(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; Fibonacci retracement levels in grey; 50-period simple moving average in light blue.)
3/12/2009 € USD/JPY € After descending substantially to hit a major support/resistance region just below the key 96.00 level, price action on USD/JPY (a daily chart of which is shown) has bounced dramatically up, potentially targeting a retest of the last swing high around 99.65. Currently, the pair is within the bounds of a newly-confirmed uptrend on the daily chart. The drop below support around 96.00 represented an approximate 38.2% Fibonacci retracement of the most recent bullish run (from the low on 2/11/2009 to the high on 3/5/2009). Therefore the current retracement might be considered a €œnormal€ retracement within the context of a potentially continuing uptrend. Of course, an uptrend continuation would not be confirmed unless a breakout above the highest point in the uptrend (99.65) occurs. If this indeed becomes the case, further resistance to the upside resides around the 101.50 price region. To the downside, in the event of a subsequent re-break and close below the 96.00 level, strong support should likely be found in the 94.60 region, which represents the peak in the middle of the double-bottom formation.
James Chen, CMT
Chief Technical Strategist
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