The Building Blocks Of Trend Development 05.15
Moving into the second day of the May 15th trading week, the Forex market has seen some exciting trend continuations. Today we will attempt to find the strongest trends in Forex by using our building blocks method described in the May 8th edition of Chart Of The Day. Picking out the strongest trends will allow us to focus on specific pairs for the remainder of the week ahead while avoiding those specifically that lack momentum and market direction.
JPY pairs still are considered the strongest trending pairs in the market. Most noticably is the decline on the AUDJPY pair pictured below. Price formed a lower high in our first trading block at 83.28 and has recently declined as much as 391 pips to our current price block low at 79.37. The pair has already formed a fresh low this week and trend traders will continue to look for lower lows on this pair. A shift in this analysis would occur on a price break over the Block 2 high at 81.10
This week, CHF pairs also come into focus. While the EURCHF is locked into a tight trading range the GBPCHF pictured below has been forming higher highs. As of today, the pair has formed a new monthly high at 1.5087 and is working on completing its 11th block higher. Showing its strength, the GBPCHF has moved over 223 pips higher from the Block 2 low at 1.4864. As the pair continues to form higher highs, trend traders should continue to look for the oportunity to buy the GBPCHF. A shift in this analysis would occur on a break under the Block 2 low previously mentioned at 1.4864.
Using the analysis above, my preference is to continue to find opportunities to sell AUD pairs, preferably against strong currencies such as the JPY or USD. The CHF has also been pegged as a weak currency and has been marked for trend trading against currencies such as the GBP and USD while the EURCHF is to be avoided.
---Written by Walker England, Trading Instructor
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