USDJPY: After Closing above 99.00, a Test Near 38.2% Fibonacci Level May Be Imminent
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 at 99.14 after closing higher yesterday following a very bullish session on Friday which had followed an ever volatile session on Thursday - where the pair bounced off the long term bullish support line (point 4 in aqua on chart) and reached highs near the 38.2% Fibonacci retracement level (point 10 in white) as plotted on the chart below.
Also on last Thursday and Friday, the pair closed and then opened, respectively, on the 50% Fibonacci level (also point 10) before again decisively breaking above the medium term bearish resistance line (point 7 in gray) that had been previously referred to as narrowing prices into a triangle formation.
While a test of the 38.2% Fibonacci level appears imminent, and a bullish continuation could follow (such as point 5 in green), unless the pair can trade above the 38.2% level and hold above it for at least one or more session closes, then a sharp drop could follow such as along a line similar in slope to previous steep short term bearish (point 1 in magenta or point 9 in red)and looking for support again on the long term bullish line (point 4).
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 99.52 with a Limit to take profit @ 99.98 and a stop-loss @ 99.09 Risk/Reward Summary: Limit risk = +46 pips profit / (-43) Stop-loss risk = Gain to Loss ratio = 1.06
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 98.86 with a Limit to take profit @ 98.44 and a stop-loss @ 99.28 Risk/Reward Summary: Limit risk = +42 pips profit / (-42) Stop-loss risk = Gain to Loss Ratio = 1.00
Medium Term Chart: