Market volatility has dropped recently, and this seems to be because of the Jackson Hole symposium coming up later this week. Traders are waiting for Jerome Powell to give the markets some direction for the coming months. Further easing? Probably yes, but how big? Will he meet President Trump’s expectations or not? Those questions are yet to be answered. For now we have to wait, but we still can spot three interesting setups on the market.
First up is the DXY; the US dollar index, which yesterday bounced from a crucial horizontal resistance. The bounce is shaped like a head and shoulders pattern, which definitely looks interesting for potential sellers. Going short now would be a bit premature, though, as the neckline is still intact. Only the price closing the day below the green line would be a good occasion to go short.
As long as we’re talking about the dollar, we should mention USDJPY, which is also drawing a Head and Shoulders pattern. In this case, it’s an inverse version of it and interestingly, it is promoting the strength of the USD. The place for a bounce is also promising; the long-term horizontal support. Here, we also have to wait for a breakout of the neckline first.
Now the sister currency pair; EURJPY. In this case, we are dealing with a descending triangle pattern. The price is increasing the pressure on the horizontal support, which is making the breakout to the downside more probable. Closing the day below the grey area will be a strong sell signal.