Technical Analysis: How to Spot Pivots in Currencies

When it comes to trading currencies, technical analysis is just as important as the global chaos impacting them.  While the importance of such analysis varies from trader to trader, we must be aware that currency markets are greatly influenced by it.

That’s because this analysis – especially with currencies – helps to remove that urge to trade on gut reactions and what may be happening in the world.  It removes the noise.

Let’s start with the USD/JPY.  


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After pulling back from a recent high of 115.44, the currency found double-bottom support at 110.88.  Should that hold, coupled with oversold reads on relative strength, MACD and Williams’ %R, we could see a potential swing higher to retest 110.88 before long. 

Between June 2016 and September 2016, we can see that triple-bottom support also served as a strong pivot point.  Even analysts at Deutsche Bank noted at the time that, “According to our RSI indicator, USDJPY is also currently at stretched levels to the downside.”

We can also look at the US Dollar Currency Index (USD).

For clues on potential direction we can draw our trend lines.  Here, you’ll notice a falling wedge made up of recent lower highs and lower lows.  Should this trend continue, an argument could be made that the USD is about to top out and potential retest a new lower low.

Should that happen, we could see a potential retest of $98.75.

Or, we can look at a one-year chart of the EUR/USD.

Again, if we draw our trend lines here, we can see the currency began to break down and begin to lose triangle support.  That’s an indication of potential moves lower.  Much of that potential break below the triangle was uncertainty over the elections in France at the time. 

As much as you may not want to rely on technical analysis as a trader, it’s very telling of potential direction.  Plus, you don’t have to worry about all the noise in the market, and it most often removes your inclination to trade on gut feeling.


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