Forex Volatility Sky Rockets

Hello Traders!

Monday’s are normal quite. But wow, what a crazy ride it was in yesterday’s trading session.  Here is a quick summary:

–          the EURUSD plunged 250 pips.

–          The USDJPY moved down 250 pips.

–          The EURJPY plummeted 650 pips (I wanted to short 20 pips from the top but missed the moment due to a webinar!)

–          The GBPJPY fell 500 pips.

–          The GBPUSD moved up 130 pips.

As you can see a wild party unfolded on this week’s Monday!

EURUSD change of Forex trading plan

Both the move up and down were forecasted in yesterday’s article. I hope that you were able to profit from that Forex trading plan. Considering the power and momentum of yesterday’s downside candle, I do think that the likelihood of the upside continuation is put in the fridge for the moment.

The weekly upward trend might still come back to life at one point in the future, but it is going to take a few weeks for the momentum of this down move to subside. So in that regard I have changed my Forex trading plan on the EURUSD to the same one Nathan has. Take a look here at this video how to trade the EURUSD.


Today I wanted to focus on the USDJPY. This currency has been the catalyst of the huge movements we have seen in the Forex market so far in the year 2013.

Actually Roubini mentions in this video (link here) how the currency market has awakened from its 4 (4) year winter sleep. The volatility has steeply risen in the last few weeks. So stayed tune to Winners Edge Trading articles and videos for more information on how to trade the Forex market profitable.

So take a look at that video and get well prepared for this increased volatility in the Forex market.

Good old fibs worked

Although the move up was huge and powerful, eventually at the end of the day the good old Fib levels served their purpose and usefulness again.

As predicted in many articles the last few weeks, the likelihood of the 94.50-95 area acting as a resistance area was definitely high. And that indeed become reality.

The UJ made a huge bearish day candle yesterday and the likelihood of a pause in the uptrend and even a retracement down are increasing.

The big question

The big question is where will the USDJPY be heading to?


If we analyze the UJ day chart, we can see a first initial move up dating back to March 20 2012, which is followed by a deep correction. The bounce of the 786 Fib was the starting point for a very impulsive explosion to the upside.

In Elliott Wave terms this would be branded as a Wave 1, 2 and 3 or ABC and the current pause is either a reversal or a retracement (depending on the higher time frame).

In my opinion the move down will most likely turn out to be a retracement because when looking at the higher time frame charts I see plenty of opportunity for the UJ to move up higher.

In that regard I expect the UJ to make a retracement for a 4th wave which is then followed by a 5th wave to the upside.

This wave 4 correction could actually still be a wave 4 correction within the wave 3. In that case the UJ would have one more internal wave 4 and wave 5 to the upside before completing a bigger wave 4 and 5 on the day chart. Only time will tell will which of the 2 plays out.

In any case, the retracements in 4th waves are usually quite choppy and take quite a substantial amount of time before they unfold in their entirety.

382 fib target

As a guideline the most likely bouncing spot, especially after an impulsive wave 3, is the 382 Fibonacci retracement of the wave 3.

The UJ actually bounced of the 236 Fib to the pip, giving evidence that this is an internal wave 4. There was a decent sideways zone and top in that level, so support seemed likely there.

However, considering an impulsive down, I do think that any move up will be a correction followed by more impulse downwards. The 382 Fibonacci retracement level would be the target at 88.70. The 382 Fib is also equal to a huge sideways bottom.

We hope that this guide on how to trade the USDJPY has helped you. Don’t forget too add your thoughts in the comment section down below.

More analysis

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Thanks and Good Trading!

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