USD/JPY has been consolidating while tapering into a point, forming what looks like a neat symmetrical triangle. A symmetrical triangle could break in either direction, so we shouldn’t have a directional bias. And if a breakout does occur, the pair may have enough momentum for a 150-pip move, based on the height of the chart pattern. Just make sure to keep an eye on those levels (dashed horizontal lines) that I marked on the chart above, since those are price areas with very significant market interest. You can even check them out yourself by zooming out to the higher time frames, then observe how price reacted to those levels all the way back to the 1990’s.
After a couple of weeks and several tries, the pair finally broke past resistance at the 0.9290 handle. The pair is currently being bombarded by sell orders, however, since the bullish advance has stopped. This gives us three scenarios: (1) the pair pushes higher, (2) the pair dips to 0.9290 before climbing higher, or (3) the breakout past resistance at 0.9290 is faded and sellers attempt a downside channel breakout. The second and third scenarios are favored by stochastic at this point, since it’s signalling overbought conditions. The first two scenarios are more likely in my opinion, though, since the moving averages are indicating a healthy uptrend and that there ascending channel has been respected since May. Also, the break past 0.9290 is significant since 0.9290 is an important price level, even on the higher time frames.
GBP/JPY has been grinding higher after getting rejected at the 129.00 major psychological level, which gives us a potential break-and-retest setup to play with. And applying our Fibonacci tool, we can see that the most likely pullback area would be at the 50% retracement level, since it lines up rather nicely with the broken support area at 133.80. Do note that the pair’s grinding price action is implying that GBP/JPY is very reluctant to go up, so bearish interest is still strong. Not only that, stochastic is already signalling overbought conditions, so make sure to keep an eye on that rising trend line that I placed on the chart, since the down move may resume without testing 133.80 first by breaking that trend line.
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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.