Good day traders!
The chart below shows the usd/jpy on the weekly time frame. We can see from the above chart that the swings in the pair is getting shallower and the drop from the high at 124.4 has reached all the way down to 75.3.Currently the price closed at 78.7. By connecting all the bottoms of the swings, you can see that the pair has a potential to bottom out at this region if it does not break and close definitively below 76.0. If it does, then this analysis is invalidated.
Now lets look at the chart closer but still within the weekly time frame. I know most traders seldom look at the bigger time frames but I think it is important to know the trends and the swings in the bigger time frames as it has bearing over how the price will behave in the lower time frames.
Looking at the chart above, we see the price moving in a triangle. The rally that lasted for 7 weeks up to the 84.135 region met with topside resistance of the downtrend channel. From there, price came all the way down to 77.63 region and bounced up to face resistance from the 21EMA. Price this week ended at 78.7 and did not come down all the way to test the bottom part of the triangle. It shows to a certain extent the unwillingness of the bears to commit further and could be due to the the fact that traders are waiting for the outcome of this Sunday’s Greek elections. Nevertheless, we shall look closely at how the currency pair behaves within this triangle and an eventful break to the downside for this pair might signal continuation of the bearish move from 124.4. However, if the pair decides to move up and test the top part of the triangle, we shall see a possibility of 81 being tested. A clean break and bullish strength from there could see the pair targeting 84 and 85 again. Now, lets go down to the daily chart of the USD/JPY.
The above chart is the USD/JPY on the daily time frame. We can see that the price is testing the top part of the channel. From here we need to observe whether the bears have the resolve to break back into the channel. Next week is an important week and we need to really observe how the price closes on Monday and Tuesday. A move back into the channel or a move back up to retest 79.7 resistance and if successful, the next target being 80.2.
On the fundamental front, Greece is at the fore front of many traders minds. There are just too many possible scenarios and the two main possibilities are:
1. That Syriza wins and Greece will eventually leave the Euro Zone or
2. New Democracy wins and being Pro Bailout and Pro Austerity measures, Greece will stay in the Euro Zone.
Whatever is the outcome, you are in a better position if you don’t have any positions in the market right now.
If you want to know more about the Greece fiasco, read this article on the European Debt Crisis Chronicles.
Besides the possibility of the Grexit shaking the USD/JPY, do take note that the rumors circulating right now of possible QE3 also has the potential to move the markets. We will have to wait for next Tuesday and Wednesday. Also, do take note of the flight to safety as reflected in the overdone dives in US Treasury Yields. For a more thorough analysis of all the above factors, do take a look at this article, Markets Anticipate Euro Bailout and QE3.
Thats all I have for now folks. All the best for your trading and continue to manage your trades well. Don’t ever let it manage you aite!