Potential short trade setup in USDHKD pair, conservative traders waits

After the extended ranging movement in the USDHKD pair, the bears finally managed to break below the critical support level at 7.8449. Though the majority of the aggressive traders have already made a decent profit by shorting the USDHKD pair, the conservative traders are still waiting in the sideline. In the daily chart, we have a nice spinning doji right at the critical resistance level at 7.8449 followed by a bearish candle. Based on the Japanese candlestick pattern it’s a very obvious bearish reversal signal but the conservative traders are still waiting for a minor bullish correction in the pair towards the nearest resistance level at 7.8449.

USDHKD daily chart analysis

Figure: USDHKD daily chart analysis

From the above figure, you can clearly see the price sharply dropped in the global market after breaking the major support level at 7.8449. The pair found some decent bullish support near the major support level at 7.8300. Currently, the pair is slowly heading towards the broken support level which turned into a strong resistance level. Executing short orders near the major resistance level at 7.8449 will be an excellent opportunity to short this pair with an initial take profit level set at 7.8351.

However, if the price breaks above the tail of the doji 7.8474, there is a strong chance the bull will regain control of this market. A daily closing of the price above the major resistance level at 7.8502 will ultimately turn the overall bias of this pair bullish. On the contrary, a clear break of the major support level at 7.8351 will eventually lead this pair towards the next major support level at 7.8300. According to the leading analyst of the Forex trading industry, any bullish price action confirmation signal near the 7.8300 marks will be an excellent opportunity to execute fresh long orders in this pair.

Fundamental factors

The recent performance of the Hong Kong and U.S economy is not up to the market which makes trading this pair extremely hard. Majority of the long term investors are cautiously waiting for another rate hike from the officials. An imminent rate hike from the FED will boost the U.S dollar index in the global market and this will eventually eliminate the current bearish threat on this pair. On the contrary, a significant delay will cause more downfall in the USDHKD pair.

The optimistic dollar bulls are waiting for the Core Retail Sales m/m data release for the U.S economy. A strong positive data release will refuel the dollar bulls and push most of its major rivals lower. On the contrary, a negative data release will refuel the bearish in the USDHKD pair which will result in a sharp fall in this pair. The overall technical parameters for the USDHKD pair is slightly bearish considering the recent break of the major support level. But the fundamental factors is a little bit messy since both U.S and Hong Kong economy is struggling in the global market. Considering the overall parameters it’s better to execute short based on the recent doji formation with a very tight stop above 7.8471 marks.

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