In the weekly forex outlook, the focus is on the Euro currencies because there are signs of a probable retracement on the higher timeframes. The Euro currencies have been downward but a retracement, which typically provides more fuel for the downtrend, is likely.
In this video, Gail Mercer, founder of TradersHelpDesk, begins by showing you the RSI direction for all the currencies. Basically, the USDCAD and USDCHF are moving up but all the other currencies have a downward direction on the RSI, with the Euro pairs (EURGBP, EURJPY, and EURUSD) approaching the oversold level. Additionally, using the Multicharts Scanner, long volume divergence is being identified (meaning that as new lows are made, the selling volume is decreasing). Additionally, as the new lows were made on the 15-minute and 60-minute chart, the Stochastics is indicating trend divergence. Again, this signals that a retracement is likely.
The most likely area for the retracements are to the ATR (average true range stop) on the 240-minute chart. However, once the retracement begins, it will be prudent to watch the 60-minute chart as the ATR on the 60-minute could provide sufficient resistance to fuel another downward move. If the ATR on the 60-minute does not hold price down, then a full retracement to the ATR on the 240-minute will be likely. The ATR values on the 240-minute chart for each of the Euro currencies are:
- EURUSD ATR value is 1.2000
- EURJPY ATR value is at 135.50
- EURGBP ATR value is at .8840
Once price retraces back to the ATR on either the 240-minute or 60-minute chart, hidden divergence on the Stochastics would reveal a new low is likely, especially if coupled with a reversal bar. The hidden divergence will typically signal a new downward movement (with momentum) is likely on the Euro currency pairs. Of course, on the lower timeframes, you would anticipate a trend divergence formation for confirmation.