Price Action and Patterns

The EUR/USD is trading flat this morning despite a series of news events beating expectations. First EUR German Industrial Production numbers printed better than expected at .8% (MoM) (APR). This was then followed by EUR Euro-Zone Household Consumption printing higher at .6%. However, despite these numbers, the EUR/USD is poised to close the day inside of yesterday’s high and low, with the formation of an inside bar.

As prices consolidate, EUR/USD traders should keep their eyes open for a breakout to determine the markets chosen direction. Bullish breakouts may begin at yesterday’s high at 1.13927 as a point of resistance. Alternatively, yesterday’s low at 1.13253 may be seen as a value of support. A breakout below this value may suggest further declines of fresh downward momentum.

Traders looking for breakout confirmation may track momentum using the Grid Sight Index (GSI). Once price has moved through either of the technical values mentioned above, traders may use Grid Sight to track historical distributions of price. After a bullish breakout of resistance, we should be seeing an increase in the percentages of historical bullish distributions. Alternatively, if a bearish breakout occurs, there should be an increased bias for historical downward distributions.

False Breakouts

The Grid Sight Index can also be used to help pinpoint if a market breakout has been invalidated. In the instance that prices breakout higher, traders should be warry of the EUR/USD declining back through previous resistance (now support). In this scenario, we should again to begin seeing an increase in bearish historical distributions. Alternatively if prices breakout lower, a heavy weight of bullish distributions may suggest a turn in price back inside of today’s trading range.

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The AUD/USD continues to consolidate today, after moving to new weekly lows late in Wednesdays trading. The weekly low for the AUD/USD currently resides at .7452, and this value comprises a key point of support for an ongoing trading range. Resistance has been noted in the graph below as the last swing high for July 19, found at a price of .757. As prices continue to range traders should continue to track short-term momentum, coupled with support and resistance, to pinpoint any future breakouts in price.

AUD/USD, 1 Hour Chart

Alternatively, traders may look for a retracement in price if price begin to turn back towards range support. The Grid Sight Index found prices declined 9 pips in 48% of the reviewed historical matches. A move through the first bearish distribution, found at .7496, would open the pair for further declines. It should be noted that prices only fell 33 pips, in only 3% of historical instances. This places today’s final bearish distribution at a price of .7472.


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GBP/JPY started September with the right foot, as for the fourth consecutive trading day, the cross has traded concisely to the upside. Performance that has lead GBP/JPY to account for an increase of 3.4% this week. On a monthly basis, GBP/JPY closed August with a 0.34%, the smallest percentage change the cross had not seen in 5 years.
Next, we are going to review some Short-term and Long-term technical outlooks in order to gain perspective what the future might hold for GBP/JPY.

Short-Term Technical Outlook:

In a short-term technical outlook, we can observe in the chart below that during the last 15 days, trading took place within the confined limits of the upsloping Andrew’s pitchfork. During this time, the 50 SMA crossed above the 200 SMA creating one of the simplest bullish signals in technical analysis, the “Golden Cross”. After this event, GBP/JPY gained great upside momentum and as for the first trading day of September, the cross got to break above resistance line of the above mentioned Andrew’s Pitchfork. As for today, price action maintained on the bullish side and for second consecutive day, the cross broke above resistance line. The cross found a strong resistance level at the extension line established by the slope on our Andrew’s Pitchfork channel placed at yesterday’s high.

However, seems that bullish momentum might be in its way to take a break, as of right now, price action and our 13 period RSI have started to show a negative divergence for GBP/JPY. Therefore, Trader’s attention should now be on those previous resistance levels delimited by our Andrew’s pitchfork channel, as now these will work as support levels for GBP/JPY.

GBP/JPY 1 Hour Chart:

Bigger Picture:

On a bigger picture, GBP/JPY finally step over overbought territory on our 13 period RSI. RSI for GBP/JPY had kept on registering lower highs during the entire year as can be observed in our chart below. However, during this week’s trading action, the cross finally got to break the negative sloped line for RSI and as well reach overbought levels. This event could imply that the cross might be changing its bias and now it might be time to start thinking on GBP/JPY with a bullish perspective. Nonetheless, we should remain cautious, as we have to remember that overbought zones represent zones of potential reversal.

As a potential first target for GBP/JPY on this bullish bias, the previous support line that was broken to the downside during the Brexit referendum should be on the mind of traders. As a second target, the 23.6% Fibonacci retracement from the June’s 2015 high and the 2016 July’s low should be in focus.

GBP/JPY Daily Chart:

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Gold prices remain in a holding pattern, with the open of Mondays trading marking the 6th session of consolidation for the commodity. Key daily resistance for the price of Gold remains above $1,265.34, while support is found near $1,241.27. Traders will be looking for Gold prices to breakout this week with the release of several high importance news events. This includes US CPI data released on Tuesday with an expectations set at 1.5% (YoY) (Sep), and Australian Employment Change data released on Wednesday with expectations of +15.0K (Sep).

Gold Price 1 Day, Support & Resistance

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The bearish move in Crude Oil prices this week has been short lived, with the commodity now trading back to weekly highs at $45.29. This move has been predicated on the hope that OPEC will agree to cut production later in the week. This morning’s advance should be seen as significant as it is the first sign of a meaningful reversal after Crude Oil Prices have declined as much as $9.73 a barrel from the October high of $51.91.

Technically, Crude Oil prices are now trading back above the 200 day MVA (simple moving average). Typically this indicator is used as a trend qualifier, and if Crude remains above the MVA it may be seen as a bullish signal for the market. It should be noted that the last time that Crude Oil prices traded above the MVA was in August, which saw the commodity advance as much as $12.68 a barrel. Even though that prices are now trending higher, traders should continue to monitor the MVA at $43.95. A move in Crude Oil prices back under the MVA could just as easily signal shift towards bearish market conditions.

Crude Oil Price, Daily with 200 MVA

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Gold prices are trading flat this morning, ahead of today’s US ISM Manufacturing data. This is considered the first high importance US Dollar event for 2017 trading, and expectations are set for a release of 53.8. Any deviations from this value may directly affect the US Dollar, and the price of Gold.

Technically, Gold is considered in a long term downtrend as prices broke remain beneath its 200 day SMA (simple moving average) at $1,268.57. In the short term, the commodity is showing a bullish bounce off of December’s low of $1,126.85. This current bounce in price has placed Gold price back above the 10 day EMA (exponential moving average), which is currently acting as support on the daily chart below at $1,145.26.


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After declining last week from yearly highs, Gold prices are beginning to rebound ahead of tomorrow’s FOMC rate decision. Expectations for the event are set to see key rates held at 0.75%, and it should be noted that no press conference is schedule this cycle for Fed Chair Janet Yellen. Despite markets expecting little in the way of policy changes, traders should be reminded that this event can still drastically increase volatility for US Dollar based assets such as gold prices.

Technically, gold prices are rebounding and trading back above its 10 day EMA (exponential moving average), which is providing short term support at $1,199.85. This bullish resurgence in price, suggests that last week’s dip to $1,184.45 was simply a retracement in a developing uptrend. If gold prices continue to rally, traders will next target the standing 2017 high at $1,220.25. Alternatively, if the commodity stalls near present levels, a breakout under $1,180.65 may suggest a resumption of golds ongoing long term downtrend.

Gold Price Daily Chart & Averages

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The AUD/USD is trading into key values of support, as the pair has fallen as much as 199 pips from the standing yearly high at .7741. This decline has come mostly on the back of recent US Dollar strength, and now the market is waiting for Fed Chair Janet Yell to make her most recent statements in Chicago later today.

Technically the AUD/USD is trending lower in the short term, trading well below its 10 day EMA (exponential moving average), found at .7634. This short term decline in price has now pushed the pair to test the 200 Day MVA (Simple Moving Average), found at .7546. This line should be considered as a critical line of support, and a breakout below this point may suggest a shift in the AUD/USD’s long term trend. If prices fail to breakout however, it may suggest that this most recent decline has been a retracement in an ongoing 2017 uptrend.

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Gold prices have gained considerable bullish momentum this week after finding support above $1,200.00. This rise has been heavily influenced by the outcome of Wednesday’s FOMC event, and now traders are looking at today’s U. of Michigan Confidence survey data for further direction. Expectations for today’s release are set at 97. As a high importance event, it is expected to increase volatility in US Dollar based markets which includes commodities such as Gold.

Technically gold prices are now trading higher in the short term, after bouncing back about the displayed 10 day EMA (exponential moving average) earlier in the week. This line is found at $1,218.69, and is currently acting as a value of support for gold. If prices continue to rally, traders will look for the commodity to again approach standing 2017 highs near $1,264.06. If prices fail to break through this point, it may suggest that gold prices are simply retracing before trading back in the direction of the metals longer term trend.

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‘The trend is your friend’

We’ve all heard it, and it makes perfectly logical sense; but in practice, this advice is so opaque that it’s practically worthless. Because even if you’re on the ‘right’ side of whatever trend is showing at the moment, the timing and entry into that setup is likely what’s going to determine one’s success or failure on that individual trade. So, it’s not enough to just find the direction of the trend and then ‘hope’ that we’re right; we also have to find support (or resistance for down-trends), we need to be patient and exercise discipline while waiting for the setup to build, and then we have to identify risk levels so that if/when we’re ‘wrong’, we have a line in the sand with which to bail in order to save the rest of our equity. In this article, we’re going to share a five-step process for traders looking to trade into new or ‘fresh’ trends using price action.

Know Your Time Frames

New traders often wonder ‘which time frame is ‘best’’? This is very similar to asking ‘what is the best temperature’. Well, it’s relative. Some like it colder, others like it warmer; but by and large most people are in the same ballpark range of comfort. Chart time frames work like this, as well. If you’re a scalper looking to hold positions no longer than 20 or 30 minutes, the setup on the monthly or weekly chart is probably going to be so divorced from the dynamics that you’re following that you might as well be looking at another market altogether. And if you’re trading a monthly setup, what’s taking place on the one or three minute chart is probably going to be pretty inconsequential to your ‘big picture’ setup.

There is no ‘best’ time frame. Time frames are merely different looks at the same picture; with the shorter or tighter time frames offering a more granular, detailed look at near-term price action. The downside to this greater detail is noise; as those shorter time frames are, in general, considerably noisier than longer-term charts. But the longer-term charts are significantly slower and not nearly as actionable; so the prerogative here should be one of balance.

Trader 'Style'	~ Holding Period	Trend Chart	Entry Chart
Long-Term	1 Week +	Weekly	Daily
Swing-Trader	few days - few weeks	Daily	4 hour
Short-Term	few hours - few days	4 hour	1 hour
Day-Trader/Scalper	< few hours	1 hour	15 minute

Don’t Chase the Breakout

The period that is often most dangerous to trade a new move is also when it happens to be the most attractive, and that’s when prices are breaking out of previous support or resistance. Breakouts can be difficult to trade, even for experienced traders, because by nature it’s the process of something ‘new’ happening and thereby there’s no recent data or observations from which we might be able to derive strategy.

Wait for Support to Show-Up Around Prior Resistance (for up-trends)

Watching a fresh breakout can be trying for a trader’s patience, and for the new trader that can be a challenging exercise as their only real option whilst watching a breakout take place is to either chase it, or fade it (go short after a bullish breakout). Given that a breakout is, by definition, a ‘new’ observation of higher or lower prices, this is an inopportune time to open positions.

Use the Shorter Time Frame to Confirm Support & Early Stage of Directional Move

Once the breakout has been found, and once the pullback has gotten under-way, traders can begin to plot their trend-side entries. This is where the greater detail and granularity of that shorter-term chart can be helpful from the additional perspective that’s provided.

Setting Risk and Bailing When Proper

After the trade has been identified, traders are going to want to add a stop as they trigger or shortly after they open the position. That way, if matters reverse, the trader has some element of down-side protection. But key here is one of expectations: Price action is rarely perfect, and perhaps more to the point, price action swings are blatantly obvious and most market makers can visibly see where prices had previously reversed. Most market makers also know these points are often used for stop or limit placement, so these price action swings can be like a red beacon for ‘free liquidity’ for market makers executing on sitting orders.

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