retracement levels and important resistance levels – to seek promising areas to take our short positions. Price pattern on the hourly must also be forming lower highs and lower lows. Please note that our aim is to sell a rally in today’s down trend.

Also, PATIENCE is the key here: we need to patiently wait for the hourly retracement. It might happen, and it might not.

Today on GBPUSD – Daily and H4 charts support Short trades.

On the Daily chart above, since the start of this week, the upward trend line that was broken downward last week, and the negative MACD divergence have helped us to maintain our bias for a downward price move. Monday’s low (which we’ve highlighted using the blue broken line) @ 1.6093 was a critical support throughout yesterday. It was broken earlier today, and as a result, our bearish bias has been reinforced.

On the H4 chart above, from a day-trade perspective, we are still very much in a nice downtrend: price keeps forming lower highs and lower lows. Price has broken the most recent swing low @ 1.6093 (which also happens to be Monday’s low) downward. This is another good sign supporting a short trade.

However, we still need our hourly charts – using Fibonacci retracement levels and important resistance levels – to seek promising areas to take our short positions. Price pattern on the hourly must also be forming lower highs and lower lows. Please note that our aim is to sell a rally in today’s down trend.

Also, PATIENCE is the key here: we need to patiently wait for the hourly retracement. It might happen, and it might not.

Today on GBPUSD – Daily and H4 charts support Short trades, but…

On the Daily chart above, the upward trend line that was broken downward last week, and the negative MACD divergence are still good enough for us to maintain our bias for a downward price move. However, previous day’s low (which we’ve highlighted using the blue broken line) @ 1.6093 is a critical support that we would like price to break.

On the H4 chart above, from a day-trade perspective, we are still in a nice downtrend: price keeps forming lower highs and lower lows. However, the most recent swing low @ 1.6093, which also happens to be previous day’s low – as earlier said – is a critical support we would like price to break.

On the other hand, if price pattern on the hourly is able to form new lower highs and lower lows – even without breaking the support level @ 1.6093 – the aggressive ones among us could consider that a Short Trade set-up. If I’m still in the market when (or if) this happens, I’ll post the update.

Similar scenarios are also playing out on the EURUSD and USDJPY pairs – both, also, to the Short side.

As in all market circumstances PATIENCE and DISCIPLINE are the keys here: the above analysis could keep us out of trade today – we never know; but let’s always remind ourselves that what we’re interested in is making money, not just making trades.