The Building Blocks of Trend Development 06.12
We are now half way through the second full trading week in June, and momentum has shifted for many traditionally trending Forex pairs. Today we will review trending opportunities on both the USDCAD and EURJPY by applying our building blocks of trend development skills to 30minute charts. By spotting past momentum, we can then focus on the strongest trending pairs for creating new entries through the remainder of our trading week.
The USD has given up much of its May gains against multiple currency pairs. The USDCAD with its inverse correlation to oil, has steadily been printing lower lows for the last trading week. The pair has decliend as much as 231 pips from its Block 1 high at 1.0435. This move culminated in a fresh low created in our current pricing block at 1.0200. This weeks price action opened lower but price has since moderately retraced printing a lower high in place at 1.0325. Traders are watching todays price action specifically to see if our trend can continue to create new lows. If not, this may send a message that our downtrend is at least temporarily on pausewith a break over previous highs.
Momentum on the EURJPY pair is currently depicted below stalling on the 30minute graph after a two block rally. With price previously driving upward, the EURJPY rallied as much as 411 pips through Block 1 and 2. Current price however, resides between our previous Block 2 low of 98.53 and high of 100.90. Without the creation of a new high or low, short term traders are enclined to wait for new direction from future price movement. This pause does allow breakout traders to use previous pricing levels for potential entry orders on the creation of a new high or low. Preference should be given to the creation of a new high over 100.90 in line with our previous two block trend.
Using the analysis above, my preference is to continue to find opportunities to sell the USDCAD into resumed momentum lower. Breakout traders can utilize entry orders on the EURJPY over previous support & resistance levels. Short term traders may give bias to past momentum upward and begin buying on the creation of fresh highs.
---Written by Walker England, Trading Instructor
To contact Walker, email WEngland@FXCM.com . Follow me on Twitter at @WEnglandFX.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.