USDJPY: Break Above Bearish Resistance Tests Fibonacci Retracement line
The medium term daily candle chart below shows the USDJPY pair surging higher in the current session after closing yesterday above a medium term bearish resistance line (point 7 on chart) and reversing near 99.42 in the current session coinciding near the 38.2% Fibonacci retracement level (point 10) of the medium term chart below. A bullish developing Marubozu candle will form if the pair can manage to close at session highs today- which would indicate that buyers of the pair controlled the trading session entirely.
The pair is trading at 99.35 (as of publication) and just off session highs near 99.42 and appears to have also regained a short term bullish support line (point 5) as well as a steep short term bullish support line (point 3) both of which could provide a bullish continuation with a target near 100.00 in the short term and with long term bearish resistance (point 8) further above near 102.00 by mid September 2013.
The sideways market (along point 7) that followed since a previous article on the pair in late August 2013 was noted as a likely continuation which since came to fruition before the decisive break above the medium term bearish resistance line (point 7).
If the resistance found near today’s high (near 99.42 and on point 10) prevents the USDJPY pair from continuing its bullish momentum, a reversal may follow down a steep bearish line (such as point 1 or point 9) - to test the medium term bearish resistance line (point 7) intersecting near 98.14 - which may now act as bearish support. If this happens, support may be found also on the 50% Fibonacci retracement level (point 8) also coinciding near 98.14. If both lines failed, further support could be targeted on long term bullish support near 96.55 by mid September 2013.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 99.51 with a Limit to take profit @ 99.81 and a stop-loss @ 99.29 Risk/Reward Summary: Limit risk = +30 pips profit / (-22) Stop-loss risk = Gain to Loss ratio = 1.36
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 98.29 with a Limit to take profit @ 97.48 and a stop-loss @ 98.89 Risk/Reward Summary: Limit risk = +81 pips profit / (-60) Stop-loss risk = Gain to Loss Ratio = 1.35
Medium term daily candle chart: