Trade Commentary – Triangle on the XAG/USD Pair

Filed under: Learn Forex Trading |

There is a rather interesting price action pattern setting up on the XAG/USD pair at the moment (the pair for silver and the United States dollar). If you take a look at Figure 1, you will see the setup in question.

 

Figure 1.

Figure 1.

Price has recently broken through a very strong level of support in this market, which had been relevant for many, many months; and it did so in spectacular fashion with very high volume. However, since then, price has consolidated, and it has formed what is known as a ‘triangle’.

 

A triangle in forex trading tends to happen when price is getting squeezed. The buyers and sellers become more and more in equilibrium, and volume typically tends to get lower and lower as the formation of the triangle progresses. In this case, the triangle is almost complete, and we are now waiting to see which way price breaks out. It could see another spectacular bearish move if it breaks to the downside, or it could begin to retrace if price has gone too far, and too quickly. At the moment, it is impossible to guess which way price will go, but what we can say is that price has coiled and is ready to spring. For me, I would have to still be slightly more bearish on this pair due to the massive bearish move that preceded the triangle. However, we would also be looking for any retracements back up to the previous level of support, which might now become a new resistance level, and if it makes it back up to here, we could be on the lookout for any bearish price action signals to tip us off that the bearish trend might be resuming. Until then, we can only really watch and wait – and see how this triangle develops.

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