In the past week, over the course of the last 7 trading days, the USD has played out perfectly following our previous articles analysis and the more in-depth analysis given to our members as we have successfully predicted every move the USD has made on each of the previous week. In the past week, we have seen a bit of everything from the USD, from a fake bullish run, liquidity being created and taken, and some manipulation, all before a bearish retracement which may be the start of a bearish reversal...
Around NON-FARM PAYROLL, the main data to come from the US each month, there is almost always a play from the market that we can easily identify that manipulates the regular retail trader. This play is broken down in depth in our community and the psychology behind it which enables us to understand exactly what the market is doing and why.
Following our last update, we explained we had two levels we would be watching out for, the 105.80 support for LONG trades to reach the 108.50 regions if we saw a bearish USD on the back of NFP or, 108.50 regions for SHORT trades, should NFP turn the USD bullish once more.
Our technical analysis shows us that either level would have to be reached and we now just needed to wait, have patience, and allow price to come to us before placing the next trade on the USD. On Friday 8th July, the Daily candle closed as a shooting star following the NFP data release that day, after a push to the upside was quickly reversed, giving a bearish indication on the 4-hour timeframe, giving many retail traders the idea of shorting the USD. However, what was followed on Monday was easily predicted as price turned bullish once again, filling and taking out the Daily shooting star with a strong bullish close which liquidated short sellers in the market from Friday. On Tuesday and Wednesday, we saw price move sideways, accumulating more positions from early buyers and sellers and, giving any of the short sellers from Friday who were still in the market a glimmer of hope, as two Doji candles showed there could be some weakness for the market to fall. Then on Thursday, we saw the move the Innovators knew would come, with a strong bullish move to the upside to break the sideways range, wiping out and liquidating the short sellers that had been accumulated during the range and taking out the early sellers from the previous Friday that were holding on for dear life before suddenly .....the reversal came 🙂
Early in your trading career or maybe even now, have you ever been stopped out of your position and then the market turns in your direction just as you got stopped out? Ever wonder why? This is due to the phycology of the market. The market is 80-90% dependent on psychology and as the participants of the market are human, human psychology, therefore, plays a huge role.
Moving on, the price on the USD and our DXY chart has now reversed after rejecting not only the 108.50 region but also pushing through as expected so, where was price heading now? As explained, our technical analysis lets us know that two levels would need to be tested, one has now been hit (108.50) so, now we can expect our second level to be fulfilled, our lovely support sitting at 105.80. Firstly, as covered in our Forex Course Lesson 1 (Which is also available on YouTube) we know that if a Monthly resistance holds, price will go in search of the next support which on our chart was at 106.50. As this level is above the 108.50 support, this became our first target which has now been hit and where some profit has been taken on our short USD trades, with our second target now being 105.80 we are expecting price to reach next.
Price is now sitting on the Weekly support of 106.50 and showing some support which is to be expected from a Weekly key level and why we took some profit on the USD shorts. Two daily Doji candles have shown indecision in the market, which on the 4-hour shows price is now in a range. A break and close below this level, and the range, would likely see our 105.80 easily reached and if reached with strong conviction, we will see the next Monthly key level come into play at 104.50. This is giving good downside scope for the USD to move lower and continue this bearish retracement further.
The daily Doji candles / 4-hour range will be accumulating orders of both sides of the market bringing in buyers and sellers before the next move. Before the real move, there will likely be a fake-out, so watch out for this. We can expect a minor pullback from the current support before a move lower, as this will bring new retail buyers into the market, buying from this support level which is creating liquidation below the support where price will attack for the next move down. As buyers enter the market, price may push higher temporarily to liquidate the short trades that have entered the market / accumulated during this consolidation/range by taking out the highs from the top of the 4-hour range to use as a catalyst for the next move lower. A move higher will be aiming for the previous 4-hour lower high, which will create a great shorting opportunity with great risk/reward.
Tomorrow will be an important day and will tell us a lot about the next move. If we can break below the monthly key level of 106.50 this will show the bears really are in control and a strong close on the Daily chart with close the Weekly candle as bearish. A daily close above, could open the door for INTRADAY long trades, to look for a quick move to capitalise on a small retracement to the upside on the lower time frames as price takes the liquidity from the accumulation of shorts just mentioned, before another leg lower.
Though the market has printed a few bearish days, it is far from bearish and the bullish trend is still well intact. Any LONG USD trades are preferred as they are with the overall trend however as we are currently SHORT, Innovation members will be using any potential LONG trades as a hedge, to put us into a win-win situation whichever way the USD chooses to go.
Potential INTRADAY long trades will be monitored in early Friday trading where if entered we will be profit taking as price takes out the high of the range and tests the 4-hour higher low. Now we once again wait for price to come to us before we strike. If price does not show any bullish momentum for an INTRADAY move higher, we will wait for price to reach our second target at 105.80 from our last article before entering the next trade.
Remember, understand what the DXY is doing and you will know what 90% of the market is going to do.