Hi Traders! CHFJPY forecast update and follow up is here. On October 8th I shared this “CHFJPY Technical Analysis And Forecast” post in my blog. In this post, let’s do a recap of this setup and see how it has developed now. If you would like to learn more about the way we trade and the technical analysis we use then check out the Traders Academy Club. Spoiler alert – free memberships are available!
My Idea:
On the H4 chart, the price which was moving lower has created a bearish trend pattern in the form of three lower highs, lower lows. Generally, after a bearish trend pattern, we may expect corrections and then further continuation lower. Currently, it looks like the correction that we are looking for is happening. The price which is moving higher has reached a key resistance zone formed by the 50%(115.564) – 61.8%(116.106) fibonacci retracement zones of the bearish trend pattern. We also have the daily downtrend line and the 200 moving averages coinciding in the same area. In addition to this we have a bearish divergence that has formed between the first high that has formed on 29th September 2020 and the second high that has formed on 7th October 2020 based on the MACD indicator. Also, the volumes are dropping based on the Volumes indicator, and based on the 200 moving averages the slope is bearish, we may consider these as evidences of bearish pressure. So until the key resistance zone shown in the screenshot below (marked in blue) holds my view remains bearish here and I expect the price to continue lower further.
CHFJPY H4(4 Hours) Chart Current Scenario
On the H4 chart, the price action followed my analysis exactly as I expected it to. The price which was moving higher reached the key resistance zone, respected it and moved lower from this zone. The market provided us with various facts supporting the bearish view here, the first one we had here is the bearish divergence that has formed between the first high that has formed on 29th September 2020 and the second high that has formed on 10th October 2020 based on the MACD indicator. Then we also had a false break of the downtrend line (marked in red) which we may consider as another fact provided by the market supporting the bearish view.
We also had the most recent uptrend line breakout on the H1 chart which we may consider as yet another fact provided by the market supporting this bearish view. The price then moved lower further and delivered around 110 pips move so far.
(Note: You can learn about a Killer Forex Strategy “Double Trend Line Principle” here)
This is a good example of how the market provided us with hints supporting the bearish view. As you can see in the example above the market provided us with hints in the form of bearish divergence, false break of the downtrend line, and the most recent uptrend line breakout on the H1 chart which acted as evidences of bearish pressure. Also, there were no contradictory signs and the key resistance zone was holding. Then as you can see in the screenshot above how the price moved lower after that. This is why I always say that as traders we should follow the facts and hints that the market provides us and take the right action.
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Happy Trading!
Yordan Kuzmanov
Chief Trader at the Traders Academy Club
