March 10 – March 15 2019
How did we do this week?
CHFJPY – Initially we were thinking of a short trade off a weak pullback but kept in mind that the momentum red candle can be an exhaustion move as well. Watching the four hour chart for patterns that indicate an upside move as price was consolidating at lows for two days. This can work off the momentum move and put you back on the hunt for longs. The four hour chart put in a higher low trend structure which is bullish. The entry is a breakout of the range. Price jumped 103 pips to highs from the break with a 2:1 reward to risk ratio. Read the comment section for a response to a long time reader of my blog about this setup.
EURGBP – Price settled in at the top of the flag and if you monitor setups on four hour charts, you had a great trade entry off a failure test of highs from what was a failed breakout higher. 129 pips to lows. There is another entry on the four hour that I will not include here but was a backwards bounce of previous resistance on March 12. Think of it as playing a short from the third shoulder of a head and shoulders pattern.
GBPCAD – Price ranged on this pair and I was not happy with my analysis.
GBPJPY – Setup evolved into a long with the outside bar on March 11. No trade but used this to watch the GBPUSD cross.
GBPUSD – After the outside day, monitored this pair (due to exposure in the JPY) on the four hour after price rallied from lows. A trend line break on the four hour, the momentum lower and rejection of lower price (you can infer from this price action a pullback on the lower time frames) and 280 pips to highs. Would have preferred the outcome of the GBPJPY cross!
USDCAD – When the chart was published the red candle was not fully formed and closed lower than the preceding candle. Wanted a pullback to go long. Inside candle gave volatility compression but had a weak close on Friday.
USDJPY – The number of inside candles suggest volatility compression. You want to see a strong break of these patterns.
Not a bad week overall last week and some of these were textbook trade setups and entries. There is no magic and this approach plays out every single week. This week was short of 600 pips that were available depending on your entry and management. I will say that the market structure made from the price action is not as clean as we’ve seen before. If these setups don’t pop out to you, then you’d be better to stand aside.
This week, much of the moves in the GBP crosses are Brexit related. That is the one issue with currencies that is hard to deal with at times. They are so influenced by interest rates and economic news. Supply and demand? No. You can’t treat currencies like you can other instruments.