Yesterday, we watched a USD/CAD breakout and retest.
And having broken out of a higher time frame resistance level, the price action was identified as possibly a pullback that could be bought. The following quote was also in that post:
“Coming back into the present, and we can see that horizontal weekly level has broken and price is pulling back inside it to retest the first intraday level of support.
As you can see on that daily chart above, price is pulling back into previous resistance that could now possibly act as support. If this does turn out to be the case, this level offers excellent risk reward for USD/CAD longs to manage their risk around.”
Boom! Nice little bounce there.
Speaking to some Vantage FX traders about the setup, you’re either going to be very pleased with yourself for aggressively getting long and experiencing zero drawdown.
Or… You’re going to be very frustrated as you watch your buy limit get missed by barely a pip or two.
But hey, that’s trading.
Going back another day to Wednesday, we were looking at GBP/JPY testing a confluence of resistance.
Once again you can click the link for the full setup including charts at the time, but essentially we had price at a confluence of higher time frame resistance and was waiting for a lower time frame pullback to manage our risk around:
“It’s the last push up into higher time frame resistance and I’ll be looking to use the edges of it as an area to manage risk around when price finally breaks out.
My bias as always is to look to fade the higher time frame level. If it does hold here, selling any hourly pullbacks would be the preferred plan of attack.”
This could have been seen as the pullback we were talking about, but there was zero rejection there for us to sell. With the beast now tracking USD strength on the back of Janet Yellen’s hawkish testimony, price continued to the top of the zone we had marked on the daily (click the link).
If you were aggressive and entered there, then you would now be flirting with your stop as price broke swing highs, if you waited for more of a sign of a rejection then the setup is still alive as long as the higher time frame resistance is holding.
Anyway, I’ll let you do the math on the risk:reward opportunities that could have come from a combination of this week’s two main trade setups that we’ve discussed.
Have an excellent weekend!
EUR ECB President Draghi Speaks
CAD Core CPI m/m
USD 4x FOMC Members Speaks
This is a guest post originally appeared on Vantage FX. Reposted with permission.