News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bullish
GBP/USD
Mixed
USD/JPY
Bearish
More View more
Real Time News
  • BoJ Minutes: Members say YCC framework has been working well. A few members noted that active ETF buying should continue for time being -BBG
  • In her confirmation as Secretary of Treasury, Janet Yellen becomes the first person in American history to hold the triumvirate of Sec'y of Treasury, Fed Chair, and Chair of the Council of Economic Advisors.
  • Stocks may have brushed aside news the US fiscal package may not arrive before mid-March But, you know what didn't? Treasuries Average of 10Y and 30Y rates at lowest since late Dec Stopped right on the 20-day SMA Overall, coming off March 2020 peaks, but AUG uptrend holds https://t.co/wm0blgxT7D
  • The calls for stimulus will be strong in the United States between Secretary Yellen, Chair Powell and President Biden. Now, is that a benefit to the Dollar for relative risk or a detriment in inflation terms? https://t.co/gMyjKoBekO
  • Heads Up:🇨🇭 World Economic Forum Annual Meeting due at 00:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2021-01-26
  • Heads Up:🇯🇵 BoJ Monetary Policy Meeting Minutes due at 23:50 GMT (15min) https://www.dailyfx.com/economic-calendar#2021-01-25
  • The Bitcoin/Ethereum ratio’s break to its lowest levels since August 2018 suggests that ETH may continue to outperform BTC in the coming weeks. Key levels to watch for Bitcoin and Ethereum. Get your $btc market update from @DanielGMoss here:https://t.co/mo3rw7bP4v https://t.co/UUbjzqhT1p
  • US Senate confirms former Fed Chair Janet Yellen as Treasury Secretary -AFP
  • 🇰🇷 GDP Growth Rate YoY Adv (Q4) Actual: -1.4% Expected: -1.7% Previous: -1.1% https://www.dailyfx.com/economic-calendar#2021-01-25
  • Majority of US Senate votes to confirm Janet Yellen as Treasury Secretary, voting will continue - BBG
USDJPY Consolidates Lower Towards 117

USDJPY Consolidates Lower Towards 117

Jeremy Wagner, CEWA-M, Head of Education

Talking Points:

-SSI readings remain stable from last week

-Rate of Change analysis shows consolidation of trend

-The bias towards breakout strategies is favored cross pairs such as USD/JPY and GBP/JPY

The DailyFX Plus Breakout2 strategy is one of the more popular strategies followed. Because it trades breakouts with a sentiment filter, the strategy tends to work well in volatile market conditions.

Over the past two weeks, we have seen volatility stabilize on many pairs while the Rate of Change indicator has become mixed. SSI (Speculative Sentiment Index) has remained stable from last week’s conviction report. This suggests a continuation of the consolidation on previous trends.

Though these ingredients don’t make widespread breakout trading feasible, there are pockets of opportunity.

USDJPY Consolidates Lower Towards 117

You will see one noticeable change from last week and it is regarding the USDJPY. The USD/JPY pattern has been clear as we have been following a longer term triangle since December 2014. We are anticipating the last leg (wave E) of the triangle to move lower towards 117 area.

Volatility in the USDJPY is expanding while SSI is showing near extreme readings at +2 suggesting further losses. As a result, many of the ingredients exist for a follow through breakout to the downside and therefore, the USDJPY conviction rating was upgraded from a ‘1’ to ‘2’.

Likewise, the conviction rating for the GBP/JPY was upgraded to a ‘2’ as well. The GBPJPY SSI reading is showing more bullish sentiment. On the backdrop of the USDJPY possibly dropping lower towards 117, that could possibly drag the GBPJPY lower as well. The headwinds on the GBPJPY analysis is that the ROC is showing medium term bullish price trends.

(Those currency pairs with a bold and italicized rating represent a change from last week.)

DailyFX Plus Breakout2 Conviction Chart for February 13, 2015

ADX

ROC

Volatility Expansion?

Sentiment Signal

Conviction

EURUSD

Trend

Neutral

Yes

Bullish

2

AUDUSD

Trend

Neutral

Yes

Neutral

1

GBPUSD

Trend

Bullish

Yes

Neutral

2

NZDUSD

Range

Neutral

Yes

Neutral

1

USDCHF

Range

Neutral

No

Bearish

1

USDCAD

Range

Neutral

Yes

Neutral

1

USDJPY

Trend

Bullish

Yes

Bearish

2

EURJPY

Trend

Neutral

Yes

Neutral

1

GBPJPY

Trend

Bullish

Yes

Bearish

2

CHFJPY

Range

Neutral

No

Bullish

1

AUDJPY

Range

Bearish

Yes

Bearish

2

EURAUD

Trend

Bullish

Yes

Bullish

3

To receive future articles emailed to you regarding the conviction ratings for the DailyFX Plus Breakout2 signals, sign up for the distribution list here.

Though this is written with the Breakout2 strategy in mind, the information contained can be applied to intraday breakout strategies in general. To trade manually, simply analyze the support and resistance levels and buy a break of resistance or sell a break of support.

As you can see in the chart above, the ADX and Rate of Change (ROC) are grouped together. Since the ADX doesn’t indicate direction, only strength of move, we want to couple it with a rate of change indicator.

When trading a breakout strategy, ideally we would like to see prices in a trend and moving. This would increase the chance of a breakout that would follow through. If prices are in a range and if the ROC is neutral, that indicates there isn’t prices are comfortable near the current levels until a catalyst creates discomfort for the price.

Ideally, we would like to see a directional move take place with expanding volatility. Expanding volatility can be measured through analysis of ATR range or perhaps volume expansion.

The fourth item is sentiment as read through SSI. The result of the “Bearish” means the SSI reading is > 1.22 and “Bullish” means SSI is <-1.22. For a current reading of SSI, log into DailyFX Plus and view the Speculative Sentiment Index section (SSI).

When taking this together and a conviction reading is assigned. It is important to understand the conviction reading is the opinion of the author and not a recommendation to trade, use, or not use the DailyFX Plus Breakout2 strategy.

A conviction rating of ‘3’ means the ingredients exist for a breakout market condition that the Breakout2 strategy enjoys. A reading of ‘1’ represents a mixed bag and that the Breakout2 strategy is more at risk of a market condition that doesn’t cater as well to breakouts.

For example, the EURAUD was given a ‘3’ conviction due to an extreme SSI reading of -2 with a strong trend in place.

Therefore, the conditions exist for a potential follow through of a breakout in the EURAUD, if a breakout trade sets up.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX Education

Follow me on Twitter at @JWagnerFXTrader.

See Jeremy’s recent articles at his DailyFX Forex Educators Bio Page.

Feedback? Email Jeremy at jwagner@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES