The Forex Chronicles

EUR/USD Approaching Strong Resistance Level At 1.1700

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Previous Price Breakout

I have posted a few trading updates about the EUR/USD pair just recently, and as you may recall, I pointed out that it was worth watching out for a possible breakout when the price was trading in a very narrow channel.

Well the price did in fact drop below this channel and although it did pull back a little, it did subsequently drop around 280 points from the closing price of the initial breakout candle.

Since then the price of the EUR/USD pair has rallied somewhat and is now back to where it was before this downwards breakout. So where does the price go from here?

Resistance at 1.1700

Well if we keep the same trendlines on the chart from last time, it is clear that there is strong resistance at these levels.

EURUSD Price Resistance At 1.1700

First of all, the upward and downward trendline from the previous channel act as resistance, but you will also notice that the EMA (100) is sitting just above this trendline at around 1.1700.

So when you also consider that these round numbers often act as strong support and resistance levels, it is clear that it is going to be hard for the price to break through this level in the coming days.

Trading Opportunities

At the time of writing, the price of the EUR/USD has reached a high of just over 1.1650 at the start of the overnight trading session (check out the last blog post to read about a trader who has managed to develop a highly profitable overnight trading strategy for the EUR/USD pair), but has subsequently dropped back to 1.1600. So it has already been sold off after approaching this resistance level.

Therefore if the price moves above 1.1650 towards the critical 1.1700 level once again, a short position might be a high probability trading opportunity that is worth taking because the price is unlikely to have the momentum to break through this level.

Alternatively, it might be worth watching just to see how the price reacts and then opening a position accordingly.

For example, if the price is sold off once again, you might want to think about opening a short position between 1.1600 and 1.1650, but if the price does actually break strongly upwards through the 1.1700 level, it might be worth opening a long position and trading a possible upward breakout because this is quite a strong level of resistance.

Disclaimer: These are just my own personal thoughts and doesn’t in any way represent financial advice. You should always do your own research and make your own decisions when trading forex.

USD/CAD Symmetrical Triangle Chart Pattern For August 2018

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Triangle Chart Patterns

It can be very useful to draw trendlines connecting the highs and the lows to see the underlying trend, and to spot any potential breakout opportunities that may be available.

Sometimes you will get ascending triangles and sometimes you will get descending triangles, but where there has been a sideways trading range, you will often see symmetrical triangles where the price is trading in an ever decreasing trading range / triangle.

This is beneficial for traders because the price has to eventually break upwards or downwards out of this triangle at some point, and when it does it often results in a strong breakout.

Symmetrical Triangle on USD/CAD Pair

You may be interested to know that there is a classic symmetrical triangle pattern on the daily chart of the USD/CAD pair right now.

USDCAD Symmetrical Triangle - August 2018

This pair has been in a slight upward trend since September 2017, but has been trading in quite a narrow sideways trading range this summer with little upward or downward momentum, which is why we now have this triangle pattern.

Potential Trade

As a result, it might be worth keeping a close eye on the daily price chart of the USD/CAD pair because it is getting very close to the lower trendline at the moment, and may be about to close below this trendline either today or in the coming days.

Therefore it could be a good time to open a new short position if the price does close strongly below this trendline because there could be a strong downward move in the following days and weeks.

As always, I am not recommending any trades. There is always the chance that any breakout could turn out to be a false one.

I am just sharing with you my thoughts and demonstrating how you can trade any breakouts that occur when the price breaks out of a symmetrical triangle pattern.

Potential Inside Bar Breakout On Bitcoin For August 2018

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Trading Bitcoin

After the European Securities and Markets Authority increased cryptocurrency margin rates to 50%, it has obviously become a lot more expensive to trade Bitcoin and other cryptocurrencies, and a lot less appealing.

The spreads can also be quite off-putting as well because even if your broker does offer Bitcoin trading, you may need the price to move 50-200 points (or more) just to break even.

Nevertheless those that do have enough capital in their trading accounts can still potentially benefit from some big price swings because this is still quite a volatile market to trade, and when the price does start moving, it can easily move upwards of 1000-2000 points in just a few days.

Inside Bar Breakout

Many people are sceptical about treating these cryptocurrencies the same as any other market, and using the same kind of technical analysis to find profitable trading opportunities, but based on previous price action, it does seem to be very profitable to trade any breakouts that occur.

That’s why I wanted to highlight the current price action because the price of Bitcoin has been trading in a sideways range just recently, and more significantly, the last 5 daily candles are all inside bars, ie the last 5 candles are all within the high and low of the large candle from 15 August (indicated by the arrows), which had a daily range of around 500 points.

Bitcoin Price Chart 20 August 2018

How To Trade

A lot of traders have their own personal inside bar and breakout strategies that they like to use, but I myself like to enter a new position when the price moves above the high or below the low of the initial candle and CLOSES above or below this candle.

In my experience, you don’t want the breakout candle to be too large, but you don’t really want the breakout candle to be one that has a small trading range either because this could be a false breakout.

Anyway I just wanted to share my thoughts on the latest Bitcoin trading action, and explain how I like to trade these breakouts when they occur.

Whether the price moves strongly higher or strongly lower after the price closes above the initial candle remains to be seen, but it will be interesting to watch what happens regardless because the price has barely moved in the last few weeks.

An upward breakout could see the price test its recent highs of around $8500, whilst a downward breakout could potentially see the price collapse if it breaches its recent low of $5887 from last week and its previous low of $5769 from June.

Please note I am not offering any advice or recommending any trades. You should always do your own research and make your own decisions before entering a position.

EUR/USD Trading Update For August 2018

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Previous Analysis From Last Month

A few weeks ago I wrote this blog post discussing the low volatility of the EUR/USD pair, and showed how it was trading in an ever decreasing channel.

When you get a tightening trading range and low volatility with the exponential moving averages and bollinger bands all tightly packed together, you often get a strong breakout in one direction or the other when the price breaks out of this channel, and this is exactly what happened.

Downward Breakout During August

EURUSD August Breakout

At the start of this month, the price finally broke downwards out of this channel (and below the outer bollinger band), closing the day at 1.1586, which we highlighted at the time on our Twitter page and our new Instagram page.

The price then continued falling during the following three trading sessions, before bouncing back for a few days. However you will see that the previous trendline acted as resistance and traders used this resistance level to open new short positions and drive the price downwards again. So there was another opportunity to go short if you missed the initial breakout.

Subsequently, if you had opened a short position at the close of the initial breakout candle, you could have yielded over 200 points so far (if you had placed your stop loss above the trendline or above the high of the breakout candle, for example), and this downwards breakout could yet yield a lot more points.

Profitability of Channel Breakouts

Whether you took this particular trade or not, I just wanted to highlight how profitable these breakout trades can be if you are patient enough to wait until a clear breakout has occurred.

Yes it can be frustrating when one of your favorite pairs is trading in a narrow trading range because the short-term moves are hard to make money from, but if you switch your attention to the daily charts, you can see some large moves on occasions, and this is one example.

EUR/USD Trading Update For July 2018

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Lower Volatility in Summer

All of the major currency pairs tend to see a large reduction in volatility during the summer months, with smaller price moves every day, and the EUR/USD pair is no exception.

If you look at the average true range of this particular pair (using the ATR indicator), you will see that it has dropped to around 65 points right now at the end of July 2018, which makes it fairly hard to trade for any short-term traders.

Narrow Price Range

As well as having small price moves, it has also been trading in a narrow, sideways price range with no clear direction.

The 20, 50 and 100-day EMAs are all very close together and the Bollinger Bands are also very narrow, which helps to confirm this narrow trading range.

More importantly, if you draw two trendlines joining the highs and lows of the recent trading range, as shown in bold in the price chart below, you can see that the price is trading is an ever decreasing trading range, which is often the pre-cursor to a major breakout.

EURUSD 31 July 2018

Potential Trading Opportunity

Subsequently, this represents a possible trading opportunity because if the price breaks strongly upwards or downwards (and closes outside this range and outside the Bollinger Bands on the daily chart), this is potentially a good time to open a new position and capitalize from this breakout.

(Disclaimer: These are just my own thoughts and ideas, and it doesn’t represent financial advice in any way. Please do your own research before opening any positions.)

A Word of Warning

Trades like these are often very profitable because everything is in place for a strong breakout (narrow EMAs, narrow Bollinger Bands, trading within trendlines, etc), but you have to be careful during the summer months because volumes are lower and sometimes these breakouts don’t have the momentum to be sustained for very long.

It will be interesting to see what happens anyway because the price has to break out of this ever decreasing price range very soon, and so there could potentially be a big move upwards or downwards in the coming weeks if there is some momentum behind this breakout.