Price spikes reveal a wealth of information
In this previous article, we wrote that spikes reveal the effective price levels that market participants are looking at as well as the maximum power of bulls and bears. We had a number of price spikes in currency pairs last night so what can we tell from the tails?
EURAUD monthly chart
- EURAUD is resisted by a 15-year trend line drawn from 2 points.
- That spike was clearly a dash in the predominant trend but despite a nearly 500 pip break, price is back at the trend line.
- At the moment, price is above the trend line on the daily chart. It would serve traders to inspect carefully for any continuation or reversal chart. If there is a continuation, all’s well. If there is a bearish reversal, then that mad dash was merely a false break.
EURAUD resisted by trend line on monthly chart
GBPNZD and AUDNZD charts
How about GBPNZD and AUDNZD? What can observe from them?
GBPNZD spike reveals potential resistance
What does AUDNZD spike reveal about this level?
Bears won in all 3 currency pairs. But since we know that these spikes were caused by a massive risk-off event when US stock indices crashed and which subsequently recovered with the indices, there is a little titbit here to think about:
- EURAUD risk-off – run towards EUR.
- GBPNZD risk-off – run towards GBP.
- AUDNZD risk-off – run towards AUD.
Does this mean in a risk-off event, NZD is a hot potato that no one wants?
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
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"I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."