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Technical Analysis: USD/JPY - Correction or Reversal?

Posted by Akhilesh Ganti on Jun 24, 2013 8:30:00 PM

The decline in Dollar/Yen since it made its 103.74 highs should still be viewed as a correction of its bullish move that started late last year as long as major support at 93.57 holds. A look at a weekly chart (below left) shows that the pair had fallen to the 38.2% retracement level of its up move from 77.13 to 103.74, which comes in at 93.57, before staging a rally to its current levels. At this juncture this suggests that USD/JPY is in the throes of a consolidation and, while the prospect of this being a correction of the down move has to be entertained, the odds are that the bull trend will re-assert itself.

usdjpy 062413 W      usdjpy 062413 4h

{Charts: Bloomberg}(click to enlarge)

Short-term, a look at the 4-hour chart (above right) shows that the price has rebounded to the 50% retracement of the 103.74 to 93.79 decline, which comes in at 98.76, and is currently trading within an ascending parallel channel. An initial break of 98.76 on a daily close and a subsequent breach of the upper channel line would target 99.94/100 which, if pierced, would bring the 103.74 high back into focus. Conversely, signs of price exhaustion would shift the odds for a re-test of medium support at 96.21 ahead of major support at 93.57. If the latter level succumbs then the possibility of a reversal would gain traction within the trading community but, as of now, this is not the expected outcome.


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