The Dark Knight Fx Series : Analysis of USDJPY
Analysis
Not very obvious but you can see the weekly chart shows the breakdown of a Double Top pattern (reversal point 122.40) achieving theoretical measured target 119.54 (122.41 – [125.28-122.41]) after yesterday’s aggressive sell-off (overnight low was 116.20). The USD managed to recover to end the day near 118.40/45.
The weekly technical studies maintained the bullish medium-term outlook, as the general uptrend is still intact with estimated trend support unchanged at 115.80 and that most of the technical indicator are still positive.
On the contrary, the daily technical studies, which we used to base on our call to sell USD near- to short-term (123.80-124.80), are showing USDJPY trading in a bearish market, as most of the technical indicators are negative on top of the aforementioned Double Top pattern.
As with any aggressive up-move or down move, I see a few days of choppy trading or consolidation until market find the next directional play. Typically we expect either the formation of a Triangle pattern or Rising Flag pattern, both of which are bearish in nature. Hence, expect to see USDJPY recovers its lost ground from yesterday’s sell off towards 120.40-121.50 areas. It has to end the day above 120.40 in order to stay within the previous sideways market (120.40 – 125.00) or risk another decline to revisit mentioned downside areas 115.80-117.30.
Strategy:
From our previous discussion, you are still holding the short USDJPY position. You might wish to take profit on that or use it to average up any existing Short USDJPY Forward positions. Alternatively,
Intraday wise, 3 resistance levels are of interest based on the 4-hourly studies: 120.15/20, 121.50/55 and 123.30/35. I prefer to sell near 120.90/00 (stop above 121.65) though 1st resistance 120.15/20 is one potential (we need to monitor the negative rising momentum; sell 120.15/20 only if this momentum turns South again).
Regards
EC