There are many things we can consider to indicate a change in trend. One such occurrence happened last Thursday. In one fell swoop, the Swiss National Bank, created a major stir in the Forex market. They basically announced they weren’t going to continue to artificially hold the Franc down against the Euro. After the announcement, the Euro dropped over 2350 pips by the end of the day against the Franc. Although big moves can occur after an economic announcement, this announcement was very unusual. It does help to illustrate how news trumps everything and the risk of leverage in trading.
Even though the Swiss decision caused a major move, I would not look at 1 day, even though significant, as a trend. Yes it may have ended a previous trend but did it start a new one? After the USDCHF dropped over 1900 pips, it climbed over 550 pips in a couple of days. If you take away the initial drop, that would be considered an extremely bullish move.
We have to consider many variables to consider a change in trend. Usually we can see the first indications from the 9 moving average reversing direction. As the 9 moving average approaches the 18 moving average, we can see the trend potentially ending. Another instance is when a pair starts to consolidate. We can see it occur when a pair starts to form a support level in a down trend or hit a resistance level in an uptrend. Other clues can be the trend strength line in the ADX as it approaches 20. We can also look at the positive and negative index line on the ADX as they approach and cross each other. All of these can indicate a trend change or the possibility that a change in trend is possible.
In the case of the Swiss Franc, I think we have to consider a “do over.” Start from where the Franc was at the end of the day on the 15th. There have only been a few days, since then. That is not really enough time to indicate a trend.
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