Yen 700 Pip Breakout?

Hello Forex traders,

Will the USDJPY be able to break out of its consolidation sometime soon? Five weeks in a row price has not been able to escape the boundaries of 100.70 and 102.70.  Basically the bottom and top forming a tight 200 pip range.

What’s next? To get more details on the fundamental side, check out the post “Abenomics needs a weaker yen: will the markets play along”.

6- 3- 2014 uj d


The interesting fact is that price is currently at the top of the 5 week consolidation zone (red horizontal lines). This means that price has approached a clear break or bounce spot. The upside momentum will need to prove whether it can break the top of the range, otherwise the resistance could stop the trend and send this back lower.

However, at one point the consolidation zone is going to break. Let us analyze the future break of both sides:

1)      Upside break (above red horizontal lines): seems slightly more likely at the moment with the current upside momentum. A break above would mean that the currency is getting follow through after the 50% Fibonacci retracement bounce. Be cautious of the resistance layers above it:

a. Broken bottom can become resistance (orange dotted)
b. Resistance trend line (purple)
c. Monthly trend line (blue)
d. Top (orange solid)

A break of the top would signal the uptrend continuation after which it is likely that the Fibonacci targets would be the main levels to aim for (-27.2 and -61.8% targets at +/- 107.75 and 111).

6- 3- 2014 uj d

2)      Downside break (below green horizontal lines): consolidation zone would then become a pause within the downside retracement that has been taking place ever since the beginning of this year. Watch out for the following support levels:

a. 61.8% Fibonacci support level at 100.19 (blue dotted)
b. Round and psychological level of 100 (blue dotted)
c. Previous top and 78.6% Fib at 99 and 98.75 (light purple)

The circles on the charts indicate the (wide) open space (red for down; green for up) potential for the USDJPY.

Of course when the Yen will be able to break out of its range and to which side will of importance for other Yen crosses as well. Let us review one of them: the EURJPY.


Yesterday Double Trend Trap summary video already mentioned the potential of the EURJPY to break out up to higher grounds.

6- 3- 2014 ej d

The EURJPY’s uptrend can be captured by using an uptrend channel (blue). Within the uptrend channel, price has managed to cross the channel from the bottom all the way up to the top, and then back down to the bottom again. The bounce up also occurred at the 61.8% Fibonacci retracement (green Fib) and the broken trend line (purple).

Currently price is on the verge of breaking to the upside. A clear resistance trend line (green) is present when connecting the tops of the pullback. A break of this trend line could spell a very interesting break out trades setup due to the presence of a strong uptrend.

When this resistance gives way, then there is plenty of wide open space to the upside within the mentioned uptrend channel. The targets could be the following:

1)      The Fibonacci targets of the 50% Fib bounce (blue) at -27.2%, -61.8%, -100%, -127.2%.

2)      Horizontal resistance levels

3)      Top of the uptrend channel (blue)

[tweetable alt=””]EURJPY target is 700 pips higher; not something a trader wants to miss out on.[/tweetable]
For the moment, any stop loss below the 50% Fib should be safe (138.75) untill price gets into higher territory.

Are you keeping an eye on the Yen? Do you expect a break up or down? Let us know down below in the comment section!

Thanks for sharing this article and Good Trading!

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