Flags are continuation patterns that form as the price of a currency pair pulls back from the predominant trend in a parallel channel. Flags can be either bullish or bearish, depending on what the trend was before the flag began to form. If a currency pair was in an up trend before the flag began to form, it is a bullish continuation pattern. If a currency pair was in a down trend before the flag began to form, it is a bearish continuation pattern. Flags usually form over shorter periods of time.
Flags all have the following five characteristics:
- Resistance level (A)—down-trending level of resistance that is parallel with the support level (bullish flag), or an up-trending level of resistance that is parallel with the support level (bearish flag).
- Support level (B)—down-trending level of support that is parallel with the resistance level (bullish flag), or an up-trending level of support that is parallel with the resistance level (bearish flag).
- Flag pole (C)—the trend preceding the formation of the flag. The flag pole spans the distance from the beginning of the trend to the highest point of the flag (bullish flag), or the flag pole spans the distance from the beginning of the trend to the lowest point of the flag (bearish flag).
- Breakout point (D)—the point at which the currency pair breaks up above the down-trending level of resistance (bullish flag), or the point at which the currency pair breaks down below the uptrending level of support (bearish flag).
- Price projection (E)—the price to which the currency pair will most likely fall after it has broken out of the flag formation (bearish flag), or the price to which the currency pair will most likely rise after it has broken out of the flag formation (bullish flag). The distance the currency pair is projected to move is equal to the height of the flag pole.
INTRADAY MARKET INSIGHTS
USD/JPY Intraday:
Key resistance at 107.00. The pair has failed to break above the key resistance at 107.00 keeping the intraday outlook bearish. A return to the immediate support at 106.75 would trigger a further decline toward 106.65. On the other hand, a clear break above 107.00, which has been holding as the key resistance for two sessions, should push the pair toward 107.15 on the upside.
EUR/USD Intraday:
Bullish above 1.1245. The pair remains on the upside after crossing above the key level of 1.1200. It is well supported by the ascending 20-period moving average, while the relative strength index stays in the 60s showing a lack of downward momentum for the pair. The trailing key support has been raised to 1.1245. Unless this level is breached, the pair should aim at 1.1290 and 1.1315 on the upside. Alternatively, a break below 1.1245 would trigger a further fall toward 1.1225 on the downside.
AUD/USD Intraday:
Further upside. The technical outlook of the pair is positive as the prices are trading within the rising channel. The relative strength index stays around its overbought level at 70, suggesting the upside momentum for the prices. To conclude, unless the support level at 0.6895 is violated, the pair should reach 0.6945 and 0.6980 on the upside. On the other hand, a break below 0.6895 would bring a return with 0.6860 and 0.6835 as targets.
NZD/USD intraday:
Upside prevails. Although the pair posted a pullback, it is still supported by a rising 20-period moving average. The relative strength index is locating at the buying zone between 30 and 50, confirming a bullish outlook. To conclude, as long as 0.6451 is not broken, look for a further advance with targets at 0.6530 and 0.6552 in extension. Alternatively, a break below 0.6451 would open a path to 0.6413 on the downside.
GBP/USD Intraday:
Further advance. The pair has recorded a series of higher top and higher bottom since June 22, confirming a bullish outlook. The upward momentum is further reinforced by both rising 20-period and 50-period moving averages. Therefore, above 1.2440, look for a further advance with targets at 1.2525 and 1.2560 in extension. On the other hand, crossing below 1.2440 would trigger a return with 1.2410 and 1.2380 as targets.
USD/CHF Intraday:
0.9435 Expected. The pair is under pressure below both declining 20-period and 50-period moving averages. The relative strength index stays below its neutrality level at 50, showing the lack of upward momentum for the prices. In this case, as long as the resistance level at 0.9495 is not surpassed, intraday bearish bias remains with down targets at 0.9460 & 0.9435 in extension. On the other hand, crossing above 0.9495 would trigger a rebound with 0.9510 and 0.9525 as targets.
USD/CAD Intraday:
Towards 1.3455. The pair is under pressure after breaking below a bullish trend line drawn from June 16. Currently, it is trading at levels below both the descending 20-period and 50-period moving averages, while the relative strength index has plunged to the 30s, indicating a bearish bias. Below the key resistance at 1.3535, expect a decline to 1.3480 and 1.3455. Alternatively, a break above 1.3535 would trigger a rebound to 1.3560.
EUR/JPY Intraday:
Further advance. The pair is supported by a rising trend line drawn from June 19. In fact, the 20-period moving average has crossed above the 50-period one, while the relative strength index has climbed to the 70s, signaling a bullish bias. Unless the key support at 120.01 is violated, the pair should advance to 120.99 and 121.27. Alternatively, below 120.01, expect a pull-back to 119.55.
EUR/GBP Intraday:
Target 0.8977. The pair has broken below a bullish trend line drawn from June 16. Currently, it is capped by both the 20-period and 50-period moving average, while the relative strength index has dropped to the 30s, suggesting a bearish bias. Below the key resistance at 0.9060, expect a decline to 0.8994 and 0.8977. Alternatively, a break above 0.9060 would open a path to 0.9089 on the upside.