USD/JPY has been steadily decreasing in recent days, as the bulls had trouble overcoming the orange resistance zone. The pair has ended its losing streak with today’s rise, however. Does it mark the end of its decline, or is there more to come?
Let’s recall our Wednesday’s commentary on this currency pair:
(…) USD/JPY recently attempted breakout above both the upper border of the rising green wedge, and the upper border of the orange resistance zone. It has been invalidated, though. The fact is that invalidation of a breakout is a bearish development.
Additionally, both the CCI and the Stochastic Oscillator have generated their sell signals, which increases the probability of upcoming deterioration.
The exchange rate is however still trading inside the blue consolidation and the rising green wedge. A bigger move to the downside will be more likely and reliable only if the bears push USD/JPY below the lower borders of both formations.
Should we see such price action, the way to the early-Nov lows will be open.
The situation has indeed developed in tune with the above, and the pair’s move lower has
made our short positions more profitable.
Yesterday brought us a breakdown below the lower border of the rising green wedge, which is a bearish development. This is especially the case when we factor in the sell signals generated by the daily indicators and yesterday’s breakdown below the lower border of the blue consolidation.
Then, there is also today’s tiny move to the upside, which looks like a verification of yesterday’s breakdown below the consolidation. All in all, the short positions are justified from the risk/reward perspective, and it seems we won’t have to wait long for the bearish scenario to be realized.
Indeed, yesterday’s breakdown below the green wedge has opened the way to even lower levels. Should USD/JPY break below the support area created by the recent lows (marked with two horizontal lines on the above chart) the way to the green support zone created by the early-Oct lows and the 61.8% Fibonacci retracement would be then up for grabs.
Interestingly, this is where the size of the downward move would correspond to the height of the rising wedge, which raises the likelihood of the bears cashing profits in this area. In other words, should we see reliable signs of the bulls’ weakness there, we could move our current profit target lower. It’ll be interesting, so stay tuned.
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Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.