In this video, I’m going to be going over the foreign exchange markets and covering a bunch of different currencies from the week of September 16th to the 22nd. I will be showing you the methodology behind technical analysis, how I address certain assets, and whether I see any particular setups that I will be taking. Without further ado, let’s get straight to the charts.
Welcome! If you’re new to the channel, my name is Matt Jimenez. I’m an entrepreneur who has worked with the greatest minds in finance for the last several years, and I’m here to share with you everything they pointed out to me. Today, I’m going to be going over exactly how I assess different markets by looking at their current price action, which allows me to forecast where I see potential currencies trading and trending. The reason I’m doing this is that I’m starting a manual journey. What I mean by that is I’m going to be trading manually while running the algorithm in tandem to see how well manual stacks up.
With that being said, let’s jump straight to the charts to see exactly what I’m looking at for this week and if there are any potential trades. Oh, and also, I know you’re probably wondering, “Matt, where’s your studio?” I’m actually building a new studio for you guys, so ignore the emptiness for now.
Okay, so we’re going to start here on EUR/USD, which is one of the most popular pairs. What I like to do before I address any chart is try to find the overall consensus of the chart. I use a multitude of tools to help me find the direction of where price action will be moving into the week, month, and so forth. I always do a top-down approach, meaning I start from the highest time frame to allow a bigger bird’s-eye view of where things can be headed.
So, with that being said, I have EUR/USD open on the monthly chart. Here we are: EUR/USD on a monthly chart. The first thing I see here is a clearly identified trend. We have a series of lower highs followed by lower lows, which is a clear indication of a downward trend. So, I’m just going to go ahead and plot this trend line right here. As you can see, we are definitely at a point of interest where a potential trade setup can happen.
Now, typically when you’re trading in a downtrend, you want to find areas to go short because you want to trade with the trend. As a side note, you could also do counter-trend trading, which would be buying the bounce back to the trend line. As you can see, each area where it bounced was a clear entry for a short-term long position within the overall move of a downtrend. Typically, when you’re counter-trend trading, you want to be fast – you want to be in and out. You don’t want to sit too long because you’re trading against the trend, and that’s not usually a profitable scenario.
There are several things I’m going to be looking at here. I’ll be looking at the RSI to see if it’s overbought or oversold, and if there are any divergences at the moment. I’ll also be checking where the moving averages are. Moving averages are an extremely useful tool that I find to act as a dynamic support and resistance. They allow me to find where price action could potentially be reacting. Typically, whenever you see the price move into a moving average, you’ll have a reaction to it, and as I go through charts, you’ll see more of that.
Now, if I grab my brush tool, all of these areas—right here: one, two, three, four, and so forth—are areas of interest to go short. As you can see, we’re here again at the trend line. I’m going to delete that and zoom in to see if there’s any potential opportunity to find a trade on this chart. So far, I don’t see anything; it’s quite choppy at the moment, and this is a monthly chart. Now, I’m going to drop down. Like I said, I do a top-down approach. I find the overall move, then work my way into smaller time frames, ultimately finding my entry points within the overall consensus of where the chart is headed.
Okay, so here we are on the weekly. I do kind of like this price action. One thing I don’t like is all this upward pressure; it looks like this trend might break. As you can see, it did get respected quite nicely, and the 200 moving average also adds a bit of confluence to that. But we did close above the 200 moving average on the weekly. At best, I could see a potential short position here, but I think it’s a low-probability setup—not something I’m actually interested in.
This would be somewhat of a setup that I might take if I liked the price action. Again, I don’t like the price action here, so this is not a trade I would deem likely to be favorable. The reason is that, even if you were to go short, you’d be shorting into a load of support. There are two moving averages pinching, showing a change in momentum, from down to up. So, if you do go short, you’re going to run into a bunch of turbulence on the moving averages. Number one. Number two, there’s tons of previous price action to the left, and price action is the only indicator we can use to guess how the chart will interact at certain levels.
Price action is super important because hundreds, if not thousands or millions, of people watch price action. The more people who watch it, the more validated it becomes, because they build support and resistance around it. If a bunch of people see a chart approaching a clear support level, the consensus is that everyone is going to buy there. People’s interactions create price action, and that’s what I look at. When I look left and see all this sloppy price action, there are a lot of trades, and I don’t think it’s smooth sailing.
Typically, I like to see a lot of room to the left. When there’s room to the left in a chart, that’s a nice swing point, with not much turbulence. Over here, if I were to look for any type of long positions in this area, I could look left and see weeks of no price action. Even over here, this is a perfect short that aligns with the monthly downtrend. If I look left, there are weeks—weeks of no price action in the way. Again, if you short this, look where it reacts: where the previous price action is. And that’s with everything in trading, so keep that in mind as we move forward.
This is a low-probability setup—something I’m not interested in. I’m going to drop down to see what the daily chart looks like. On the daily, as you can see, the moving averages are now below price, which means they’ll act as support. Again, I don’t find that appealing for taking a trade. The RSI here is very neutral, in the middle, so it’s not screaming ‘short’ to me—nothing that makes me want to go short.
Typically, I want at least four things in alignment with my trade plan. What do I mean by that? I need as much confluence as possible. If I’m going short, I want the RSI to be overbought, possibly with a bearish divergence. I want it to be in a significant area to go short, like at the top of a trend line, as it is here. I want the moving averages to be above price, and I want the price action to show some type of rejection. Typically, what I look for is large wicks with small body candles, which indicate that there’s loads of volume coming into the future candles that will form.
Right now, I don’t see anything appealing. Let’s move on to the next chart: GBP/USD. When you’re looking at GBP/USD and EUR/USD, they are pretty correlated, so if you go short on EUR/USD, you wouldn’t want to go long on GBP/USD—you’d essentially be hedging your trade. If you want to do a double short, you’d find GBP/USD short as well.
This chart is in a clear downtrend because, as I said, it’s quite correlated with EUR/USD. I don’t like that the moving averages are pinching, which shows a possible bottom forming, indicating some upward trend might start. I don’t see any setup here that interests me at the moment. Let me drop down to the weekly chart. There’s nothing interesting here. We are definitely at a level of resistance, but it’s not a significant one—just something identified. Let’s drop down lower to see what the daily is showing.
On the daily, as you could see with EUR/USD, it was shifting, but here on GBP/USD, it has already fully shifted into a structured uptrend. If I grab the trend line here, you can see a series of higher lows and higher highs being formed, which indicates an uptrend.
Now, USD/JPY looks a bit more interesting to me. This is a perfect trade setup. Right here, we have EUR/USD showing overbought territory, then forming a bearish divergence. If you don’t know what that is, it’s basically when there is a lower…
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