Forex Technical Update July 23, 2010 USD/JPY in a Flat to Test Resistance
- 4H and Daily: As anticipated in the latest USD/JPY update, the breakout yesterday was just expanding the consolidation action from a rising triangle to a flat, or sideways channel.
- The 4H chart shows some of the internals of the consolidation, and so far there has been non-impulse waves within the flat. To me, this suggests the market may spend some more time within this pattern. Also, this pattern may still expand further. Impulse waves would have suggested the market wants a quick correction.
- That means, so far we have a, b patterns complete, and c is developing. If the resistance holds, it will be complete there. To me, there may be another decline followed by a rally to complete the consolidation pattern.
- Looking at the daily, we remember that the market is bearish, and from last week's update, bullish outlooks are limited, but bearish outlooks are also limited since we are in a significant support zone. So intermediate outlook is uncertain to me.
- In the short term, it appears daily price action has been somewhat bullish this week, although within a sideways context. .
- Momentum is definitely a clear clue, as the RSI is showing bullish divergence.
- So if the market brings the pair higher, fibonacci studies may help anticipate where it might turn back down lower.
- 88.50 is 61.8% retracement of the latest downswing in the 4H chart, and is the near-term resistance for this pattern to expand a bit higher.
- However if the pattern takes on a zig zag instead of a flat, it can expand even further towards 61.8% retracement in the daily, 90.35 area.
Fan Yang Currency Analyst Commodity Trading Advisor
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