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The rally has approach a very interesting resistance level here at 10270. If price can break and hold there is plenty of space above. Support level from the monthly chart at 10200 very strong, price is above the RSI 50 and respecting the 20 ema.

 



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Hi , I think you are right about this being a pivotal point.  For me the market would need to break through 10300 sustainable to negate my leading scenario, which is further falls towards the 9500 area.  So far the market has been following my medium term road map well and I have no reason to suspect a change to that at present but a break of 10300 would give me reason.  If, as I suspect, the market bounces back down out of the current resistance zone then a continuation of the move down that may go down as much again as we have seen so far is on the cards.  You will note the Pennant formation that is occurring just now.  In classic chartist lore there is a saying, "the pennant [or flag] flies at half mast" (i.e. at the half way point of a motive wave) and it is a continuation signal.  And there is a decent chance we already saw the turn yesterday...

 

For EWT folks, the wave 3-4 (blue) has not yet been followed by the necessary 1-5 form final wave down to conclude the higher level wave down.  There is still a chance that we saw the end of the higher level down move on Brexit day but the subsequent moves do not fit well with that scenario for me.

 



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Yes, that is what I love about levels, they are unambiguous lines in the sand. See how price respects them (or not) to gauge their current significance. The 10200 and 10270 are clearly important (pivotal) and once the orders are cleared out price must move on, which way is not particularly important to me, it is the momentum of movement once either level has been cleared that creates opportunity.

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'Sell the rally' has been the default option for USDJPY here this year (worked a treat in July), but not surprisingly that big round Y100 number is certainly making life interesting. It's too early IMO to call an end to the ongoing downtrend, but it will be interesting to see how the next bounce in the pair does...

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Your trading approach is to watch these points and trade out of them, whichever way they go right ?  Out of curiosity typically how long do you hold such a trade for?

 

As you know my approach is different.  I set up to trade according to the road map I have analysed out and set trade triggers accordingly about these levels (in this case I am all Short).  In some ways this is similar to you except I hold for much longer and reevaluate a breach of my road map rather than jumping into a reverse because at that moment I will not know how it fits with the bigger picture, unless it fits an alternative scenario, which I do not have in this case.

 

What is useful is that both of us can discuss the pivotal points, using different analysis techniques, and happily trade according to our separate strategies.  The discussion is the most useful thing for me because an alternative (or either way) view is a good challenge.

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Tru dat , at what point would you call a turn?  For me it has to break the daily trend line (that would be about 10500 from here, likely lower when it eventually does break).  Of course is you prefer levels then 10800 is a strong line in the sand.

 

It would be nice to see that retrace down on DX that I am looking for to send USDJPY on its final leg down.  Oh hello?  Is that USD weakness I see as I write?

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10500 would mark it I think, I'm always cautious about calling turns though (I always say, 'when it's happened, I'll let you know'). I tend to watch the monthly chart as well for a broader trend, then look to movements against that trend for potential opportunities. I'm still kicking myself about that July one.

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  I would usually be out before day close of any trade and hardly ever hold a trade over the weekend. I tend to have set targets but change their basis depending on the market. A faster market I look to levels for targets and reduce position size, average days I look at the ATR and the flow of push and pullback for smaller targets with larger position size.

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That's the one! I remember watching it rally and wondering if we'd see the trend reassert itself, which lo and behold it did. 

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That's the one! I remember watching it rally and wondering if we'd see the trend reassert itself, which lo and behold it did. 

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Yeah that is where EWT helps me.  I had a down trend tramline on the daily plus a Fib 38% resistance plus a 1-4 of 5 count (therefore expecting a turn into wave 5 down) plus Negative momentum divergence on 4 hourly and hourly chart.  This all added up to a high likelihood turn within the major trend, which I traded Short just after the turn.  This is also why I am of the opinion that the move down is not yet concluded.  In short, as long as the market stays within my long term road map I am confident in trading it with that road map.  When it ceases to fit the road map, well a rethink is necessary.

 

What I am now stalking is a 1-5 form down in this final move to a suitable support zone with Positive Momentum Divergence.

 



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With $ Y again from a monthly perspective it is reasonable to assume that we are currently in a retracement and as pointed out in the past that we most likely are riding at present a C wave or W2, therefore the 61 or possibly the 78.6 could well be the termination of W5 of C. Of which then given a stronger dollar W3 could continue. With debt to gdp standing around 230% and very little prospect of significant growth, with a long over due not yet stated country credit downgrade approaching hopefully on the horizon and finally a prospect of a stronger US $ fundamentals do indeed point to that direction. Of course follow fundamentals as you wish, most technical analysis believe all info is on a chart therefore this approach seems quite favourable although fundamentals are always interesting to observe, if anything else.

USD JPU 30 MINUTES.png

USD JPU 30 MINUTES.png

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Agree the Monthly/Weekly is showing further downside to complete a EWT1-2 retrace before strong rally in wave 3orC  however I don't follow on your daily.  All the signals point to the fact that the market is in a wave 3 of 5 down to complete that wave 2 on the Monthly that you have identified.  Can you clarify why you think there should be a rally now?

 

Re Fundamentals, not really the place for a more general discussion but in short, following fundamentals in the short term can mess with your technical analysis as you start to see things in the charts to fit the fundamentals that don't really exist (confirmation bias).  I do look at fundamentals to support the long term trend and am watchful of short term volatility around key data releases but otherwise ignore fundamentals while conducting technical analysis to avoid such bias creeping in.

 

WRT this market I have a road map (see below) that fits with my big picture and expect this market to rally only when the overall USD rally takes place and that will not happen until there is a flight to safety and/or a rate rise by the Fed.  I would hope to see this market drop into my indicated support zone before then and ideally give a reversal signal.

 

My play here is to hold my shorts until that Green wave 3 is hit and then exit and wait in the tall grass for the rally. 

 



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Hi Mercury, apologies for the late reply today and thanks for sharing your opinion. What it does appear is that I misplaced the W4 quite badly, this was supposed to be placed on the 4 hourly chart. But as you pointed out for me, is that yes all signals point to W3 of W5. Therefore play this out to around that 61%f level before exit of shorts and long on entries.

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A couple of recent quotes on the Yen strength conundrum:

 

Forecasters who started 2016 predicting yen weakness have had to revisit calls predicated on Japan’s ability to use rhetoric, monetary stimulus and quantitative easing to stymie the currency’s advance. Efforts that would typically weaken the yen have proven largely ineffective this year, signaling that the BOJ may have run out of room to maneuver. At this point, the yen’s strength appears to fall short of levels where the BOJ would consider entering the market to sell yen — a step that hasn’t happened since 2011 — according to Mizuho Bank Ltd.

 

“The verbal warnings will get stronger until something nearer 90, which might induce some form of physical intervention,” said Neil Jones, head of hedge-fund sales at Mizuho in London. “It is very unlikely that they will unilaterally intervene at current levels.”

 

Yen strength is underpinned by a pullback in Japanese inflation expectations, said Lee Hardman, London-based currency strategist at Bank of Tokyo-Mitsubishi UFJ. That decline in the inflation outlook enhances the allure of Japanese bonds, according to Hans Redeker, the head of global foreign-exchange strategy in London at Morgan Stanley.

“The result of that is real rates in Japan go up on a relative basis and it has been the real-rate differential driving dollar-yen to this decline below 100,” Redeker said in an interview on Bloomberg Television.

 

The BOJ’s threshold for intervention is between 90-95, former Japanese vice finance minister Eisuke Sakakibara said in an interview earlier this month.

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Wondering if we could see a break out from this contracting triangle. Always remain cautious with these EWT patterns, but too often they seem to appear in different markets. However this could be a retrace. Price action on 4 hourly channel, does suggest that bearish momentum for now is not as strong as it used to be.

JPY (DFB).MONTHLY.png

 

 

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It could be a potential break out Triangle formation  BUT the bigger picture still points to more downside so that it the more likely bet for me.  Will need to watch out for a false break out up, which could just be a natural relief rally before a further drop.  I would need to see a confirmed break out rally of some strength to be satisfied the move lower is cancelled out.

 

One observation, and although I am not expert on EWT labeling of Triangles I think it is normal to start where you have your B?  This would then indicate the E is about to complete that would set up a drop not a rally.  Having said that I am by no means convinced that we are looking at a real Triangle here, it is very easy to start seeing Triangles or other similar formations all over the place.

 

Also as regards EWT wave labeling I tend not to label the Pennant retrace as this often seems to happen half way along a move and throws out the EWT labeling if you use it.  Ironically the Pennant (or Flag) is often the deepest retrace and catches the eye in a way that makes it compelling to label it.  When in doubt (and actually as a matter of good practice) always check the higher time frame charts to see if your 1 hour makes sense.  it is all too easy to get lost in the weeds of lower time frame charts.

 

The issue for us with this market is after such a good move down when will it end.  All the oscillators are pointing to a rally but they often do on the way down.  best to rely on support/resistance and big picture trend analysis.  To be clear I am watching for an exit first rather than a reversal.  i have by back stop zone in mind should a surprise reversal take place (i.e. an earlier one than my analysis is suggesting) and if that happens I will then wait for a retrace of the rally before getting Long.

 



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BTW,  did you notice the date when my daily lower channel tramline cuts the weekly 62% Fib?  You guessed it, 30 Aug (or thereabouts...)

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I have just noticed that date funny enough. It is always difficult to all an end to this downtrend, but this is why it is best to look at longer term time frames, however, their is a very strong potential for this rally to occur around that 61% fib level. In terms of the triangle identified, quite often I find these occurring and this is where you must question are seeing something factual or deceiving. An example is cable where if you joined to segments you could see an expanding triangle, but then again this can be deceiving again. Got to love EWT, just seems to force you to challenge yourself all the time, which leads to better trades.

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Can you show me the expanding Triangle on Cable?  I don't see it.  Cable looks like it has just begun a wave C up to me.

 

Re EWT challenging, I am not so sure it leads to better trading, sometimes I find myself over analysing using EWT, which is why I only use it as a broad guideline these days.

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No Mercury, what I meant to say is that triangles are deceiving that I could even see one on cable, just igonore that post and yes EWT should always be used with a combination of different technical or tools.

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I looked again at your potential small scale Triangle  and I have found a scenario that nicely conforms to it.  Clearly at a consolidation formation the market can break out either way (see my 4Hourly chart) but if it does break up into a rally the I think it will be a short lived affair culminating in a retest of the upper resistance zone in line with the Pennant break and previous failed retest.  Potentially this would produce and EWT 3-4 (green) prior to a drop to Wave 5 and the end of the larger time frame retrace after which comes the USD rally. I have noticed that it is quite common for such small scale Wave 3-4 retraces to kick outside a running tramline pair and create a new tramline pair.

 

So I the only play I would contemplate here is a possible Short on any retrace back up to the resistance zone, maybe a short off a break through the Triangle downward but I am not so sure there is much more to go on this move so I am really thinking about the potential big USD rally.

 

Looking at the big picture charts, On the Weekly you can see 2 clear Triangles.  The higher one was breached during the Brexit week and has subsequently provided support recently.  The lower one provided support during Brexit week already.  There is a maxim that the apex of a strong period of Triangle support is a strong candidate for a turning point and the apex of the lower Triangle is right in the lower support zone and cuts the lower tramline on (I can't believe I'm saying this) 30 Aug.  You can see this more clearly on the Daily chart.  The lower Fib 62% support cannot be ruled out but I would not like to bet the house on it.  Consequently I will be exiting all my shorts once we get close to the resistance zone of the Pennant Triangle and searching for a confirmation of a turn into a rally phase.

 



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Hi Mercury, I would never like to call tops or bottoms in any market, as I have heard and seen far too many to this, and results in a disaster about 90% of the time, but continuation of this bearish trend is coming into question, especially if we get close to that 61% fb level. I do find quite often on these long terms timeframes find that price action can often keep crashing into the tramlines of which eventually you will see price action eventually focusing more to the right than the left (might be just me who notices this,lol). If we do get a retrace it most likely will be just that W4 we would be looking for before potentially the final move down.

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Calling absolute Top/Bottoms is a fools game I agree  although it is fun to have a go as part of a long term road map rather than a trigger for big time trading as I am doing on Stocks.  However calling a retrace turn IS absolutely something that is beneficial and a key objective for a swing trader.  Sometimes I might enter what is sometimes termed an anticipatory trade when the signals are all aligned, knowing that the turn is not yet confirmed (so if I get handed a loss so be it!) and other times I wait for the confirm (there are a variety of confirm signals and the key is to be ready for the eventual break out because it usually happens fast and you can get left behind).

 

I see no such signal just yet on this pair so remain in the bearish camp for now, but as I said I don't think it will be that long before we do start seeing some turn indications.  Everyone seems to be Bullish on the Yen, and I am glad of it because I am riding that sentiment down on this pair BUT when it becomes too Bullish it is time to pull stumps.  I would allow the market to run as high as 10270 before changing my stance, although in truth I don't expect it to get that high...

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Price gaps all over the currency markets last night as well as Gold/Silver.  Some have already been closed (GBP & EUR) but USDJPY hasn't yet.  This was a break out of 's small Triangle and normally I would suggest this is a Bullish signal (it may well turn out to be I guess) but for now I am expecting this gap to be closed and then we will see if the market rallies away again or drops through.

 

Anyone got a view on this?

 



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Price gap is now just about closed on this and all other major FX pairs, except for USDCAD.  There is a corresponding small gap on Oil, I can't help feeling both will be closed in the next wave, which would be following by road map.  Gold is almost closed but Silver is some way off, watching both of these could give clues to the other.

 

I wonder what  will happen on USDJPY next?

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 I've noticed that your Hourly chart Triangle could actually be part of a large scale Triangle on 4 Hourly.  I have often found that this happens and the larger time frame formation makes more sense.

 



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Funny enough, I was thinking the same thing yesterday, I quite find that original past analysis can should sometimes readjusted when your given some price action, hence the similar conclusions you have discussed here this morning.

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