After an early morning rally during the North American session we have seen some consolidation in the 0.8957 - 0.8967 range, setting up what looks to be a bull flag. From here I see three near-term possibilities:
1. Bull Flag. If price action breaks to the upside of the flag, I expect it to continue toward the 1.272 (0.9020) Fib extension of the latest leg up (labeled here as 'Drive 2'), extending as far as the 1.618 (0.9069) Fib extension before turing around.
2. Three Drives Reversal Pattern. Price is currently sitting between the 1.272 and 1.618 Fib extension of Drive 1 and may represent the end of Drive 2 of a three drives reversal pattern. If price action breaks to the downside of the flag, watch for it to continue toward the previous resistance turned support (S/R) located at 0.8900. Notably, this S/R is found between the 0.382 and 0.618 Fib retrace of drive 2. Price action may reverse here to begin drive 3, which would be expected to extend to between the 1.272 (0.09175) and 1.618 (0.9080) Fib extension of drive 2 before the trend reverses.
3. Head & Shoulders. If price action breaks through S/R at 0.8900, watch for it to continue down toward the neckline (around 0.8840) of a possible Head & Shoulders pattern. Price action would be expected to reverse here, retesting S/R before continuing downward.
Which of these patterns will play out remains to be seen. I will update as plans become invalid or more likely. Waiting and watching for a clearer signal for now.
Trade with caution. This is not trading advice.
1. Bull Flag. If price action breaks to the upside of the flag, I expect it to continue toward the 1.272 (0.9020) Fib extension of the latest leg up (labeled here as 'Drive 2'), extending as far as the 1.618 (0.9069) Fib extension before turing around.
2. Three Drives Reversal Pattern. Price is currently sitting between the 1.272 and 1.618 Fib extension of Drive 1 and may represent the end of Drive 2 of a three drives reversal pattern. If price action breaks to the downside of the flag, watch for it to continue toward the previous resistance turned support (S/R) located at 0.8900. Notably, this S/R is found between the 0.382 and 0.618 Fib retrace of drive 2. Price action may reverse here to begin drive 3, which would be expected to extend to between the 1.272 (0.09175) and 1.618 (0.9080) Fib extension of drive 2 before the trend reverses.
3. Head & Shoulders. If price action breaks through S/R at 0.8900, watch for it to continue down toward the neckline (around 0.8840) of a possible Head & Shoulders pattern. Price action would be expected to reverse here, retesting S/R before continuing downward.
Which of these patterns will play out remains to be seen. I will update as plans become invalid or more likely. Waiting and watching for a clearer signal for now.
Trade with caution. This is not trading advice.
Comment:
Price action has slowly drifted out of the flag to the upside, but without any real momentum an enticing long position has not yet developed. There are some medium importance news events scheduled for the early morning hours of the London session. I expect price action to continue to drift with no set direction until then. News will probably serve as the catalyst to get this pair moving.
Comment:
Still no clear direction. Unfortunately I will miss the news events and don't feel comfortable taking a position yet. Watch price action develop over the next few hours and trade carefully.
Comment:
Wow! I just checked in here and was surprised to see that while price action did move over the last 10 hours, it has yet to move out of the 1.272/1.618 Fib extension box. Given that it is Friday and Asia and Europe are now closed, I am not expecting to see a clear break in either direction until next week.
Comment:
The upward movement in price action on Friday was not strong enough to convince me that price will be moving much further upward at this time. Note that price action turned around right after it touched the 1.618 Fib extension. As a result I am favouring the idea of a retracement to kick start this week. I have updated the Fib retrace and Fib extension price ranges based on Friday's high (see chart). I have also cloned 'Drive 1' and its retracement as a projection of future price targets (blue line). Note that both the Three Drives Reversal and Head & Shoulders trades are still valid.
Comment:
Price action has entered a key area now, the region between the 0.382 and 0.618 retrace of Drive 2. I'm watching for an opportunity to either enter long if price action reverses from here, or to go short if price action breaks and holds below the support/resistance line.
Comment:
Trade active:
I have taken a long position, looking to take profit between the 1.272 and 1.618 Fib extension of Drive 2 (see chart).
Trade closed manually:
Price action is moving aggressively in either direction. I'm out until this gets more interesting.