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Triangular Trigger

Triangular Trigger

DailyFX, Research


The Dow Jones FXCM US Dollar Index has traded sideways so far this week. It recently broke above a downward sloping resistance line that has held since January so price action appears bullish for the greenback. However, if you have been frustrated by the lack of price movement in the past 2 days, look to a cross pair for trading opportunities.

(Created using FXCM’s Marketscope 2.0 charts)

The Trading Opportunity

The AUDJPY has conformed to a nicely shaped triangle pattern. If this pattern is correct, then prices could thrust higher and make a run towards 89.00.

(Created using FXCM’s Marketscope 2.0 charts)

There are 5 clear waves inside the triangle. By connecting the swing highs and the swing lows, you have a symmetrical triangle.

Additionally, notice how the price diverged relative to the CCI (orange dotted lines) at the recent low from earlier this morning? We also have a bullish hammer candle pattern confirming a bullish bent on the pattern.

Look for prices to retrace a portion of the wick left by the hammer candle and enter a long position.

Entry : Long near 85.80

Stop Loss : Near 84.80

First Profit Target : Near 87.80

Second Profit Target : Near 89.00

It is possible that prices may not retrace the wick as the divergence suggests a very weak trend down. Therefore, look for a breakout trade going long on a break above resistance near 87.00. If that occurs, move to the 1 hour chart and identify a swing low to place your stop at. To maintain at least a 1 : 2 risk to reward ratio, look for profits at twice the distance to your stop.

What is a cross?

Crosses are pairs that do not include the USD. Since the USD is the world’s reserve currency, it offers the most liquidity of the currencies and therefore tends to trend strongly. Over the past couple of days, the trend has been absent so cross pairs can offer up additional trading opportunities. By trading the AUDJPY (a cross pair), you remove the USD out of the equation and can see patterns emerge that offer trading opportunities until the USD trend re-ignites.

High Probability Breakout Trading

Breakout trading is a style used by many professional traders. If you are unfamiliar with breakout trading or new to trading in general, I am providing a webinar today on High Probability Breakout Trading. It will be held at the DailyFX Trading Room at 12pm Noon ET (4pm GMT). I look forward to seeing you there!

Happy Trading!

Jeremy Wagner contributes to the Instructor Trading Tips articles.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.