*FX Currency trade using simple Technical Analysis*
Happy Monday to you all. Here is another technical analysis blog post as I know a lot of you like to see how I analyse the financial markets and actually enter trades. This trade breakdown is another FX currency pair (my specialty).
You can track this trade live on my TradingView profile by clicking on the link below:
This is a very simple set up utilising a higher timeframe trend and a key support zone I have noticed is holding strong. Let’s start by looking at the weekly timeframe chart and I will talk you through what I was seeing before I entered a long position.
Pre Trade Analysis:
I have marked the key swing points on to the chart with yellow circles because these are the highs and lows I have used to determine that bullish bias at the current region price is in. I have used the weekly swing highs at around 1.24 and the previous swing low at 1.04 to place the weekly Fibonacci Retracement levels on the chart. As you can see, EURUSD is in a bit of a weird spot at the moment and could be considered “range bound” on multiple timeframes but I noticed that the last weekly highs were much higher than the previous so this could be a sign that the trend may become bullish soon. Therefore, I am looking for a long position entry at key fibonacci retracement levels like the 0.618 where price is at now.
I also saw that price is decelerating and almost “flattening” as it is has approached the weekly 0.618 Fibonacci Retracement level. This is very important because it means that the higher timeframe bearish momentum is dying down and the probability of a reversal is even greater. You can see price is getting squeezed from both sides and a descending wedge pattern is forming which is widely known as a reversal pattern. Price has also made 3 wick tests of the 1.12 zone which is a nice round number and psychology number for the EURUSD FX currency pair and these low tests give me confidence that the support zone here will hold.
The daily timeframe didn’t really do much for me in terms of providing an entry as it is very choppy. This is most likely caused by the deceleration seen on the weekly timeframe but consolidation like this does tend to lead to a good breakout move in a certain direction (hopefully up!). I therefore went straight to the 4hr timeframe chart to look for a good entry for a long position on EURUSD.
The 4 hour chart shows a very important piece of analysis that gave me the confidence to enter this long position. If you look at the other timeframe charts up close (daily & weekly) then the current trend is pretty much sideways but on the 4hr timeframe I saw that the last high was a higher high. This is a major sign that the trend could soon reverse and if this next low is higher than the previous then it is almost confirmed. I have marked the chart with the 4hr highs and lows for you to see for yourself.
The blue zone on the chart is the 1.12 support zone. This is a key level I have marked on which coincides with the weekly Fib 0.618 retracement level. This zone has held strong against 2 previous tests and I have now entered a long position on the 3rd rejection.
My initial profit target is marked on the 4 hour chart above. I will target the previous swing high at 1.1440 because this is the near term resistance and price is still consolidating on the daily/weekly timeframe. Therefore, there is a chance that price will reject this upper resistance and start to drop back down again.
Ideally I would like for price to break the previous highs to confirm the bearish trend has reversed. My next profit targets would then be the weekly key resistance zones at 1.20 and 1.24. As always, it is best to just keep it simple and the basic highs and lows over the next few days and weeks will tell me what I need to know about this trade.
My stop loss is placed a conservative 30 pips below my entry. This allows some breathing room but keeps the Reward:Risk ratio quite high. If price reaches 1.1440 (previous 4hr highs) then that would produce nearly 8R.
The chart below shows the current status of the trade.
Thanks for reading and I hope this gives you a further insight in to how you should layer up your analysis to produce higher probability trade entries. Keep it simple and always remember to look at the bigger picture before looking for the lower timeframe entries.
All of my technical analysis is done using the TradingView platform which is fantastic. You can sign up to a free of charge, monthly, annual or 2 yearly subscriptions and it is definitely worth investing in if you want to start trading. The software is so easy to use and full of functionality.
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Have a good week and please remember to like and follow this blog to stay up to date with all my posts and analysis!