GBP/USD

 

Fractals anybody?

 

We’ve reintroduced ‘fractals’ into our regular analysis.

 

FYI you can find this in this in the MT4 platform by navigating to:

<Insert> <Indicators> <Bill Williams> <Fractals>

 

In truth, we’ve been using them all along - because fractals are simply a way to identify ‘swing highs’ and ‘swing lows’. 

 

That’s because, as we know, higher highs and lows make an uptrend and lower lows and highs make a downtrend - and when neither or both are happening - it’s a sideways trend.

 

For GBP/USD - weekly fractals are trending higher

 

BUT there has been a large bearish weekly engulfing candlestick.

 

 

Dropping down to the daily chart, we see the weekly bearish engulfing as a steep correction with two lower fractal breaks. A third lower fractal break would coincide with a move below the 1.30 round number.

 

This to us would indicate a major US dollar comeback and a clear end to the GBP uptrend (and probably the EUR/USD uptrend too.. See next below)

 

 

There is still a chance for a bullish bounce but there is no swing high (shown by an upper fractal) yet to judge this on. 

 

For now, the bearish break would be confirmed by a close below 1.30 / support for a move that could target the last major swing low at 1.27.

 

EUR/USD

 

The euro looks softer than Sterling. 

 

EUR/USD failed to break (or even test) key resistance above 1.12 and has formed a double top pattern with two matching higher fractals.

 

EUR has already formed a lower low on the weekly chart and broken below its big round number at 1.10 (neither of which has happened to GBP).

 

Price now sits at the former resistance-turned-support zone around 1.09.

 

 

On the daily chart, a long-legged doji candlestick pattern formed after the break below the last lower fractal. This is a weak break that is more likely to see a bullish reversal.

 

 

A daily close below 1.09 would confirm the bearish action, while a close back over the last upper fractal at 1.10 would imply the correction has ended.

 

Silver (XAG/USD)

 

Silver hasn’t closed above its former high from May - but it has made a second weekly close above it. Closing prices are ultimately what matters.

 

The hammer candlestick pattern formed last week that rebounded off a confluence of support from the last upper fractal and the broken down trendline suggests the breakout will happen soon - perhaps this coming week.

 

The daily chart for silver shows that one lower fractal was made as part of a correction of the bullish trend.

 

That was followed by a bullish engulfing pattern that saw follow-through the next day.

 

The bullish trend will be on solid footing while above 31.0 but a break back below 30.0 would indicate a bigger correction back into the old trading range.

 

But that’s just what we think, do you agree or disagree?

 

Send us a message and let us know.

 

Happy Trading!

 

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Produced by Jasper and the Trading Writers team in collaboration with WeTrade.