The Building Blocks of Trend Development 05.29

Moving into the fourth final week of May, the Forex market has seen a series of charts consolidate and others create new trends. For the month, our primary focus has been in pairing weak pairs such as the

Euro

with strong safe haven currencies such as the

USD

and

JPY

. Today we will focus on these existing trends and newly created ones, using our

building block

analysis method. Finding continued strength in the market will allow us to focus on specific pairs for the remainder of the current trading week and the new month ahead.

JPY pairs have been our primary focus for finding strong trends throughout May and for good reason.The

EURJPY

in particular has declined 277 pips from its Block 1 high at 102.12 created on May 22nd. Pictured below we can see this move lower into Block 2. Currently the May 24th Block 2 low is acting as support on the

EURJPY

at 99.35. This week however price has temporarily stalled, neither creating a new low or fresh high. This movement can be treated simillarly to trading an inside bar. Traders can await a

breakout

in the direction of the trend , unders support, prior to placing fresh entries.

EURJPY

EURCAD

The selloff of Euro pairs has also shifted to traditional commodity currencies such as the

CAD

. The EURCAD is trading as much as 249 pips lower from its Block 1 high established on May 21th . This pair is new on our radar and fresh off a . Over all, momentum is gaining towards the downside with lower highs and lower lows being formed in both Block 1 and Block 2. Currently, price is ensuring that a new down block will be created. Price has created a fresh low on the EURCAD earlier today,on May 29th at 1.2813. As weakness prevails on the EURCAD, traders may look for opportunities to sell into continued weakness.

Using the analysis above, my preference is to continue to find opportunities to sell Euro pairs. This bias holds true on the creation of three down blocks on the EURCAD currency pair. As well, trend traders will look for the

EURJPY

to break new lows under.

—Written by Walker England, Trading Instructor

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