NZD/JPY Trade Update, EUR/AUD Review...

Last updated 12/29/2009 12:56 PM EST (GMT -5) 0 Comments - Add your comment

FX360 Technical Analyst Staff

Technical Analyst, GFT

For the past couple weeks, we've been tracking a potential NZD/JPY selling opportunity in the form of an emerging 8hr double-top (bearish) Gartley pattern. This setup was last highlighted in Dec.15th technical feature, " Will 65.00 NZD/JPY Resistance Hold? " In fact, the 65.00 ceiling did initially hold as prices dipped past 63.00, but failed to break below point C keeping the original short setup intact and valid as prices have now finally broken through 65.00 resistance. This relatively brief dip has also resulted in an additional bearish ABCD confirmation pattern within the original CD leg. This new ABCD pattern (in gray on the chart example below) is, more specifically, an 127.2% ABCD extension pattern (where CD is 127.2% longer than AB) and comes in just a bit below our original projected entry of 66.80. This may require a slight adjustment to our entry to perhaps around 66.50, so we'll check in on this trade over the next several hours and see if any shorter time frame confirmation patterns emerge which will give us a much better idea whether or not to adjust our entries/exits.       On a somewhat related note, the recent EUR/AUD short setup just missed our entry by a few pips before tanking (see before & after charts below), and this particular  NZD/JPY setup shows the same potential to perhaps drop off a bit early. The good thing about waiting for a shorter time frame confirmation pattern is that is not just that they can help with more precise entry and exits, but waiting for a confirmation pattern can also help avoid a trade altogether if there are warning signs (gaps long bars), for example. This is not to say that the two pairs are correlated in any way, or that we will see a similarly aggressive collapse, rather simply is meant to serve as an example.

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