Forex Technical Update August 4, 2010
 USD/JPY Shows Reversal Signal

  • 1H: The USD/JPY was not bottoming yet in the previous update, where the decline was projected to around 85.30, suggested by a negative reversal in the daily chart.
  • s very strong in rallying against the JPY. The 100 pip rally in the first 4 hours of the US session, was sharp, and in itself is a reversal signal.
  • RSI Signal: The RSI offers a similar signal reflect the momentum has turned bullish in the near-term, and may be the first step to an intermediate term rally, or reversal. This is a pop, meaning the RSI rallied straight from oversold zone to overbought zone, without crossing back under its short-term moving average, which is a simple 5-period one here.
  • A buy signal in some systems is formed when the RSI does cross back down, reflecting a correction, and then crosses back up, given that it did not go below 50, or if more lenient 40.
  • Expected Resistance; Further Confirmation: In the short term, we see the pair hitting 38.2% retracement level and also the previous consolidation support zone. This will provide some resistance.
  • If the market can eventually break above after a pause, it shows that the market has bottomed.
  • As I mentioned in yesterday's video, if the USD/JPY breaks above both the simple moving averages (50 and 200 period), then a true reversal signal is given for the intermediate term.
  • For now, this is still a short-term signal, but it can be treated as a good first sign of reversal. More confirmation needed though.

  Fan Yang
Currency Analyst
Commodity Trading Advisor

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