ForexPros Daily Analysis July 19, 2011


Tomorrow: Free webinar on ForexPros - Sharpening Your Edge Series: Finding Your Entry

Expert: Andrei Knight

Start: Wed, Jul 20, 2011, 08:00 PST
End: Wed, Jul 20, 2011, 09:00 PST

Learn how to spot the 3 different types of entries: trend-following, range, and counter-trend, as well as how to confirm those signals and fine-tune your timing.  Join leading fund manager and trading coach Andrei Knight for this exciting instructional webinar which will transform the way you look at charts and help you achieve better trading results.

Mr. Knight is the author of Trading Forex for a Living from Harriman House, the Institutional Trading Secrets Revealed DVD course from Rockwell Trading, and much more.

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Is Reversal Next in USD/JPY?

Following weeks or relative inaction, the USD-JPY finally sprang to live last week. The price found solid resistance at the 100 SMA, around 81.60, and sold off for the next few days, closing below the critical 80.00 level. Before the trading stopped for the week, the lowest point reached was 78.45.

The USD/JPY touched that level twice, on two consecutive days, forming a possible “tweezer bottom”, well-known candlestick reversal pattern. Here this formation indicates a probability of a bullish reversal, even though the tweezer bottom is not regarded as a “strong pattern”, like a hammer or an engulfing line.

It formed in a general location, which supports the possibility of a reversal. The price has almost reached the 78% Fibonacci retracement level of the 76.12-85.52 dominant upswing, often a level where the trend reverses. It does not project how far the price should move from here, only that a probability for a change in trend direction has increased.

Unfortunately, tweezer bottom needs addition confirmation from the price action itself, meaning a bullish day. So far, there is none. Instead, the small dojis signal indecision. We need to see a more directional day, which will likely determine the next price swing in the USD/JPY.

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Forex Trading Analysis written by Mike Kulej for ForexPros. For more information about technical analysis visit ForexPros.

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