| USD JPY Technical Overview |
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| Thursday, 13 January 2011 19:20 |
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When we study the monthly chart for the pair, we will discover that trading has been to the downside during the previous years. Since mid 2007, we witnessed a serious acceleration to the downside as seen on the chart below.
We can see that the major bearishness is organized within a major descending channel since the beginning of this century and exactly, since January 2000. The most important factor is that the pair became very close to the support of this bearish channel, where it visited levels around 80.00, while the support line of this channel resides at 79.10 areas. Reaching those areas was accompanied by positive technical signals that further strengthen the major support level, as the support line of the main descending channel should assist the pair to move upwards according to the rules of the channel prices and this is the first one. Besides, momentum indicators are showing oversold signs, while Stochastic has already overlapped positively. Not only that, but a falling wedge has been drawn successfully on the chart since 2005 -shaded in yellow- and this pattern supports the more bullishness could be seen. Al we need now is breaching its resistance levels around 88.20 to activate this upside wave. If this breakout is seen accompanied by a monthly closing, the short and medium term will be definitely positive, targeting 95.00 zones, followed by revisiting the most sensitive areas around 101.65. Areas of 101.65 represent a previous broken neckline for a bearish pattern, where the pair acquired half of its scientific target already when it approached the psychological areas of 80.00. Thus, breaching the resistance line of the wedge will be an indication that the targets of the aforesaid bearish pattern have been limited around 80.00 and the direction reversed from there, which still remains within the major bearish channel over long term basis. On the other hand, there could be a possibility to invalidate the expected bullish trend, and that’s when we look at the same monthly chart from a different perspective. This case is based on resuming the medium term bearishness favor after a slight correction and the chart below provides more details:
Here, we can see that the bearish direction that started at 124.14 -middle of 2007- has been organized ideally inside a bearish channel. Thus, the awaited upside move is seen as a correction due to the positivity of momentum indicators to touch 88.20 zones before resuming the descending wave, targeting 72.80 and maybe areas below 65.00. The factor that supports this idea is that the complete technical targets of the huge bearish pattern with the neckline at 101.65 haven't been touched yet. Thereby, the pair might try to reach the full targets. To recap, the pair may move upwards over medium term basis during 2011according to the first scenario, but a break of 79.10 will trigger panic sell-off during the coming year. By: Yasir Mubarak Senior Technical Analyst Risk Manager |
Disclaimer
There is substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products. Each investor must consider whether this is a suitable investment.
Trades or trade recommendations made on this site have not been made by Georgia Anderson.
Trades or trade recommendations made on this site have not been made by Georgia Anderson.
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