Quite a few of the Euro pairs are reaching some key levels and I thought I would share some thoughts on most of them in one post…
To disclose I am not in any trades for these pairs yet, but they certainly are on my watch list especially in the next 1-3 weeks as they are higher timeframe setups (swing/ position trades).
Please note all monthly chart screenshots were taken on 10th Feb (i.e. mid-month) so have yet to close – and will change.
The pairs I will be looking at include the EURCAD, EURGBP, EURJPY and EURUSD, primarily weekly/ monthly charts for macro patterns.
There will be plenty of Euro, Usd and Jpy news in the coming weeks that could provide the catalyst for a lot of these possible setups or simply negate them.
Here we have a possible bearish 5.0 + a reciprocal AB=CD pattern on the monthly chart with overbought indicators near the 50ema, this is possibly reinforced by the weekly chart that has a bearish Gartley pattern with similarly overbought indicators that terminated at a supply level/ 2std dev Bollinger band and has now confirmed a three candlestick evening star formation (circled in red).
I will be waiting for another retest of the highs on this one with intraday setups to short this hopefully with the 200week simple moving average (just above D) in line as well… the Risk to Reward is not good enough for me night now and the 10-20emas (support) are directly below the current price and the profit window is too small at 1:1
Weekly Chart showing clearer view of pattern/rejection candle
The Eurgbp has behaved as expected in my previous post in October 2012 which you can find here – this was also based on weekly/ monthly charts so a continuation of the theme.
At present the monthly chart appears to be rejecting the supply level noted in my previous post, right at the channel resistance trend line; this is also confirmed by the indicators being overbought and crossing over.
On the weekly we have hit the head and shoulders target level and now rallied up to a supply level above the 200sma and clearly rejected this level, closing back under the 200sma with a bearish engulfing candle (give or take a pip). I believe this is very significant.
Changing the perspective slightly to better show the pattern I noted emerging I switched to a 2week chart, the main reason is because the pattern is clearer on this chart and also it shows the importance of key candlestick reversals.
I do not know the exact candlestick pattern names and I don’t think they are overly important but one method to look at rejection candlestick patterns at key levels of interest is to add the candles together, in this case this two candlestick rejection pattern on the weekly chart, it formed a gravestone doji/ pin bar rejection on the 2week chart – right at a bearish gartley pattern completion with an AB=CD and overbought indicators.
This is quite appealing to me as it also rejected outside of the 3 std dev bollinger bands, which are supposed to contain 99.73% of all price action. This shows that we have now rejected an extreme move, i.e. mean reversion is the more probable outcome from here, and given the distance to the 10-20ema’s we also have a profit window…
As per my previous post, I showed two levels that were possibilities for Shark patterns on the Eurjpy, and Murphy’s law saw my stop being taken despite the intraday setup working, it lacked follow through
Moves such as these in jpy’s recently that are clearly impulsive (and extreme) with no reasonable pullbacks to even the 23.6% retracement levels. Of course you only know this in hindsight…
The jpy’s especially the Usdjpy are in extreme trends, 2 red weekly bars in 19/ 12 green weekly bars in a row etc… this was/ is clearly extreme buying, and I am sure the COT (commitment of traders) report will be very one sided – Heading into high timeframe resistance levels….
Given I was stopped out of my first trade at the 88.6% retracement, I am looking to again trade my pattern as planned but first wait for a price action confirmation that shows weakness around my key levels.
The monthly chart currently has a small doji type bar, however we are only a 1/3 through the month and this could change dramatically, we also have two supply levels on top of each other at our fib levels.
Usually in this instance I would trade the upper level only, this works quite well in this case as it also coincides with the 127.2% retracement level, however I would only like to see a shadow tagging this 127% level or even slightly higher BUT then close under or very close to the 113% level.
Therefore I need price action to remain closed on a monthly basis very close to or under 126.70 ish which it has done for two weeks running – right at the level… preferably any bar at this level will have a small body.
I will of course be looking for price action clues on lower timeframes, but the default chart if it gets messy will be the monthly chart.
If this pattern works around where it is, the targets will be around the Fibonacci retracement cluster levels I have dotted in blue (50-61.8%) which will be a nice stop and reverse level (5.0 pattern)
If it closes above the 127.2% retracement it will negate the pattern and the above scenario is void
The Eurusd weekly has a bearish Gartley pattern at present, along with many other Euro pairs, it also appears to have an bearish engulfing candle similar to Eurgbp, again if you add these two candles together you would get a shooting star at a Gartley/ fib cluster level… with indicators again overbought
It is worth noting that there are two Fibonacci cluster levels on this chart and the Euro could possibly rally back up to 1.3850ish fairly easily as many people are expecting a Eurusd at 1.40 due to the inverted head and shoulders in this chart (neckline around 1.30 – 1.31).
Essentially they are all short Euro trades for somewhat similar reasons, and all highly correlated so risk is going to have to be adjusted/ managed accordingly
I am being cautious with the jpy pairs right now because strong trending markets work against Fibonacci ratio traders unless you trade the smaller timeframes or alter your entry technique to allow for more confirmation, as very strongly trending market conditions are more suited to trend following/ breakout strategies.
Part of knowing your strategy is being aware of what type of market conditions it performs poorly.
Hope this helps, and apologise for the longwinded post