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Forex: Ideas You Can Trade- USDJPY Poised to Test Long Term Support

Posted by Steven Hatzakis on Oct 2, 2013 3:18:00 PM

USDJPY:  Very Close To Long Term Bullish Support coinciding on 61.8% Fibonacci retracement level

The medium term daily candle chart below shows the United States Dollars (USD) versus the Japanese Yen (JPY). This pair is generally known as USDJPY (or Dollar-Yen) pair and is trading just off session lows of 97.13 and currently trading near 97.35 (as of publication).

The USDJPY pair appears poised to test the long term bullish support line (point 4 in aqua) as the trend of the past few weeks has been along the medium term bearish line (point 9 in red) which has proven to contain the direction since a previous article where the likely convergence of these lines was noted.

The support that may be tested near the long term bullish support line (point 4) happens to coincides with several other lines including the 61.8% Fibonacci retracement level (point 10), the medium term bearish resistance line (point 7 in grey), as well as near 97.00 (a key static support line). These four support lines intersecting near the same price indicate that there could either be a significant reversal (bounce) of the bearish trend (into a bullish one) or a significant drop if these lines fail - leading to a steeper bearish descent.

If a reversal occurs, the resistance line (point 9) must first be overcome in order for a true breakout to be considered, and with a target following near the 50% Fibonacci level (point 10) and 38.2% (also point 10) further above.

If support fails (along point 4) then a parallel support line (dotted) near 96.00 could stop the descent and if not then the target near 94.00 could follow over the short-to-medium term.

 Below are examples of how to trade a bearish continuation or a bullish reversal:

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 98.11 with a Limit to take profit @ 98.99 and a stop-loss @ 97.88 Risk/Reward Summary: Limit risk = +88 pips profit / (-23) Stop-loss risk = Gain to Loss ratio =  3.82

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 96.89 with a Limit to take profit @ 96.09 and a stop-loss @ 97.50 Risk/Reward Summary:   Limit risk = +80 pips profit / (-61) Stop-loss risk = Gain to Loss Ratio =  1.31

 

 Medium term daily chart:

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