Several key players in the USD-spectrum are coiling up into wedges; EUR/USD, GBP/USD, and USD/JPY are all coiling up to varying degrees. Depending on things unfold in the days ahead, there could be a good trade to come out of at least one of them. Gold is quickly approaching a major inflection point, be on the watch for volatile price action.
Technical Highlights:
- EUR/USD descending wedge forming
- GBP/USD falling wedge on the build
- USD/JPY symmetrical triangle nearing apex
- Gold is very near a major inflection point
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EUR/USD descending wedge forming
For the past month the euro has been bouncing around off long-term support (top of the range from 2015/16), with each bounce so far becoming increasingly weaker. This has price bottled up into a descending wedge. Ideally, given the trend, descending nature of the wedge, and big support, a breakdown would likely lead to the more explosive move, but we can’t rule out a top-side breakout. The short is likely to be the ‘easier’ play, but we’ll maintain flexibility in the event of a bullish break.
EUR/USD Daily Chart (Descending wedge on big support)
GBP/USD falling wedge on the build
GBP/USD has a pair of intermediate-term trend-lines which given their angle is creating a short-term falling wedge. The development of the wedge comes at support from Oct/Nov, which wind up as the floor should we see a top-side breakout of the pattern.
Given the extended decline and nature of these explosive patterns, a relatively explosive rally could unfold if the upper trend-line is broken. Traders have perhaps become all too comfortable shorting cable, with the ‘Johnny-come-lately’ crowd getting squeezed. There are a couple of scenarios (a breakdown could take shape), but this is the most tantalizing. Waiting for a confirmed break will be the key.
GBP/USD Daily Chart (Falling wedge)
USD/JPY symmetrical triangle nearing apex
USD/JPY has spent the past 5 weeks or so bobbling back and forth between trend-lines, forming a symmetrical triangle. The trend prior to its development suggests an upside breakout could be on its way, but a steadfast downtrend line from 2015 could prove problematic shortly after a breakout. To run with a bullish bias a breakout of the triangle and weekly close above the trend-line is needed. A downside break won’t require the same stringent weekly bar criteria.
See the IG Client Sentiment page for how sentiment changes can help you better gauge market direction.
USD/JPY Daily Chart (Symmetrical triangle)
Gold is very near an important inflection point
As we wrote this morning, gold is quickly closing in on a major trend-line test. Rising up from December 2015 is a trend-line that also constitutes the bottom of a long-term wedge pattern. Indeed, a big spot, not to mention in confluence is the December low at 1236. Hold or fold? For more details, see today’s gold & silver commentary.
Gold Daily Chart (Approaching big support)
Resources for Forex & CFD Traders
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
