The volatility in the market dropped recently and the reason for that seems to be in the Jackson Hole symposium later this week. Traders are waiting for the Jerome Powell to show the direction for the forthcoming 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 one is the DXY, so a Dollar Index, which yesterday bounced from a crucial horizontal resistance. The bounce is shaped like a head and shoulders pattern, which definitely sounds interesting for the potential sellers. Going short now would be a bit premature though as the neckline is still intact. Only the price closing a day below the green line would be a good occasion to go short.
If we are talking about the dollar, we should mention the USD/JPY, 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 - it is the long-term horizontal support. Here, we also have to wait for the breakout of the neckline first.
Now a sister currency pair, so EUR/JPY. In this case, we are dealing with the descending triangle pattern. The price is increasing the pressure on the horizontal support, which is making the breakout to the downside more probable. Price closing a day below the grey area will be a strong sell signal.