Watch for Candlesticks to Confirm Divergences on these Pairs

This article was originally published on Nadex.com.

There are potential divergences on many forex pairs this morning but they need to be confirmed with candlestick patterns.  The candlestick patterns will potentially either confirm a divergence pattern or indicate that the pattern will not hold.  In the examples below, there are two potential outcomes based on the candlestick either confirming or not confirming the divergence patterns.

AUDUSD

The AUDUSD 720-minute chart is indicating a potential bearish hidden divergence pattern.  If the pattern is confirmed with a bearish candlestick, then price may return to test the .7040 area and even exceed it.  Another scenario is that the bearish divergence is confirmed and price fails to test or exceed the prior low at .7040.  That would be a potential for a trend reversal.

Watch for Candlesticks to Confirm Divergences on Major Pairs AUDUSDEURUSD

The EURUSD 720 minute chart is indicating a potential bullish divergence (lower lows in price and higher lows in the Stochastics).  However, the current price bar will need to close above 1.1505 to confirm the pattern.  If confirmation occurs, then price may test the ATR (red plus sign) on the daily chart.  If the price bar forms a bearish bar, then we could see a retest of the low at 1.1430. 

Divergences on Major Pairs EURUSDUSDCHF

The USDCHF 720-minute chart indicates a potential bullish hidden divergence pattern.  A potential reversal bar is forming but would need to be confirmed by the end of the day today.  A retest of the high at about .9960 may occur.  If a bearish bar forms or price fails to exceed the high at .9960, then a drop down to the ATR on the daily chart may occur.

Divergences on Major Pairs USDCHFUSDJPY

Both the daily and 720-minute charts are indicating a potential bullish hidden divergence pattern with a potential bullish candlestick pattern.  This may indicate that price will try and test the high on the daily chart at 114.56.  However, traders need to watch the 114.00 area, as it could act as resistance.

Divergences on Major Pairs USDJPY

 

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