We are half way the week and when analyzing the markets this early morning the currencies seemed to be in “tough” spots. To me, the most interesting setup today seems to be the USDJPY.
It made a decent sized bullish move during the night with impulsive 1 hour candles. The currency has been progressing sideways ever since which could indicate a pause for further continuation to the upside. I am keeping an eye on that development.
A break north could be signal the continuation of the USDJPY uptrend. Be careful though as price has moved up a tremendous amount of pips so taking extra caution and moving your stop to break even along the way is wise.
Time now for me to give the best Forex help possible so let us take a good look at the USDJPY from all angles!
The week chart shows us that we have broken the top of spring 2012 and are moving up sturdy and full of momentum. However we can identify areas of resistance that could be good to watch out for.
Key levels of resistance to the upside could be:
a) A top dating backing back to May 2010 at around the 95 price level
b) The 786 Fib of the swing high swing low of the last move down (blue Fib) is at 90.50
c) The 382 Fib of the entire move down (green Fib) is at 94.
d) Several bottoms, dating back to spring 2012, acted as support then and could be resistance now. Those price levels are around 88-89. That is where current price is
e) The round numbers of 90 and 100
f) We have travelled +/- 1,520 pips in this uptrend, when counting very the bottom of the turn. 1,597 is a Fib sequence number and many times huge moves finish around a Fib sequence number.
On the day chart we can see 2 days of bearish momentum pushing price back some 150 pips. Price however seems to be bouncing back up from a level of support:
a) The sideways move and a top
b) The moving average
We need to zoom in to the 4 hour for more clues.
In the 4 hour chart we can see a touch of the 382 Fib retracement and a potential break of the bull flag correction. We need a full close and bullish candle for a break to be confirmed. The Oscillator has also moved back to the zero line and could be ready for a next move up. The 4 hour chart shows engulfing twins, a sign that we might be pushing up again.
The last chart on my list is the 1 hour chart. I have identified interesting upward potential on the higher time frames. Now I will monitor the 1 hour chart to see if we get:
a) Continuation of the momentum and impulse to the upside
b) A break of the sideways move
c) Will use that chart for entries, stop losses, trailing stop
My reasoning for using the lower time frame level of a 1 hour chart is because the current price levels are in a weekly resistance zone. The currency pair might find it difficult to continue its northward march in a similar fashion to what we have witnessed so far. There are quite some reasons for the currency to slow down, stall or even reverse in its upward move. But the currency could just as well keep on going.
Therefore entering on a lower time frame gives me more flexibility in:
a) Moving my stop sooner when approaching the top as I will have sufficient Risk to Reward to justify such a move
b) Measuring whether or not we get an impulsive move and impulsive continuation. Any signs of a halt and I might consider exiting, depending on how price action unfolds
c) Making an attempt to join the uptrend but in a cautious manner
This is my trading plan!
Those are my 2 cents! Are you planning to trade the USDJPY and what are you looking for to happen? Or are you already in the USDJPY? Please let us know in the comment section below.
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