The Asian session which open in Tokyo at 24:00 GMT normally start with a flurry of early activity as dealers move rapidly to process their backlog of outstanding orders during the late New York session. This first couple of hours of activity after Tokyo open usually feature most of the fireworks in this session. The lack of market depth during Asian session means that more often than not, traders testing the limits of any previous range (possibly recording marginal highs/lows), only to fall back and consolidate the move after lunch period since volatility-hating central banks and exporters love to turn this session into the day's consolidation session. The hour before Frankfurt open, the consolidation pattern normally will be broken.
At 7:00 GMT Frankfurt session open, the European traders especially the EUR cross traders have the tendency to reverse the direction that broke from the consolidation. London which opens at 8:00 GMT has always been the market trend-setter. Although the initial moves may not begin in London, this is where the large players operate and get a chance to swing their big sticks. Moves initiated and extended in London should be taken seriously since it is the only money center with deep enough pockets to overcome any "artificial" interference such as central bank interest. Thus we typically see London picking a direction and sticking with it until New York enters the fray.
I base my scalp trade on the above time and price pattern. Trading EURJPY between 5:00-9:00 GMT period, I managed to incorporate the time and price pattern that made my trading easier and convenient. Between 5:00-6:00 GMT (after lunch in Tokyo) EURJPY is at the last stage of consolidation. Normally the period between 6:00 – 7:00 GMT the consolidation pattern will be broken then at European opening hour , EURJPY will reverse the trend of the broken consolidation pattern. One hour later i.e. at London open, London traders will try to impose some trends. Normally a reversal of the first hour European ‘s trend..
To illustrate such pattern, let us take a look at my analysis of EURJPY on Tuesday, Wednesday, Thursday and Friday.
Tuesday: January 12
EURJPY formed a pennant and a breakout occurred at 6:00 GMT. Prices moved upward and touched the daily pivot and subsequently retreat to the pennant . I was expecting EURJPY to bounce back and break the pivot point for the upside. Instead, EURJPY gaining strength it become weaker after Frankfurt opened and found support at S1. At London open, traders made an effort to reverse the downward trend but overall weakness in EUR overwhelm the attempt.
Wednesday: January 13
The ascending channel that began in early morning Asian session was part of the bigger triangle formation. A breakout of the triangle upper line at 6:30 GMT moved price to a resistance below 132.50. A double top was formed at first hour European session that was found support at Asian session opening price or at the apex of the triangle. An expected reversal occurred at 5 minutes after London open that pushed EURJPY to test the 132.50 level.
The ascending channel that began in early morning Asian session was part of the bigger triangle formation. A breakout of the triangle upper line at 6:30 GMT moved price to a resistance below 132.50. A double top was formed at first hour European session that was found support at Asian session opening price or at the apex of the triangle. An expected reversal occurred at 5 minutes after London open that pushed EURJPY to test the 132.50 level.Thursday: January 14
A broadening top was formed since Tokyo noon (3:00 GMT). At the third touch of the upper resistance line of the broadening top that occurred at 5 minutes before 6 GMT a divergence of price and MACD occurred. A double top head shoulder pattern (clearly shown on 1 MTF chart) and 1-2-3 pattern were formed. The second top was the second break of 133.50 that failed.
A broadening top was formed since Tokyo noon (3:00 GMT). At the third touch of the upper resistance line of the broadening top that occurred at 5 minutes before 6 GMT a divergence of price and MACD occurred. A double top head shoulder pattern (clearly shown on 1 MTF chart) and 1-2-3 pattern were formed. The second top was the second break of 133.50 that failed.On the way down, EURJPY get a support of 60 EMA. A bullish 1-2-3 pattern with BB MACD moving passed zero level and the blue lag crossed 15 confirmed a reversal at 8:00 (7:00 GMT). Target is at previous high. A shooting star ended the uptrend with a break of 133.50 level that failed.
Friday: January 15
EURJPY fall sharply in the early hours of Asian session. Then price consolidate to form a pennant. A penetration at 7:25 (6:25 GMT) pointed a continuation of downtrend. At first hour of European session a consolidation occurred again forming a reverse flag just above the 133.00 level indication a continuation of price downtrend.
