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Bears Beware... USD/JPY looking strong on solid technical’s.

Last updated 1/20/2009 12:13 PM EST (GMT -5) 0 Comments - Add your comment

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FX360 Technical Analyst Staff

Technical Analyst, GFT

Coming off major weekly support, the USD/JPY is poised for a 500 pip jump before running into some serious Fibonacci resistance. Current risk on the long side sits at approximately 200 pips, so with roughly 500 pips of potential profit  this trade  carries an attractive 1:2.5 risk-to-reward ratio.

There may even be an opportunity to cut down that risk in the next day or two as the yen re-tests previously established resistance right around 91.50-91.00. So we may see a dip down 90.00-89.50 which would reflect a  61.8%-78.6% retracement of the rally beginning at point C (88.47) with stops set just below this low.

However, if prices break above 91.00, then it’s off to the races with a projected rally up to major Fibonacci resistance at 95.30-96.30

We don’t see this setup very often on daily charts, especially with such an acute amount of risk (approx 100 pips), and such a favorable risk-to-reward ratio.  We’ll keep you posted as it develops….

(Click Chart to See Larger Version)

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  • Weekly Chart - Coming off major support zone defined by converging Fibonacci extension levels. RSI, Stochastics and MACD all following suit based on previous bullish turns.
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  • Daily Chart - 3-in-1….a butterfly pattern beginning at X3 (93.90) within a Gartley Pattern beginning at X2 (100.54) within ANOTHER Gartley pattern beginning at X1 (110.65) all setting up to complete near D (96.30-95.30). It doesn’t get much better than this.

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