You would not be blamed if you never really thought about the USD/TWD pair. In fact, the Taiwan dollar is a fairly obscure currency. However, when you see a trade that looks this perfect as far as the setup is concerned, you have to be willing to take it. I believe that we are starting to see a very strong selling opportunity forming in this particular market.
The US dollar fell below a massive trend line a couple of weeks ago against the Taiwan dollar. You can see that recently we have balanced though, right back to where we have seen quite a bit of horizontal support in the neighborhood of 31.20, or so. Keep in mind, this is a fairly exotic pair, so quite often the support and resistance barriers tend to be more along the lines of a zone rather than some type of line. With that being said, you can see that the area had caused quite a bit of support previously, going all the way back to November 2014.
Shooting star
So when we bounced during the Friday session and formed a shooting star, this immediately caught my attention. You can see that the uptrend line that I have drawn on this chart gives a little bit more credence to the downtrend as well. With the shooting star meeting the resistance both horizontally and as far as the trend line is concerned, I then placed a Fibonacci retracement to on top of it and suddenly there were several different reasons to think that this pair was going to fall. The top of the shooting star managed to hit the 50% Fibonacci ratio, so I think that there are far too many factors lining up to think that we are going to fall.
On a break below the bottom of the Friday candle, I am selling this pair and aiming for a complete return to the recent lows. That should send us somewhere in the neighborhood of 30.72, and it would not surprise me if we fell even lower than that. This could be the beginning of a significant sell off.
