USD/JPY Daily Chart 8:00PM 9/30/2012
78.6% retracement: The USD/JPY has been falling since the last update where a rally was rejected from clearing a key declining trendline that went back to a resistance pivot in April 2011. The move has been small, falling from 79.21 to about 77.50. As the daily chart shows, the market was not able to clear below 78.6% retracement of the 77.13 – 79.21 swing.
Engulfing candle: The rejection of the bearish attempt was followed by formation of an engulfing pattern against the preceding downswing. Friday’s (9/28) candle closed above the previous 3 daily candles. This is a sign that there is strong demand around the 77.50 handle.
Trendlines: When you look at the weekly chart, you can see that as the market got to 77.50 it was closing in on a rising trendline going back to the historic low of 75.56. Respect of this trendline support indicates the markets respect of the bottom put in during the second half of 2011 as well as the fear of Japanese intervention as the Japanese yen strengthens against the US dollar.
The market is between converging trendlines and price has not shown the market’s decision on a direction.
Momentum: The momentum in the weekly chart is right now in consolidation mode as the RSI reading is stuck between 40 and 60. However, there is a slight bullish bias because it had tagged 70 earlier in the year, and has held above 40 so far. In fact if the market is to build bullish momentum, we often see the RSI hold above 40. This theory suggests that a correction cycle is over.
Comparisons of previous downswings: The current bear run in 2012 has lasted 27 weeks since mid-March. The previous downswing in 2011 took 28 weeks from April through October. Before that, there was a 25-week decline from May 2010 through October 2010. In 2009, there was a 33-week downswing from April through November (to the left of the chart – not shown).
The downswings have started usually at the start of Q2, and ended mid Q4. As we get into October, the start of the 4th quarter, maybe we should get ready for a the completion of the 2012 downswing and a subsequent rally either as a correction, or as the start of a major reversal after failure of the 2012 downswing to reach lower like the last 3 did.
USD/JPY Weekly Chart 9/30/2012
Fan Yang CMT is the Chief Technical Strategist, trader, educator and a of the main contributors to FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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