USDJPY is ready for a reversal 2 October 2014
- The USDJPY has been persistently Bullish since 2012
- We are approaching a major resistance at overbought conditions
- Major Support and resistance levels
- Medium term analysis
The USD JPY has been on a persistent uptrend since July 10th of this year. In the longer term, the pair has been on a bullish streak since 2012. We are currently approaching the 2008 highs about 100 pips above out present levels. However as we approach this major resistance the bulls seem to be losing steam and a possible consolidation is anticipated.
Major Resistance levels
- The most significant resistance level right now is the high of 2008; 110.72. We have not been at this level for six years and it is conspicuously visible on both the weekly and monthly charts. Because of the significance the market would place on such a level it will be important to see how the pair moves as it approaches this area.
- Above the 2008 high is 111.33 the low of June 2006 this is the next resistance medium term resistance.
- 110.50 is our weekly R2 for the pair
- The next resistance is 109.87 which is the Weekly R1
Major Support levels
- The first support is at 108.58, the weekly S1
- 107.88 the weekly S2 is the next support
- The final major support that we will look at here is the 105.41 level which is the high of 30th December 2012.
On the monthly chart, it is clear that the pair has been in a Long term uptrend from January of 2012 under such a clearly bullish long term trend as expected, the 21-period moving average is trailing below the candlesticks. This is an indication that the bullish momentum is likely to persist in the long term.
The RSI is reading at 85.85 which is a bearish counter-trend signal indicating that we are at overbought conditions. The stochastic is also giving a bearish reading at 89.13 signaling that the conditions for the pair are extremely overbought.
From the weekly chart, the 21-period moving average has crossed below the candles indicating that the bullish momentum will to continue. We thus expect the bullish trend to resume.
Both the RSI and the Stochastic indicate that we are currently at overbought conditions reading 84.72 and 93.16 respectively.
On the daily charts, the 21-period moving made a bullish cross below the candles sticks on 8th august and has been trading below it ever since. This is an indication that the bullish momentum is likely to continue in the medium term. Continue.
The RSI is reading 70.0 showing that we are near overbought conditions but not quite there yet. This neutral signal is matched by the 80.1 reading from the stochastic. These two indicators show that although we are still redlining the pair it is not quite oversold as yet.
Yesterday, as we approached the 110.00 level the pair was unable to push beyond the 110.08. We have since then fallen to a low of 109.2 level. This indicates that significant selling pressures exist at these levels.
Keeping in mind the overbought conditions indicated in the monthly charts and the fact that we are now approaching a significant resistance level with evident selling pressures present, we anticipate a consolidation in the uptrend to occur as soon as we near the resistance.
Under these conditions a great trading approach is to take profits 20 pips near the resistance if you were already short at 110.52 or fade the counter trend at the weekly S1 with tight stops. A more cautious approach is to wait until we are trading well above the 2008 highs to go long.
When there is a will there is a trade
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