With USD/JPY pulling back to retest a key support/resistance zone, we asked the question if USD/JPY was ready for another run, or if it would fall in line with the USDX at resistance and drop straight through it.
Being the first trading day of 2017 in a still holiday-shortened week, we naturally expected some liquidity issues. Price certainly jumped around as conditions were obviously thin, but it was definitely tradable.
Price pulled back into our entry levels, but the USDX momentum was too strong and they didn’t even look like holding.
The importance of using USDX in your trading analysis can’t be underestimated.
USDX was taking the heat we spoke about just above and on Tuesday it was time to take notice and join the ride rather than fight it.
With AUD/USD testing previous support that had given a strong, V shaped bounce previously, the setup was there on the Aussie.
That USDX rejection candle we highlighted in Wednesday’s blog was hugely telling and as the USDX continued to get hammered, the Aussie kept rallying.
There were enough intra-day pullbacks that the risk-averse trader should have gotten long somewhere along the way and the aggressive traders certainly cashed in.
It was exactly the same as last time where we have the higher time frame resistance level having held, and now a short term pullback to test previous short term support now as possible resistance. This is the level that allowed us the excellent risk:reward as we shorted.
The last time price dropped off this level, we called this setup a Christmas gift and yesterday showed it is the gift that keeps on giving.
Here’s to 2017!
Dane Williams – @VantageFX
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