Monday, January 10, 2011


USDJPY had a range last week of 81.73 to 83.21 and was not as volatile as some of the other pairs. It closes, capped by its weekly 20 EMA (curently 83.62). Price touched its high last week on Friday so it's coming into the week with bulls in control.

Note, though, that on the daily chart, Friday's high was an upper shadow on the candle and that's most likely because it's near resistance with the downtrend line from May coming in just pips above it on the daily chart and the weekly 20 EMA which has been roughly capping the pair since last June. The next resistance is .8441/51 (a double top that formed between November and December with confirmation at 82.35 and price target of 80.19). After that, resistance is 85.00, 85.86, 88.04 and and 88.34/56 (a fibo and a longterm downtrend line).

So what could be going on here? There's always a chance of a trend reversal but that's a trifle optimistic at this point. It could be an ABC correction which is seen most clearly on the weekly chart. If so, 83.60 would be the target of the current C wave if C is to be .618A and if the low of B was at 80.94. That's very close to where the pair is. If C were to equal A, the target is 85.25, near the monthly 10 EMA, a speed line on the daily chart, and near a round number. It could also be a bear flag that began with the October low of 80.31. If so, its resistance is near the 85.00 mark. My general plan would be to short at some point but note that I'm already short the EURJPY and the correlation between the two pairs is high. That means it's essentially the same trade as far as risk goes.

The December low was 80.94 so it's possible the pair will bounce in a range between there and 84.00 for a while.

Here's a daily chart:

© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.

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