The USDJPY pair last week formed a temporary bottom and reversed higher. A confluence area formed which led to the bounce higher. This area forms when trading techniques/strategies come together and create a high probability BUY/SELL zone. Confluence Trading signals a trader on which side to take a trade by combining more than one trading technique or analysis and entering the trade when they all line up. Traders can spot confluence areas on any time frame. The chart below will show visible signals calling for the USDJPY pair to push higher.
USDJPY 1 Hour Chart June 22 2021
On the 1 hour chart above, a bullish trend reversal divergence pattern (black) formed on the price chart and indicator together while also hitting the 200MA dynamic support (dark blue) which caused a bounce higher. Adding to the bounce higher, a support/resistance zone (pink) was visible and a bullish pattern (light blue) triggered BUYS at the XA 1.27% Fib. retracement level all in the same area creating a confluence trade setup. When the USDJPY confluence trade was spotted traders should have only been BUYING and not SELLING because all the signals were strictly bullish. 1) Bullish Market Pattern (light blue). 2) Bullish Support/Resistance Zone (pink). 3) Bullish Dynamic Support 200MA (dark blue). 4) Bullish Divergence Pattern (black). 5) Indicator in the oversold range signalling a bullish view. All trading techniques aligning together confirming the bullish price action that followed.
Of course, like any strategy/technique, there will be times when the strategy or technique fails so proper money risk management should always be used on every trade. Hope you enjoyed this article and follow me on Twitter for updates and questions> @AidanFX or chat me on Skype > EWF Aidan Chan
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