Defining Trend's Potential

Trend trading is a basis of most of strategies that are currently in use on the Forex market, so one of the sharpest questions nowadays is how to determine the trend, and specifically its direction at the selected time interval. To be fairly clued up of this issue it should be clear what the trend itself means and which factors does influence on its direction, as well as to understand some features of its move determination.


14 July 2016: XAG/USD: price is consolidating
14 July 2016: XAG/USD: price is consolidating

Since the beginning of the week, the price of silver keeps consolidating while trading at its July 2014 highs. Precious metals were supported by anxiety growth on the market after UK...

12 July 2016: USD/CAD: general analysis
12 July 2016: USD/CAD: general analysis

The USD/CAD pair continues growing after strong data on the US labour market was released last Friday. Moreover, the Canadian Dollar remains under pressure due to the period of weakn...

US NFP Preview: what to expect of EUR/USD
US NFP Preview: what to expect of EUR/USD

It’s Non-farm Payrolls day. Market consensus expects the US economy to have added 175K jobs during last month, leaving behind May’s miserable 38K print, while the unemployment rate i...

USD/CAD slides back below 1.3000 ahead of employment details
Haresh Menghani
USD/CAD slides back below 1.3000 ahead of employment details Haresh Menghani

The USD/CAD pair once again got rejected from just above 100-day SMA and has now turned down to currently trade in negative territory around 1.2990-95 region.A tepid bounce in crude ...

Canada: Consensus is for a 5k change in net employment - BBH
Sandeep Kanihama
Canada: Consensus is for a 5k change in net employment - BBH Sandeep Kanihama

Research Team at BBH, notes that Canada reports June jobs data and the consensus is for a 5k change in net employment, down from 13.8k in May. Key Quotes“Last month’s reading was unb...

Beware the Bund squeeze or will the real ECB please stand up? – RBC CM
Sandeep Kanihama
Beware the Bund squeeze or will the real ECB please stand up? – RBC CM Sandeep Kanihama

Peter Schaffrik, Chief European Macro Strategist at RBC Capital Markets, suggests that the UK’s vote to exit the EU has made Bunds even richer and has exacerbated a problem that has ...

UK: Amidst political chaos trade deficit narrows - BBH
Sandeep Kanihama
UK: Amidst political chaos trade deficit narrows - BBH Sandeep Kanihama

Research Team at BBH, suggests that the next UK Prime Minister will be the first woman since Margaret Thatcher as the two top vote-getters amongst Tory parliamentarians were Theresa ...

US nonfarm payroll growth expected to rebound to +210k in June – Goldman Sachs
US nonfarm payroll growth expected to rebound to +210k in June – Goldman Sachs

Zach Pandl, Research Analyst at Goldman Sachs, forecasts that the US nonfarm payroll growth rebounded to +210k n in June from just +38k in May.Key Quotes“In part the pickup reflects ...

Canada: Setting up for employment report (June) - TDS
Canada: Setting up for employment report (June) - TDS

Research Team at TDS, suggests that in Canada, several individual industries are poised to reverse recent declines and are forecasted to drive the creation of a respectable 20k jobs ...

GBP/USD further downside unlikely – UOB
Pablo Piovano
GBP/USD further downside unlikely – UOB Pablo Piovano

The current pullback in GBP/USD seems over-extended in the near term, according to the research team at UOB Group.Key Quotes“GBP moved above the 1.3020 resistance (high of 1.3048) be...

Gold recovers but remains below $1360
Haresh Menghani
Gold recovers but remains below $1360 Haresh Menghani

Gold has managed to recover majority of its early losses and is now heading back towards $1360 level as we head towards the crucial release of US non-farm payrolls data, later during...

CNBC: Markets pricing in 78% chance of BOE rate cut next week
Dhwani Mehta
CNBC: Markets pricing in 78% chance of BOE rate cut next week Dhwani Mehta

According to Hargreaves Lansdown, the UK.-based investment providing platform, financial markets are pricing in a 78% chance of an interest rate cut from the Bank of England (BOE) at...

UK sentiment continues to tank - MUFG
Sandeep Kanihama
UK sentiment continues to tank - MUFG Sandeep Kanihama

Derek Halpenny, European Head of GMR at MUFG, suggests that there have been numerous sentiment readings in the UK suggesting the obvious – that there was a sudden collapse in consume...

UK: Economy was doing a bit better than expected heading into the referendum - TDS
Sandeep Kanihama
UK: Economy was doing a bit better than expected heading into the referendum - TDS Sandeep Kanihama

Research Team at TDS, suggests that the first taste of post-Brexit data came out overnight with the release of a special one-off GfK consumer confidence survey.Key Quotes“The report ...

US NFP: Consensus is for 180k increase in June - BBH
Sandeep Kanihama
US NFP: Consensus is for 180k increase in June - BBH Sandeep Kanihama

Research Team at BBH, suggests that the FX market is quiet ahead of the US jobs report as most of the major currencies are trading within recent ranges, though cable and dollar/yen r...

US nonfarm payrolls expected to increased by a net 160k jobs in June - Nomura
US nonfarm payrolls expected to increased by a net 160k jobs in June - Nomura

Research Team at Nomura, notes that the May employment report shocked to the downside, as it showed that the US labor market only created a net new 38k jobs, well below market expect...

EUR/USD trims gains near 1.1070 ahead of NFP
EUR/USD trims gains near 1.1070 ahead of NFP

The shared currency is giving away part of its earlier gains vs, the dollar, with EUR/USD testing the area of 1.1070/65.EUR/USD attention to PayrollsSpot remains aligned with the bro...

JPY: Scope for further strength from here – MUFG
JPY: Scope for further strength from here – MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the most obvious FX move post a weaker NFP print would be a drop in USD/JPY through the 100.00 level.Key Quotes“At levels ...

US NFP Preview: 9 major banks expectations from the June release
Sandeep Kanihama
US NFP Preview: 9 major banks expectations from the June release Sandeep Kanihama

We are closing in on the June’s release of US Non-Farm Payrolls data. The following are the expectations as forecasted by the economists and researchers of 9 major banks.The May empl...

US: Jobs should rebound, expect a reaction if that’s incorrect - MUFG
Sandeep Kanihama
US: Jobs should rebound, expect a reaction if that’s incorrect - MUFG Sandeep Kanihama

Derek Halpenny, European Head of GMR at MUFG, notes that the US dollar remains stronger since the Brexit vote result two weeks ago with the DXY index up 2.7% as I write, primarily du...


Purpose of the Trend Line

One of the simplest instruments in order to determine the trend's availability and its potential on the exchange market is the trend line. The trend lines will not only help you to determine the direction of the trend, but also to establish support and resistance levels. What is the purpose of the trend line? It shows you the last price movements, as well as instructs you regarding the future tendency of the market. Further, the trend line is a dynamic line of support in an uptrend and dynamic line of resistance in a downtrend. Average Directional Index (ADX) - is a popular technical indicator that is used to measure the direction and strength of the trend. Values ​​above 30 on the ADX indicate the strong trend, while the value below 20 indicates flat market or absence of the trend. The higher the ADX (above 30) value, the stronger trend is.

The Trend Line Formation

Defining trend’s potential that is the main tendency of the market within a specific period of time, is the first step of the technical analysis. As we mentioned above, the trend could be the uptrend one, the downtrend and the sideways.

The trend lines could be formed if you connect two or more of maximum and minimum prices. The trend lines are required in order to determine the trend’s tendency, its reversal, as well as the support lines and resistance price. Support lines are conducted through local minimum, but resistance lines through local maximum. 

The support line characterizes the level when buyers become stronger than sellers, but the resistance level vice-versa, when the sellers are at an advantage before the buyers.

The resistance and support lines define the price channels, within which the movement and fluctuation of the current trend price occurs. 

When trading within the channel, the financial instruments should be bought at the local minimum, sold at the maximum, but in case of forecast appearance that the price will leave the channel limits, the player should do the opposite.

If the price crosses the line of the channel and extends for more than half of its current range, it means a signal for the forthcoming trend reversal.