FX TECHNICAL ANALYSIS


where price is above and moving away from the averages.


Trendlines: Figure 5: USD/JPY Daily Chart


Trendlines can be an excellent tool to show you what you have missed. You will often hear about the ‘3-touch’ rule which confirms a trend, yet the moves following the third touch can often lead to disappointment. A broken trendline can be far more satisfying to confirm a reversal, especially when you’re not on the wrong side of the trade. Also, as trendlines can be quite fickle in FX markets, we prefer to focus on the relationships between peaks and troughs to assume a trend is in place.


Relative performance: Figure 6. Trendlines


momentum view on one chart. As price action is the fastest data point on there (as MA’s are


lagging indicators) we are


looking at momentum and trend of higher timeframes. Therefore we can monitor the relationship between price and the MA’s to assess the health of the trend. This can aid with the confusion fractals may present, so if you


40 FX TRADER MAGAZINE July - September 2017


An easy bullish signal to monitor is for price to be above and accelerate from the MA’s. If the pullbacks are minimal (bullish signal) then it is a clue to move to a lower timeframe to seek bullish signals. Strong trend should show several timeframes


insist on using one timeframe to analyse, then moving averages are a decent shortcut.


Instead of focussing on one market, it can benefit to watch several currency crosses to gauge the underlying health of the trend you want to trade. If we identified a strong bullish trend on EURUSD, we’d take more comfort if this was apparent over more than one Euro cross. The same can be said for trading stocks within an index – if multiple markets move in tandem it suggests a stronger fundamental force is behind it.


Matt Simpson


Senior Market Analyst ThinkMarkets


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