Who will be the winner of this week’s Forex battle: the US Dollar bear or US Dollar bull?
The market reacted bullish after the release of the NFP figures but decisively bearish to the FOMC statement. The GBPUSD 4-hour chart, for instance, shows the dramatic fall and subsequent rise clearly on the graph (see orange and green circles). What can Forex traders expect for the upcoming week?
FIBONACCI TENNIS
It seems like Forex traders can expect a game of “Fibonacci table tennis ” on the GU as price bounces back and forth between the bullish and bearish Fibonacci levels. Despite the news events, price respected both the bearish 50% Fibonacci level (orange Fib) and the bullish 78.6% Fibonacci level (magenta). However, the bullish 4-hour pinbar (blue circle) and the break of the resistance trend line (red) are signs which communicate to me that the bulls could have a very slight edge in the short-term.
The GU bullish rebound could last for a while and carry price to higher regions such as the Fibonacci confluence levels at:
- 61.8 retracement and -27.2 target at 1.63 (light blue circle)
- 78.6 retracement and -61.8 target at 1.64 (blue circle)
Price could be able to make a dip first (red arrow in screenshot) but then ultimately the trend of the week could be UP (green arrows). BUT… the down trend is strong and price could just as easily revert back into that trend this week. I think that the confirmation of a downtrend continuation is the break of the support trend line (purple) and the bottoms (purple circles). If price pushes through these support levels, then the long term trend is back into motion.
LONG TERM BEARISH
Despite the unsure prospects of the GU in the short-term, I am still expecting the daily downtrend to continue at one point or another, either upon break of the bottom and/or from the Fibonacci target and retracement confluences at 1.63 and 1.64. If price does retrace that high, then those levels would be the logical turning spots for more downtrend continuation. Basically the daily down trend remains strong and unless price breaks above the daily top at 1.6525 (dark red box), the chart tells me to remain bearish in the long run. The first bearish target is the -27.2 target (orange Fib in green box) at 1.58.
EU AND UJ CONFIRMATION
The EURUSD and USDJPY seem to confirm the same analysis as the GU above. Both the EU and UJ are in strong, long-term USD up trends but price is retracing against that trend. The question, which always lingers in these cases, is whether the retracement is indeed completed OR whether the retracement will get expanded with more USD weakness.
The EURUSD is playing Fibonacci table tennis as well: price could break out for a bigger retracement up towards the 38.2 Fibonacci retracement (blue) OR it could break the support trend line and bottoms (purple) for a downtrend continuation (red arrow).
The exact same analysis is valid for the USDJPY: price is approaching the 38.2 Fib level, which could be the turning spot for the longer-term uptrend continuation. The very maximum retracement should be the 50 Fib; otherwise I would not consider the long-term trend to be up.
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