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Trading Yen Crosses from Here; Wait for Downside ’Surprises’

By , Sr. Technical Strategist
05 April 2013 20:58 GMT

Major USDJPY resistance probably isn’t until 2009 high at 101.43. That level is also near the 1999 and 2005 lows. Near term action could get a bit tricky but probable supports aren’t far below. The EURUSD should remain supported through the month.

See the Daily Technicals for an overview of other USD crosses.

USDJPY

Weekly

Trading_Yen_Crosses_from_Here_Wait_for_Downside_Surprises_body_usdjpy.png, Trading Yen Crosses from Here; Wait for Downside 'Surprises'

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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FOREXAnalysis: I begin with the weekly USDJPY chart; it’s good to get perspective when markets are hectic. Over the long term, there is a lot more upside. Remember, the decline from 2007 was a 5th wave terminal thrust. The implications are for a return to the 4th wave extreme, which isn’t until 124.13 (end of pattern) or 147.66 (price extreme). A move of this magnitude is going to take some time however. Working a bit closer to home, price tested the August 2009 high today but major resistance probably isn’t until 101.43. That is the 2009 high and near the 1999 and 2005 lows.

FOREX Trading Strategy: Look to the left of the chart and you’ll notice a circled area. That area is just after the breakout that followed the initial pullback after the 2005 low. The point I’m trying to get across is that there will be pullbacks. Near term, the upward sloping channel (see below) provides a point of reference to trade from. The channel is of smaller degree than the one that was broken in December but the trading logic is the same. That is, if price breaks above the channel, then watch the top side of the channel for support.

From an even shorter term perspective (2 charts down), it is possible that we get a sharper than expected pullback now. The NFP dip and subsequent rally leaves the advance from the 4/2 low in 5 waves (see the pre NFP chart from Friday morning). It’s difficult to see price coming all the way back to Friday’s low (which is the breakout day), so I’d look for support at the Friday midday low of 96.84 and Thursday close at 96.32. In summary, I’m looking to buy a dip (96.32/85 is support – watch for updates on Twitter @JamieSaettele). You may also consider automated breakout systems in trending markets.

USDJPY

Daily

Trading_Yen_Crosses_from_Here_Wait_for_Downside_Surprises_body_usdjpy_1.png, Trading Yen Crosses from Here; Wait for Downside 'Surprises'

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

USDJPY

5 Minute

Trading_Yen_Crosses_from_Here_Wait_for_Downside_Surprises_body_usdjpy_2.png, Trading Yen Crosses from Here; Wait for Downside 'Surprises'

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

EURUSD

Daily

Trading_Yen_Crosses_from_Here_Wait_for_Downside_Surprises_body_eurusd.png, Trading Yen Crosses from Here; Wait for Downside 'Surprises'

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

FOREXAnalysis: The EURUSD followed through on yesterday’s reversal, suggesting that the turn is finally ‘for real’. To review, the decline from 1.3133 is an expanding diagonal. Diagonals are usually quickly retraced, as is occurring right now. 1.3047 is minor resistance with 1.3133 probably a bit more important. Focus later in the month centers on 1.3300/40 (former pivot and 61.8% level). It’s worth mentioning that a JS Spike (key reversal with a specific volatility condition) formed this week. This is only 5th such occurrence since 2011. The 4 previous ones the weeks of the January 2011 low, 2011 high, mid-September 2011 (false), and 2012 low. See the below chart for instances (circled).

FOREX Trading Strategy: Currently long and looking for an early week low, probably between 1.2934 and 1.2985.

EURUSD

Weekly

Trading_Yen_Crosses_from_Here_Wait_for_Downside_Surprises_body_eurusd_1.png, Trading Yen Crosses from Here; Wait for Downside 'Surprises'

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele

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Jamie is the author of Sentiment in the Forex Market.

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05 April 2013 20:58 GMT