You have the current USDCAD Daily on 27/1/17 chart showing a classic butterfly pattern. The price is currently moving down to the last point D, to complete the setup. If this point is met chart theory suggests you can get a Fibonacci retracement of at least 38.2%.
This is an extension pattern that uses specific Fibonacci ratios to validate the structure. This trade gives better than a 4:1 risk ratio with a potential 2.3% gain.
You have the current EURJPY 4h on 27/1/17 chart showing a classic butterfly pattern. The price is currently moving up to the last point D, to complete the setup. If this point is met chart theory suggests you can get a Fibonacci retracement of at least 38.2%.
This is an extension pattern that uses specific Fibonacci ratios to validate the structure. This trade gives better than a 5:1 risk ratio with a potential 1.1% gain.
EURUSD on the 27/1/17
the price is moving upwards creating an ascending wedge looking for a break of the support line. Unfortunately charting software unables to put stop loss and take profit at an angle.
Looking for a 1% change in price with over 3.5/1 ratio
The AUD has been depreciating since the since September 2016 but in the past month and a half we have seen a reduction in the trading range. This narrowing of trading range has now shown 3 possible confirmations of a resistance level that the price has rebounded off to create a triangle pattern.
Chart theory suggests that if the pattern is broken, the move can be magnified. If the price breaks above resistance level, looking at the height of the triangle, theory would suggest the next level would be around the high back at the end of 2015.
EUR has been dropping in value over the past few days and if this trend continues a possible setup for a butterfly pattern will emerge. If the C mark is hit, then a possible final leg up to D to complete the pattern could take place. The pattern will likely be confirmed or voided over the next 2 weeks.
From the current level of 1.41 the rate could fall toward point C on the chart below which sits around the 1.404 level.
Chart theory suggests that if the XABC points have all been met and the price moves towards the last level D, and reaches that point, the pattern would indicate a reversal at this level and a possible retracement of 38.2 - 61.8% of the CD distance.
Cable has been dropping in value since Brexit and since the start of the new year and we have seen multiple waves that could be setting up a Wolfe wave pattern. Currently 4 points have been met on the indicator which chart theory suggests the price should then move back towards the bottom line.
From the current level of 1.254 the indicator would suggest the rate could fall toward point the bottom line on the chart below which sits around the 1.199 level.
EUR has been dropping in value over the past couple of weeks and if this trend continues it will create the final leg of the indicator. Currently 4 points have been met on the indicator which chart theory suggests the price should then move back towards the bottom line.
From the current level of 0.86 the indicator would suggest the rate could fall toward point the bottom line on the chart below which sits around the 0.83 level.
From the D point of 0.89995, the rate could fall toward the 38.2% retracement level or CD line according to chart theory. Point D is just below a significant round number 0.9 which are often seen as strong resistance line which adds further confirmation around the level.
Long position on NZDCAD, butterfly pattern looking to capture part of the C-D move with a stop loss below the right wing of the pattern.
If the CD leg is completed the butterfly would also be complete indicating a possible reversal and shorting opportunities.
It [B][U]IS[/U][/B] because of the US Dollar, nothing else, no opinion needed - it’s the underlying workings of the FX markets and the makings of currency pairs!
If USD is quoted first in a currency pair, such as in your example - USD/CAD USD/CHF, then these will be positively correlated with each other. Note, the only time they may lose correlation is if CAD or CHF changes sentiment at a rate greater than USD. [I][lets call this group 1][/I]
If USD is quoted second in a currency pair, such as in your example - GBP/USD EUR/USD, then these will be positively correlated with each other. Note, the only time they may lose correlation is if GBP or EUR changes sentiment at a rate greater than USD. [I][lets call this group 2[/I]]
Lets now assume that USD is the driving quote currency in all the pairs mentioned above, ok?
In this assumption, Group 1 [B]WILL BE INVERSELY CORRELATED[/B] to Group 2
It’s no magic, just simple ratios
All the currency have USD as the base or term currency, so all are correlated if the movement is caused by a move in the USD. Today was NFP which directly effects USD.
Since the start of the year, Sterling has seen some strength after the large drop around Brexit. The USD index has dropped during this time, from above 103 to below 100 as uncertainty is creeping in. Since the start of the new year, a Wolfe Wave has appeared which has been discussed in a previous blog entry. After the 5th wave, we have seen a further move higher within the Wolfe Wave which has created the 4th point of a butterfly pattern.
You also have a round number causing a key support level which has been tested at X and B. Traders looking to trade the CD leg would generally want to close the trade before it gets to this level
Currently, you have a strong support area that has been tested multiple times forming a triangle pattern. The right wing of the butterfly pattern is currently forming and you have a couple of strong entry points ti take advantage of.
From the current level of 1.06818, the rate could fall toward point C on the chart below which sits around the 1.05980 level. If this part of the pattern is confirmed, some technical traders may look to go long around this area instead of waiting for point D or the shoulder to fully form. As the pattern is not complete, no pattern has been confirmed so the probability will be reduced and may therefore only be attempted by the riskier traders. Chartist will look for certain areas the can be used as support and resistance levels to place stop losses. The top of the left shoulder is an example of this.
If point C is completed and the price moves towards D, it would confirm the right shoulder and indicate a further move toward D. Chart theory suggests that if the XABC points have all been met and the price moves towards the last level D, and reaches that point, the pattern would indicate a reversal at this level and a possible retracement of 38.2 - 61.8% of the CD distance.
Point D is located below a major round number which can often form strong support and resistance levels. Breaking of these levels can lead to a shifting in sentiment and further movement so these can be used as areas to place a stop loss.
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