Testing the waters after a failed break - Week 38 | Technical Analysis by Jasper Lawler

Weekly thoughts

When markets fail to break down at a long-term support, it often speaks louder than if they had.

That's what's happened to the US dollar vs multiple currencies - and I have three of our favourite examples (setups) this week.

I also want to renew last week‘s discussion. Namely, how to pull the ’trigger.

We have a theory i.e. we think something is setting up in the market

- in this case, a (at least temporary) bottom in the US dollar.

Theories need testing.

So, how do we test it？

We test it in the market by trading - theres no other way.

First, lets discuss the setup.

A failed breakdown

When a market tests support but cant break, that failure itself is the signal. It shows demand stepping in each time price dips.

In a downtrend, sellers should control. If they can‘t push through the lows, they’re losing control — maybe briefly, maybe longer.

Think of big institutions: they buy at support while others sell, pushing price up. They wait for price to return and buy again — thats support at work.

A false breakdown is a sneakier version. Market makers push price below support to trigger stops, creating liquidity for large buyers. Once filled, selling dries up and price snaps back.

Thats the essence of a failed breakdown: less real bearish conviction, more about clearing stops.

For traders, it signals control shifting from sellers to buyers. On charts, look for a fake low, momentum turning higher, and short-term consolidation (wedge, triangle, or range) before probing higher.

The trigger and execution tactics

This is where the art of trading meets the signal.

What we advocate is ‘testing the market’.

• Test the waters at market

• Enter a small starter position around current levels. The idea is that if the market is ready to take off, you want early exposure.

• Quick exit on failed test

• If price doesnt show that early momentum i.e. it quickly rolls over, then exit without hesitation. No harm in cutting small.

• Buy the retest

• Should price pull back towards near term support or a demand zone, watch for a bullish candlestick (engulfing, pin bar) to confirm entry.

• Exit again if wrong

• If the support level doesnt hold, cut your losses and move on.

• Scale in if right

• If the move higher develops, youre already positioned. Add on strength — for instance, on a breakout of resistance or out of a chart pattern.

• As usual, we could be wrong that the US dollar has bottomed. It‘s famously difficult to call a bottom in any market until after the fact! That’s why we have stop losses..

• And if the US dollar can‘t find a bid, there are some other charts that look good - NOK/USD is one our fav’s mentioned in week 35.

• Setups & signals

• We look at hundreds of charts each week and present you with three of our favourite setups and signals.

• USD/CHFSetup

• The 0.80 level is a big one for the Swiss franc. Last weeks candle was a hammer pattern and a bullish sign 0.80 could eventually hold as support.

• Signal

• A failed breakdown seen better on the daily chart has the price sitting inside a triangle pattern with bullish RSI divergence. A breakout above the triangle could confirm the long term level has held.



• USD/SGDSetup

Big support from last year was 1.28. This year the price got down to 1.27 twice but both times it didnt last long.

• Signal

The price is retesting a broken rising trendline and could fall back as bears sell the retest. However any drop back towards 1.28 could be an opportunity to get bullish at lower prices, while a push back above the trendline could be a bullish confirmation.



• USD/PLNSetup

The Polish Zloty is setting up a possible double bottom with its 2021 low. 1.36 is the big round number to watch.

• Signal

A false breakdown could be the first sign of a bullish recovery. A break back over the downtrend line could offer confirmation the bottom is in.



But - as always - thats just how the team and I are seeing things, what do you think？