USD/JPY Technical Analysis 10 Aug 2012

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Due to the fact that my favorite Eur/Usd currency pair is looking very uncertain on the charts the last couple of days, I’ve decided to do a technical analysis of another currency pair today: Usd/Jpy. Let’s take a look at some charts and see what they can tell us about likely future price action:

USD/JPY Technical Analysis 10 Aug 2012

The above chart is a weekly chart of Usd/Jpy. Technical indicators on the chart are as follows:

  • Blue 21 EMA
  • Green 50 EMA
  • Pink 100 EMA
  • RSI
  • Slow Stochastics
  • MACD Histogram

 

What I can deduce from the above chart is the following: 1- Price action is still below the descending trendline drawn over the March 2012 top. This means the trend is still medium term down. 2- A double-bottom was made around the 80.00 level, yet double-bottoms seldom complete down trends. 3- Price action is still below the 50 and 100 EMA, and currently touching the 21 EMA and being held back by it. 4- RSI is under 50 which is bearish. 5- The MACD histogram and the Slow Stochastics don’t really show anything except a slight bullish bias. Taking the above into consideration, the recent days seem to be forming a bear flag. There may be a little more upside but I would say that is limited to around 79.40 (100 pips up from the current level), while the downside targets would be 76.00-74.00. Before I give my trade recommendation, let’s take a look at the weekly chart for more technical confirmations.

usd jpy

The above chart is a weekly chart of Usd/Jpy with the same technical indicators as the daily chart. Again, price action is below all 3 EMA’s and obviously also inder the descending trend line from the March 2012 top. On the weekly chart, all three indicators (MACD histogram, Slow Stochastics and RSI) are all showing bearish signals. Thus, the weekly chart confirms the bearish bias that I’ve deduced from the daily chart.

Trading Recommendation

I’ll anticipate for another 100 pips to the upside but I would break this into two trades. 1- Short Usd/Jpy at market (78.40) with a stop just above yesterday’s high of 78.80 2- If the first trade gets taken out, then enter a second short at 79.20 with a stop and 79.50.

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About: Dirk de Bruin

Dirk de Bruin, author of Forexhabits.com is a self-taught technical analyst and trader providing technical analysis tutorials and analysis of currency pairs to educate and help other traders make more money and stay in the game. He relies purely on technical analysis and tight money management for long-term profitable forex trading.

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Dirk

The trade at market of 78,40 was a good call with the pair currently trading at 78.20. I would move my stop to break even to eliminate risk from this trade and continue to hold this position until it either becomes a fat profit or gets stopped out for 0.