(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; downtrend lines in red; chart patterns in yellow; Fibonacci retracement levels in grey; 50-period simple moving average in light blue.)

3/19/2008 – USD/JPY – Will price action on the USD/JPY daily chart, as shown, bump this key pair back up into the parallel downtrend channel (represented on the chart by the parallel red lines) from whence it came? Or has price just performed a classic pullback up to the downtrend line which it broke last week, in preparation for a further down-move in the direction of the break? There appears to be a slight technical bias towards the latter scenario, although this would only be confirmed if price actually breaks down below the long-term low of around 95.76 set on Monday. If this level is broken with significant momentum, a further down-move might very well be expected, as a break-pullback-continuation formation will have occurred. It is also interesting to note that this pullback up to the downtrend line coincides accurately with a key 38.2% Fibonacci retracement level (the high-to-low retracement span being measured from the last swing high on 2/14/2008 to Monday’s long-term low). In the event of an impending downward continuation, the next major support clearly resides in the region of the long-term low around 95.76, as mentioned. In the event of a move back up towards the original downtrend channel, on the other hand, initial resistance remains at the bottom line of the parallel channel.

James Chen

Chief Technical Analyst

FX Solutions

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