USD JPY Could we see a re-test of the 110 level?

[donaldprice]

 

The currency pair, was a few weeks appearing as if there was no stopping the bearsish downtrend, however around the 110 level the bulls appeared to be storming in, but since then struggled to reach the 114 level. It was clear that the uptrend momentum was not going to last much longer and a breakout appeared placing the bears in control again. Could we see a retest of the 110 level again? Be interesting to here other traders insight who are keeping an eye or trading this pair.

[Mercury]

Nice analysis DonaldP.  This pair has been quite correlated with the US markets for some time but of late, as you pointed out, it has been more bearish.  My underlying narrative with this one is that investors flood to safety in jittery times and one place of historic safety is the Yen.  I believe that the recent rally was more to do with the US markets rally (flood back out of safety during this) and expectations on interest rates surrounding the USD.  In addition the Yen reacted badly to BoJ's last round of stimulus, an ever increasing trend globally I think.

 

So my feeling on this pair is you have to watch the Nikkei and US stock markets and be wary of any BoJ and Fed announcements.  If the US markets start to go bearish (my forecast) then I expect this pair to drop.  However I think the US will drop, pop and then drop harder and we could see the same here.

 

My analysis suggests that if USDJPY drops through the 62% Fib on the daily chart (blue line where price is at this morning) then it could go on towards the 38% Fib on the Weekly (that's about 10775) before a relief rally.  If it turns back from the 62% Fib then a relief rally will happen now before a later sharper drop.

 

Look forward to your thoughts on this and ongoing updates as we progress.

 

Here is the hourly chart:



[Guest oilfxpro]

It is possible  , jpy  gets stronger on usd   and indices weakness and deflationary economies

[donaldprice]

It appears USD JPY has dropped more that i thought and certanily what the BOJ had NOT hopped for, https://next.ft.com/content/69bcc44d-c996-327f-a068-bd029ea2f3f0 from this FT article it appears the BOJ are pulling their hair out over this. 

[Guest Rich88]

Oversold, due a bounce from here

[donaldprice]

USD JPY, as you can see from the 3H chart, has been selling very steeply now, however as you can see from the weekly chart pivot point, this could be where a potential bounce could come into play. However failing that and selling continues the 105 level looks like the next logical place to target of which i think you would expect the BOJ to act. If a bounce where to take place from the 3H chart pivot point (blue line) you would possibly be looking at the 50%  FIB level and depending on momentum could possibly push through past 62% or fail at 50% and opportunity to go short. 

[Mercury]

My analysis also suggests a likely relief rally in EW3-4 format.  On the Weekly chart I depict the long term trend as down with this move not yet finished, hence I expect a relief rally up th W4 and then a final leg down (assuming the W3 isn't a Wc taking us back up in a strong rally...  Nice touch on the Fib 38% and parallel tramline on the Weekly chart with Pos Mom Div and oversold Stochastic and RSI.

 

On the Daily I have a good EW internal count on the Wave 3 and good Pos Mom Div and oversold Stochastic and RSI here too.  On the Hourly chart also Pos Mom Div but after a shape drop it is not that pronounced so a further leg down can't be ruled out.  Do have oversold Stochastic and RSI here too and coming out of over bought territory.  Good set of parallel tramlines contain the recent drop at the Fib 38% on the Weekly.

 

All in all looks set fair for a relief rally at least to the fib 38% (Daily) which coincides with Wave 4 turn and resistance.  Likely to initially go up to a Wave A maybe Fib 62% on the Hourly before returning in a Wb and then a final Wc in 1-5 fashion.  After that we will have to see where we are in terms of Wc or Wave 3...

 

I've taken a Long just above the Fib 38% with a stop just below the recent low (plus a bit).

 

Here are the charts:



[donaldprice]

Very interesting analysis, there Mercury, i will have to personally brush up on eliot wave theory, however your charts are very well structured. I think in terms of being oversold, is that quite often within a change in trend we usually would see some more obsvious RSI, MACD or STOCH divergence, therefore probably stay quite cautious, but the scenario to go long will have to be closely watched as the momentum to the downside has been well intact. But always appreciate to hear your insights. 

[Mercury]

Donald,

 

If it was a major turn or trend change then I would agree but I have this as just a W3-4 relief rally so Mom div is all I'm looking for and over bought for the others is sufficient.  There is a divergence on Stochastic and RSI on the hourly if I'm reading it right, not a big one but it's there.  I have found that if you wait for perfection you invariably miss good set ups so I go when I feel the likelihood is with me and I have a low risk trade with stops just below the Fib 38% Weekly.  If another leg down is put in I can go again.  The risk is worth it as the reward is possible 600 points or more.  If you favour a more definite set up wait for the turn and the first 1-2 and the go Long.  If I hit the turn exact I usually look to double up at that point.

[donaldprice]

Absolutely Mercury, waiting for the perfect moment for a trade is many of the times not going to be exact, but i do find your tram lines quite effective of which i will definetly incoorporate within my strategies as they offer quite a good guide. It is always great to see how others employ different strategies. 

[Mercury]

Donald,

 

Glad it is helpful.  One watch out though it takes a lot of practise and you have to keep updating them as you go so you don't rely on old data too much.  When you are not busy practice on markets you don't know and don't follow.

[Mercury]

We did indeed get another leg down but unfortunately my stop was not hit and the Weekly chart Fib 38% held, so far.  The market has just poked through my middle tram with Pos Mom Div off the strong Fib 38% resistance.  I expect a short run followed by a retrace (could be quite strong) in EW1-2 fashion before a stronger rally.  I still think this is a relief rally and at the right moment (TBD) I will cash and reverse to take the next leg of the Bear on this market down.

 

Thoughts anyone?

 



[Caseynotes]

Seems content to go sideways today. Clear and strong demand at 10760, sellers unable to overcome the buyers on two major attempts. Some selling pressure at 10840, If price can break that there is more resistance at the 10900 level.

 



[donaldprice]

There appears to be some very clear divergence, and the sellers dont seem to be strong enough to break down the current support. However, the BOJ appear to be only be able state some small talk, but no current intervention policy until other countries support their policy. Problem is like the x-bank of japan governor is that once the BOJ starts weakening their currency again, or try, other countries will keep on competing, not that its done the ECB any good either. But it will be interesting if we could break out and close on the next tram line, or as you say break the support, however the picture is mixed, but my bells are set for both those levels.

[Caseynotes]

USDJPY testing resistance at 10910, could be worth watching how price responds at this major level.

 



[Mercury]

Hitting a strong tramline and Fib 23% resistance plus 8 Apr turning point.  I'm expecting a bounce off this into a EW1-2.  Have cashed this swing and will await events (either a strong breakout or retrace):

 

All things being equal I am seeing this as a big picture relief rally with a lot further to go but would need to see either that breakout or EW1-2 to have confidence to get in again, especially with everything else that is going on.

 

EUR/GBP/USD are better set for now.

[Caseynotes]

As per my post on Monday in this thread the bottom was established at 10760, the bulls secured 10840, then moved on to 10900. After a brief blip on poor US retail data today bulls are now looking at the next resistance, the key weekly level of 10970.

 



 

 

[Mercury]

Agree, I'm expecting a retrace drop from about that 10970 level before a significant rally up.  I am overall bullish the USD across the board.  This cross has been going against the grain for a while but is that set to normalise?

[Caseynotes]

USDJPY tags 10970 weekly resistance zone so we have re-tested 110. But what now? A lot will depend on the battle going on in the dollar index as it trys to bounce off range support and breakout of a decending triangle.

 

The daily USDJPY; but look at the other 2 charts from a couple of days ago. Technical Analysis, drawing trend and countertrend lines is a basic, right?, but two professionals have produced two different charts. There's always room for third opinion.

 



[Mercury]

Very interesting and valuable point Caseynotes, for what it's worth let me add my chart to the mix, which I thin comes out somewhere in between the two you posted...  I frequently draw several options for tramlines and you only know how well you have drawn as price action evolves but you do get a "feel" for a particular market, although markets are prone to changing dynamics as we all know...

 

This issue is why I never rely solely on any one technique but require 3 or 4 to align before I start to get interested in placing a trade.  I find that when this fails me it is either because of some fundamental bias misunderstanding by me or emotion kicking in.  The more people disagree and offer alternatives the fewer mistakes I make.

 

On this cross, as previously posted, I thing we have had a turn and a EW1, now into a retrace back to wave 2 and then we can expect a strongish rally BUT I think this is just a big picture relief rally and once we trace out an A-B-C it will be down again so the long term resistance on one of those charts is probably about right.

 

I usually look for the 62% Fib for the retrace but these hourly 1-2s can go back to nearly a double bottom/top so a number of factors will play out before I make my final decision, including the risk that we haven't actually hit the turn yet...

 

Charts:



 

 

[Caseynotes]

Nice chart series again, I see you've plotted an option 3 for your tramlines. All have validity, and plotting levels as you do can only make life easier when deciding how the market is moving, possible turning points and how to react if they do.

That bit of extra work in anticipation can save a lot of stress when the market does something unexpected (as it is always trying to do) and you need to make a decision fast. 

 

As you know you and I are at opposite ends of the trading style scale. Intraday trading on a low time frame chart on an average day is about looking for surges and waiting for the pullback. When the pullback fails price will often surge again but these surges on an average day only climb about 30 pip before pulling back again to about 10 pip above entry, so I am just trying to pick off 25s throughout the day. As I've mentioned before you often get 3 surges with the fourth failing and price falling away to seek reassurance at the 50 ema where the pattern will start again or completely fail.

Different styles for different people, it's all good.

 

Bye the way, are all your charts moving sideways too?

 

[Mercury]

Yes, different strokes for different folks.  I used to do the day trading thing but it didn't work for me so I fixed on the longer term approach, which suits my analytical style and trading psychology better.  It's important to find what suits you I guess is the message there.  When I was trading shorter time frames the thing that killed me was not seeing the bigger picture trend and I wound up betting against that too often, hence my shift in approach.  I now want to try and identify the long term and medium term trends and turning points and trade off the 1 hour (sometimes 15mins) charts.

 

By moving sidesways you mean the price action?  What time frame are you thinking about?

[Caseynotes]

re; moving sideways I was just laughing at eurodollar in it's 20 pip range since yesterday afternoon. I usually trade off the 1000 tick chart.

Getting the bigger picture is why I take notice of all your posts. please don't stop.

[Mercury]

Ha! no chance of me stopping, unless I go bust!!!

 

When charts do go sideways, on whatever timeframe, it usually does so in congestion zones, as I'm sure you know, or in complex EW4s.  The trick is working out which way it will break.  Having the long term and medium term picture can help your chances on that but still it is all about chances and likelihoods isn't it?  No amount of analysis can come up with a sure thing but the more we do it the better we get, if we are open minded...

[Guest Condor]

I'll Second that  ! re  posts, keep 'em coming.  I'm learning off them & just finished reading Burford and now reviewing what I've gone through.  I think I've learnt loads since Easter when I opened account and now trading smarter consequently. I'm hoping this will allow me to contribute more as time passes and not just learn off you guys.  Cheers C.

 

[Mercury]

Just post what you see and think, no problem, don't wait to become an "expert" or you will be dead before you post.  I certainly do not consider myself one and I am sure I will learn from you too.  Since being on this community I have been reminded by several traders of the value of support and resistance for example.  Publish and be damned, **** the more damned the better in my view, greater learning opportunity (as long as it is constructive of course..., if not best just ignore it)

[Mercury]

At a decent turning point potential (Fib 50%) with indicators in the right place, though not yet turned out of oversold so could drop further to the Fib 62%.  This move looks like a Wb to me which suggests a move up to Wc and W4 completion, possibly to the red Fib 62% and Daily down-sloping Tram (crica 11150).  That's a potential points haul of about 300 and I'd place my stops about 10810 so a risk of 60 points, not a bad ratio for a retrace move.

 



[donaldprice]

It appears that its holding on to that present support around the 61% fib level, if you look of the half hourly chart, the momentum does seem to be slowing right down to the downside, of course as you say exercise caution, but a small risk of course. If there was a break down then without doubt, the target would be 107.63.

By the way, the oil analysis a few days ago turned out to be really good, therefore a decent short at present, however the doha meeting could go either way with all these mixed messages. 

[Caseynotes]

Wow, nice charts  If you keep this up you'll have  quaking in his boots (ps don't tell him I said that).

[donaldprice]

We all learn from each other, trading is a constant learning process, like other professions and there always be individuals who have ideas, that no doubt you would not arrive at in the decisered time, unless you networked with others.