Today the forex market hasn’t been particularly quiet, although the ranges have been relatively tight. Yet, what´s distinctive today is that the price action has been all over the place. 

As I mentioned in the first forex update today JPY and Gold have been advancing but not the Swissy, so this is not a run for safety. Remember though, we are still in summer and many traders are still soaking their feet on some exotic beach, so don’t expect fireworks. However, there are some good trading opportunities in these sort of markets, particularly for scalpers and intraday traders.     

You might as well review your trading strategy for the week 

Chaotic Price Action  

Most of the forex pairs correlate with each other; EUR/USD usually correlates with GBP/USD and often with the commodity Dollars, the commodity Dollars correlate between themselves with the Canadian Dollar taking its own path sometimes. The Swiss Franc, the Yen, and Gold correlate between them since they are the instruments where the market seeks consolation when panic sets in.

It's a summer Monday with thin liquidity and the market is not its usual self. I suggest that you don´t trust the usual correlation today, but rather look for individual trade opportunities and play out the game.    

GBP/USD Keeps Bouncing in its Range

Last Friday I thought that GBP/USD was trying to form an uptrend which would be the retrace of the bigger downtrend which started earlier this month. But looking at how the hourly chart has developed today, we can say that this is more of a range than a retrace higher. It´s not a perfect range, but that´s how these chart setups are in forex, the price doesn´t usually respect levels to the pip.

We see that a bottom has been put in place around 1.2840-50 while the top comes around 1.2900-15. GBP/USD slipped to the bottom of the range at the start of the London session and bounced right back up. This brings the top into play once again, so get ready for a sell forex signal soon if we get to the top line of the range.  

After a downtrend, we either see a retrace higher or some range trading before the next leg down. When we see the price form a range after a downtrend, that´s a signal that the downtrend will carry on sooner rather than later since the buyers don’t have enough stamina to push higher.

It´s for this reason that I still keep a bearish bias towards this forex pair, but we have to be patient until the economic events start happening as the week progresses.  

Are you going to play  the top of the range soon? 

Trades in Sight

Bearish EUR/USD

1. The price is near the top of the range
2. 1.1790-1.1800 has been providing resistance recently
3. Stochastic and RSI are overbought on the H1 chart
4. The market is wary of Draghi´s speech at Jackson Hole summit later this week

Similar to GBP/USD, EUR/USD formed a rough range between 1.1680s and 1.18 last week. In the last few hours, we have climbed up to the top of the range. However, it seems like the buyers are having difficulties up here considering the climb has stalled.

Now, the stochastic and RSI indicators are both overbought so sellers will probably call it a day and get out. Since it is Monday and liquidity is low, I don’t see this move stretching too far higher and we might open a sell forex signal soon in this pair.  

If the last candlestick closes like this, it would be yet another sell signal

Bearish GBP/USD

1. The H1 chart is severely overbought
2. Stochastic is overbought and RSI is getting there soon
3. The area around 1.29 has been solid resistance last week

We already explained the situation in this forex pair above with the range between 1.2840-50 and 1.29. We´re still climbing although the pace has slowed. I´m following the price action closely to see if/when the sellers give up and then open a sell forex signal.   

This has been the market today, slow and without a clear direction. There aren’t many trade setups at this moment, so I´m just following EUR/USD and GBP/USD. I´m keeping an eye on NZD/US as well, since we couldn’t close it when it was near the support level.