Daily Technical Update May 10, 2010  USD/JPY: Attempting to Resume Bullish Mode dtu_051010_usdjpy4h  

  • 4H and 1H: Following up after Friday's USD/JPY update, there were many risk appetite induced gaps to start the week, and the USD/JPY was one of them. After an opening gap and a futile attempt to close it, the market continued rallying.
  • The 4H time-frame shows the this bullish attempt is still in the short-term but has brought the pair above 61.8% retracement, which suggest this rally may not be a correction to a larger decline. This suggests an attempt to return to the previous bullish mode in the short/intermediate term. Note however, that the USD/JPY is in a longer intermediate term consolidation with 95.00 as the resistance.
  • The speed of this rally, coupled with the speed of the previous 500+ pip slide tells of a market that wants to resolve the current imbalance as soon as possible, and why? Maybe a bull run is on the horizon. This is my opinion, and as you have seen, being prematurely bullish on USD/JPY may not be prudent.
  • The 1H time-frame shows a swing projection towards the 95.0 resistance area. The RSI is breaking 60, and price action broke a minor consolidation resistance.


  • 15-min: The 15-min chart shows the gap more clearly. There was an attempt to close it, but it bounced up after 61.8% retracement. Then in the European session if was struggling, but eventually succeeded in breaking above the 92.80, let's say 93.00 resistance area.
  • The bullish breakout is confirmed with RSI breaking above 60. There may be a double top forming ahead of the US session, with support near 93.10, let's say 93.00 area and resistance at 93.50 area, but for now it is simply a flat correction. So, don't be fooled if the market temporarily breaks below 93.00 as it would still be in the context of a flat correction, that is until the decline reaches back into the consolidation zone beneath 92.50 area.
  • There is a positive RSI divergence, which suggests a continuation rally, its suggested swing projection? You got it - 95.00 area.
  • So far, the RSI in the 15-min chart is the only one that reflects a bullish mode. The 1H chart is showing an attempt, and the 4H chart shows a neutral mode. Breaking above 93.50 would probably bring the 1H RSI in line, and suggest a retest of the 95.00 high.

Fan Yang  Currency Analyst Commodity Trading Advisor