With the dollar index reaching record lows yesterday, let’s look at a potential move to the downside on USD/JPY.
On the 4 hour chart above, we can see that price made a lower low by looking at the upward pointing arrow. We also have a potential head and shoulder pattern which lines up nicely with the 50% and 60% fib which can be seen more clearly when looking at the two highlighted boxes drawn on the two sets of double bodies in the left shoulder region. Looking at the fib tool drawn more closely, we can see that there has been a rejection off of the first zone as well as a reversal off of the 50% fib. If price breaks through the 50% fib, the next point of call for the downtrend to continue would be the 61.8% fib which lines up perfectly with the upper zone of the left shoulder.
On the 1 hour chart above, we can see that there has been a close below the key level of 106.000. Plotting a fib we can see there has been two wicks into the 61.8% level and both candles closed below the key level. Looking at the highlighted box, we can see price has been consolidating on the key level and we just had the breakout as well as a retest of the box. Price has been making spinning tops at current price indicating indecision in the market, if there is a breakout above the drawn box, wait for candlestick confirmation at the zones spoken about above on the 4 hour chart.
Later today, the US will be releasing their Initial Jobless Claims which has made slight improvements in recent weeks. The Philadelphia Fed Manufacturing Index will also be released which will be important to watch out for as a positive data release could provide some relief for the dollar which could push this pair slightly higher into the above mentioned zones.
Remember to always be patient and wait for candlestick confirmation. Only take trades which line up with your personal trading plan. Subscribe to receive updates sent directly to your email.