USDJPY—daily This pair continues to show some interesting but messy price behavior. On the daily chart, a flag pattern is forming, possible consolidation on the way to higher prices. If this is a flag, the target is 92.13, which seems somewhat unlikely although certainly not impossible. However, before this ever happened, bulls need to carry the price above 84.20/77, 85.16 and the recent spike high of 85.52. Note that the price has moved back inside the triangle (the dotted lines) that contained it for the most part over the last several months. The low so far has been 82.65, very close to the support I blogged about last week of 82.56. A .382 retracement of the recent move up from the 76.59 low would be 82.11; 50% is 81.06. Here's the daily chart:










© Dianne Fecteau, 2011. 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.

USDJPY—immediate support and resistance

On the daily and hourly time charts, immediate resistance is a zone of 84.20/77, 85.16 and 85.52. Immediate support is at 83.47, 82.56, and 80.71. On the hourly chart, there is a symmetrical triangle with a possible next leg down to a D point at 83.55 before a move up to point E from the Elliott perspective (whereupon it should move down sharply). One can also view the recent hourly price action from 83.47 as an ABC correction with possible C targets of 84.10/84.47/85.06. After that it should move down. Recent high has been 84.26.

© Dianne Fecteau, 2011. 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.

USDJPY—weekly chart

Yesterday I looked at the monthly chart where there were some interesting characteristics. The weekly chart is also interesting in its own way. Price is getting close to a downtrend line resistance from the 110.69, July 2008 high. Tying it back to the monthly chart, 110.69 was the high before it broke below the multi-year symmetrical triangle.

Look at the weekly rectangle before the recent spike low to 76.45. One sees a high of 84.53 and low of 80.22 or 431 pips. Subtracting the 431 pips from the 80.22 low, one gets a target of 75.81, not far below the recent spike low of 76.45. However, that spike low quickly reversed. Price came back in the rectangle and pushed above its upper boundary. Psychologically, the market participants charged down, reversed en masse, and charged back up. Terrific herd behavior.

If price should maintain itself above the rectangle, the potential price target is 88.94. There is negative divergence with RSI on this chart just as there was on the monthly chart. However, before it could get there, price must overcome the downtrend line resistance, located today at 86.19.

Thinking about both the monthly and weekly charts, it is possible wave five ended at 76.45 (I would not bet the bank on this or anything relying only on Elliott Wave Theory but one could argue this wave count). However, if true, the next move would be up in an A wave.

Weekly chart support is at 83.4, 81.39, 80.59 and the egregious 76.45. Below that is not much support.

Here's the weekly chart.









© Dianne Fecteau, 2011. 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.

USDJPY—monthly chart

USDJPY fell to 83.47 over night but has since rallied a bit. On the monthly chart, the pair fell from a multi-year triangle in 2009. If one tries to interpret the price target from this based on an Elliott perspective, it's too low to be meaningful (well, it would be meaningful if it happened but it's not realistic from today's vantage point). One could estimate a wave five price target at 62.76 (gulp) if golden section calculations are used.

Interesting is the fact that if you look at the AB=CD harmonic, the 1.27 extension of CD is 76.19. This is based on A beginning at 147.63 and ending at 101.22 (4,641 pips) and C beginning at 135.14. 4,641 times 1.27 equals 5,894. Subtracting that from 135.14 brings it to the 76.19. The pair hit a low of 76.45 in the most recent dip.

Also interesting is the symmetry of the move from 147.63 to 76.45. It's almost, not quite, a three-drive pattern, a harmonic pattern that can signal a trend reversal. Note the positive divergence with RSI on this chart and the hammer at the recent low. These three together suggest higher prices may be coming. For that to happen however, the pair must first overtake the long-term downtrend line. It also needs to overcome resistance at 85.54, 85.93, 90.00 and 94.99.

Here's a monthly chart. I'll post a weekly chart later.










© Dianne Fecteau, 2011. 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.

USDJPY—30-year chart

USDJPY fell quite a bit below the April 1995 low of 79.70 to a low of 76.59. It recovered to 79.74 overnight and is languishing in the 79 zone since then. There are many stories about the currency afoot—the central bank is intervening or its not; yen are being repatriated or not. I thought it worthwhile to take a longer-term look back at the chart. I have posted the 30-year monthly chart below.

On the chart, I marked the point of the Kobe earthquake in January 1995. This was a major disaster for Japan and one can see that the yen continued to strengthen in the months following the earthquake, bringing USDJPY from 101.45 down to 79.70. It's possible a similar story will play out this time even though there are differences between the two situations.

Another thing to note on the chart is the multi-year triangle. This suggested there would be a long downside move. That happened. The target of that triangle is 75.43 so it supports the idea that the yen could continue to strengthen although the vast majority of the move may over. Using some geometric techniques, I've long had another price target of 77.91 that of course has been exceeded.

One more thing on this chart is the positive divergence between price and RSI. One can't trade based only on divergence but it's an intriguing signal that there might be some upside in the offing.

Is the central bank intervening? The length of the most recently closed 3-hour candle suggests they are. I read that on Monday they sold yen, buying 186 billion dollars. However, as history shows, intervention doesn't always work to stop a slide determined to happen.

So what now? Taking the conservative road is not a bad idea—staying out of the market completely until the situation with the nuclear reactors stabilizes. Rumors are rampant and can cause large market moves quickly.

If one is going to trade, one needs to do so with tight stops. However, tight stops have a downside—in volatile and uncertain times, they can be taken out rather suddenly and then the market moves in the direction of the initial trade. Wide stops, though, are not the answer. Yesterday, for example, the GBPJPY moved from a high of 130.54 to 122.71 and the EURJPY moved from 113.31 to 106.64. You can offset the volatility somewhat by changing your position size downward. If you normally trade full lots, lower it to mini-lots; if you normally trade mini-lots, lower it to micro-lots.

I've been trading very little in the last few days—this type of market is better observed. When I do trade, I'm often in and out quickly. This style of trading doesn't lend itself to blogging so you've seen fewer blog posts from me.

I hope and pray that things will stabilize in Japan quickly. The Japanese people are resourceful and resilient. They may come out of this stronger than before it began.

Here's the 30-year chart:










© Dianne Fecteau, 2011. 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.

USDJPY—at Nov. low

USDJPY touched 80.30 which is one pip below the Nov. 2010 low of 80.31. After this, there isn't another low unless one goes back to April, 1995 where the low was 79.70. It's not that far away in price.

© Dianne Fecteau, 2011. 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.

USDJPY—dropping

My long from 82.73 stopped out at -40 pips. Price action has carried down such that it's back inside the breakout above the resistance down trend line from July of last year and is approaching the downtrend line from June at 81.40. This is also near the uptrend line of the roughly sideways or triangle action that has been containing price action since the beginning of November. Let's see what price does there.

Support is at 81.40/35, 81.12, 80.94 and 80.31.

© Dianne Fecteau, 2011. 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.

USDJPY—caution

While it would be safest to trade this pair at the extremes of the sideways range, I bought this pair yesterday at 82.73. My reasons were that this was near the 82.73 downtrend line of the bull flag drawn on the daily chart below. This was also not very far above the downtrend line from the July, 2010 high at 82.40. Finally, it was also near the 50% retracement of the move up from 81.12 to 83.97. A rally will bring the pair to resistance at 83.55, 83.97, and 84.51 (Dec. high). A possible price projection based on EW is 84.99 (wave v = wave i). At that point I'd look for a short position.

The price movement is taking place within a roughly sideways channel after a very long downtrend so it's possible price can collapse. However, note that the price is edging above downtrend lines. This suggests a period of reaction or consolidation before any downtrend resumes. The most recent range is between 80.94 to 85.07 so there's some room for upward price movement.

If the pair doesn't rally and drops below 82.40, additional support is at 81.12, 80.94 and 80.31. Note that if it drops below the rectangle, there's room for quite a nice move down based on the width of the rectangle. Bottom line here is that you must be cautious with this pair and inexperienced traders may want to sit it out until price approaches one of the two boundaries of the rectangle .

Here's the daily chart:












© Dianne Fecteau, 2011. 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.

USDJPY—sideways

On the three-hour chart, the sideways range the pair has been in since the end of December is evident. This range is 80.94 to 85.07. Within that range the downtrend line from the 89.12, July 2010 high is coming in at 82.40. This is near the 82.73 downtrend line of the bull flag. The two of these should serve as support to the current move down. This is the price for a possible short-term long position.

If the pair rallies from this low, resistance is at 83.55, 83.97, and 84.51 (Dec. high). A possible price projection based on EW is 84.99 (wave v = wave i). This is within the range and I'd look to short there.

If the pair doesn't rally then look for support at 81.12 and 80.94.

Here's the three-hour chart:












© Dianne Fecteau, 2011. 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.

USDJPY—weekly chart

The weekly chart clearly shows USDJPY's long-term downtrend. The downtrend line from 8/2008 comes in at 87384; the one from 4/2009 comes in at 90.30. These two lines crossed while forming their second touch at the 94.99 high in 5/2010. A downtrend line needs at least two touches to be valid.

Within this downtrend, there's a triangle pattern. If it's interpreted from an Elliott Wave perspective then it must break downward. The upper boundary of the triangle was touched yesterday at 82.47 which should be point e. I couldn't sleep last night and decided to short at 82.24 since the stop could be tight. I'm not trading because of the triangle by itself but rather because of the overall downtrend, the touch of a downtrend line (which happens to be the upper boundary of the triangle), and momentum behavior on shorter-term charts. When I add those reasons to the weekly triangle and triangles on shorter-term charts, the probability shifts to favor short positions.

However, I don't consider this a slam dunk trade. For one thing, there's much uncertainty among traders—witness the preponderance of doji candles on various charts. For another, the pair hasn't dropped as much on the hourly chart as I would like to see if the downward trend is resuming. This is where the ability to have a tight stop shows its real value. It helps make the risk tolerable given contradictory factors.

Support is at 81.12, 80.94, and 79.30.

Here's the weekly chart (my trades don't show on the weekly chart as I use a different package for long-term charting):











© Dianne Fecteau, 2011. 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.

USDJPY—breached resistance trend line

USDJPY has poked its head above the downtrend line that began in May of last year, possibly in reaction to S&P cutting Japan's bond rating from AA to –AA. Still, a break of a trend line is a break of a trend line and shouldn't be ignored. If the week's close is above the line it strengthens the case that the pair is basing.

If this is an ABC correction on the daily chart, then the potential targets for C are 83.54, 85.14 and 87.74. At 87.74, USDJPY runs into resistance from a speed line. The December high was 84.53; the September high, 85.93.

81.86 should hold if there's to be more upside. Below that is support at 80.94 and 80.31.

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.

USDJPY—resistance

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.

USDJPY—Bounce

USDJPY has bounced to a high of 81.41 this morning. I wrote yesterday that it wouldn’t surprise me to see a drop to the historic low of 79.95 but it hasn’t happened yet. I also wrote that resistance will be at 81.92/97 (10/19 and 10/13 highs), 82.88 (9/14 low) and 83.40 (daily downtrend line). It’s getting near that first resistance so let’s see what happens.

© 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.

USDJPY—Near long-term lows

The low for this pair in 1995 was 79.95 and it has touched 80.41 so far today. Given past behavior in other pairs related to the Swiss Franc, it wouldn’t surprise me to see it swoon to the 79.95 or possibly 79.60, the bottom daily channel line, and then bounce sharply—or maybe not so sharply if the dollar doesn’t begin to rally. However, the move down is rather intense and overly dramatic and has been going on for five consecutive weeks. There’s positive divergence on the daily chart. Some sort of rally is probable. Depending on one’s risk tolerance, one could try a long around the 80.00/.50 level since the stop can be tight. More conservatively, one could wait for a touch of 79.96/60 and a rally. Resistance will be at 81.92/97 (10/19 and 10/13 highs), 82.88 (9/14 low) and 83.40 (daily downtrend line). At any of those points sellers will probably enter the market.

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.

USDJPY—still dropping

The pair failed to base in the 81.38/81 area and has reached a low of 80.89. The highest probability is that it is heading for at least the nearest channel downtrend line at 79.92. This is near the 1995 low of .7970 so it's likely this would spark a rally as bottom fishers bought. How far that rally would go—well, it will depend on if the dollar can get a rally going something that, at the moment, looks unlikely. But you know the markets often turn when you least expect them to. There is positive divergence on the daily, three- and one-hour charts. On the hourly chart (not shown) a hammer formed with the low of 80.89 so that's the nearest support level. Below that invalidates the hammer.

The way I'm planning to trade this is to short rallies once a bottom seems to have been reached. I may take a short-term long if this morning's low holds but I'm doubtful a long could get much further than the 83.00 area and, more likely, 81.38/81. A .50 retracement from the 85.93 high would be 83.41. The 20 daily SMA is at 83.39.

Here's the 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.

USDJPY—basing for now

I haven't looked at this pair in a while and thought I'd check into it to see if it was showing any signs of basing. The low so far has been .8138. It looks as though it's trying to base at .8181. There is positive divergence on the daily chart.

The pair has had three robust down weeks from the high at .8593. A .382 retracement from here would be .8312; the 50% level is .8366. Since the downtrend line from May is at .8371 and the 20 daily SMA is at .8382, this is probably a reasonable price at which short sellers would descend unless it looked as though the dollar was rallying strongly. If the pair exceeded .8450, there might be higher prices in store as short covering would come into play. Beyond that is .8593 as a target. Monday's candle was bullish although a candle alone doesn't mean much and the pair needs to start showing some strength soon.

If the pair should continue dropping, .8008 is the downward daily channel line. Given that this is near a psychological round number and that .7970 was the low in 1995, one would probably see a rally. Only the most aggressive trader would risk a long at this point and a tight stop (around .8130) is mandatory unless one wants to risk a couple of hundred pips. If it retests .8130 and begins to rally then it's more attractive as a long.

Here's the 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.

USDJPY—new low

I stopped and reversed this morning. The long trade from 85.45 profit-stopped out at +20 pips whereupon I went short at 85.63 and 85.54. I've already moved my stop to breakeven on both which is a bit tight but in this illiquid market I'd rather be out then begin to incur losses if the market spikes in the opposite direction. I can always get back in.

On the daily chart (not shown) there's a potential evening star formation with Friday's close being the second candle (and star) in the formation. Only if today closes deep within the Thursday's candle will this be confirmed. That close could be at or below the current price of 85.35. The low is below Friday's low. However with RSI on the hourly chart (not shown) moving to oversold, there's a chance there will be a rally. If one wasn't already short, a better trade would be to sell that rally if it takes place.

The weekly chart shows a gloomy picture with a multi-year downtrend and a potential fifth wave down taking place.

Support is at 85.18. 84.73 and 84. Below that there's not a lot of support. Resistance is at 85.96 and 86.45.

Here's the weekly 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.

USDJPY—bounce

There's been a bit of a bounce off yesterday's low of 84.73 which shouldn't have been a huge surprise. I went long this morning at 85.45 and took partial profits at +45 pips this morning. The pair's future direction is somewhat questionable in the short term. It was just a bit of a probe below the 84.82 low from Nov. '09. As I wrote yesterday, there was quite a bit of positive divergence in several time frames. What the pair does as it approaches resistance at 86.24/45 will be interesting.

Remember, though, that the downtrend is solidly in place and while one can trade a bounce one has to keep that in mind. A clear break below 84.73 would signal it's ready to scoot on down to newer, deeper, hand wringing lows.

Here's the three-hour 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.

USDJPY—treacherous waters

Lots of chattering about how the Yen has reached a 15-year high against the USD with the spike down to 84.73. To say the sentiment is bearish would be the understatement of the day.

Looking at the monthly chart below one can see several things of interest. First, note the steady trend down from the Aug. '98 high of 147.63. Yep, it's a downtrend with consistent lower highs and lower lows. In fact, this has been generally true since the 1982 high of 277.65.

Second, note the wedge pattern we're currently trading within. There could be a rally as it bounces off this bottom line but the new low of 87.73 is lower than the prior low of 84.82 from Nov. '09. Below here there isn't a lot of support as I wrote August 3 and the low of 79.70 from Apr. '95 is a steep drop.

Third, and most interesting, is RSI behavior. You have positive divergence between price and the oscillator which is normally bullish. You can also go broke trading divergence by itself which is why you need at least one other confirming signal. With this kind of downtrend I'd prefer more than one if I was thinking of going long. The other thing to note about divergence is that it is often most useful within the context of the larger trend, i.e. positive divergence after a severe drop in an overall uptrend. Finally, the positive divergence on this pair extends down into the lower time frames—check out the three-hour chart. The other interesting thing is the "failure swing" in RSI which I've highlighted with the two arrows. According to Wells Wilder a failure swing (in a downtrend) is when the indicator drops below 30, rises, and then drops below 30 again but not as deeply as it did the first time. One has a buy signal when it exceeds the first higher point in the RSI. I've placed another red arrow where that appears. There are some other intriguing things about RSI as well as the price behavior but that's enough for now.

So where am I going with this? If you're not already short (and I'm not) the safest approach is to sell a rally. One could also risk small longs from this level but as I wrote earlier this month you want multiple confirming signals on shorter-term charts as well as an extremely tight stop. Anything below 84.50 is ludicrous at this point. If you are short I'd light up and take some profits and add to the position with a clear break below 84.50. But be careful—we're in treacherous waters here.

Here's the monthly 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.

USDJPY—wedge bottom

Even though this pair is in a vicious, long-term downtrend, there's a potential buy on the daily chart as it nears the bottom of a wedge (85.57). Because wedge lines are often steep, it's difficult to maintain the angle. This hints there might be a rally of sorts as it bounces off the bottom line. It's sometimes said that the "safest" way to trade a wage is to wait for a break outside the boundary lines. I'm not completely in agreement with this but trading style and risk management are things each trader needs to ascertain for themselves. Sometimes after a break, prices tend to dither about before making a sustained move.

Note, too, the positive divergence on the daily chart. There's also positive divergence on the three- and one-hour charts. The low of November '09 was 84.82. The pair is currently offered at 85.82. If I go long I'd want to start taking partial profits fairly quickly and in any case by the time price reached 86.50 or so, perhaps even 86. There's additional resistance at 87.05, 87.45, and 87.70. That's a strong zone. If the pair breaks below the line, then support is at 85.50, 85.00, and 84.82 (Nov. '09 low). Below that is a 1995 low of 79.70 with no real interim support before it. Obviously one would want to be short.

Here's the 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.