Looks like USD/JPY could be in for a much larger retracement! On its daily forex time frame, the pair is still showing signs of pulling back to the long-term rising trend line. Stochastic has already reached the oversold area but hasn’t quite crossed up yet, indicating that there’s a bit of selling pressure left. Using the handy-dandy Fib tool on the latest swing low and high shows that the 50% to 61.8% Fibonacci retracement level are closest to the trend line, which is also around the 104.50 to 105.00 psychological levels. Waiting for reversal candlesticks on the Fibs and trend line might be a good idea if you’re planning to go long!
Here’s another trend line setup that’s already about to play out! AUD/JPY is testing the daily trend line support while stochastic is indicating oversold conditions, which means that a bounce is bound to happen sooner or later. If so, the pair could make its way back to the next area of interest at the 96.00 major psychological mark or perhaps until the previous highs near the 99.00 handle. While the long-wicked candlestick formation right on the trend line suggests that buyers are putting up a fight, a downside break could still be possible.
Is this a rising channel forming on GBP/JPY’s 4-hour forex chart? The pair looks poised to test the channel support near the 170.00 major psychological level while stochastic has just reached the oversold area. Pound bulls could jump back to action once the oscillator starts moving higher, and they could take the pair back up to the channel resistance past the 180.00 handle or at least until the mid-channel area of interest near the 177.00-178.00 levels. Make sure you set your stop below the bottom of the channel if you’re thinking of going long at the support area.
To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis.
Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.