The USD/JPY dropped 300 pips (3.3%) during the last 3 trading days to a low of 90.73 on 1/12/10. In fact all of the yen crosses have moved substantially lower in the last 48 hours, with the GBP/JPY dropping 300 pips (2%) and the EUR/JPY dropping 275 pips (2%). Wait, hold on! This sounds like the same commentary I wrote last week! Last week the timing was off for a sell. Last week I wrote: The USD/JPY has reached a nice sell zone on the daily chart, so we will look to keep with this theme of selling USD/JPY on pullbacks to various Fibonacci levels and Moving Average resistance. Sells should be placed between 92.00 and 92.50 with stops above the previous high at 93.25. The trade triggered short overnight and went immediately in profit by 35 pips when it started to rally again on news and the trade got stopped out. Proper trade management would have moved the stop down to the corrective high at 92.75 once price peaked there and came down to 92.10. (65 pips off the high price).
When the price made a new high at 93.75, at that point you have to start all over again once a new high is reached and look at the smaller time frames for another short trade entry based on the candlestick patterns and other measures of resistance. Now that we are close to the 38.2% Fibonacci support on the entire move at 90.36 (which coincidentally also coincides with today's S1 Pivot, watch that level for support and a bounce to correct the move down over the last 3 trading days. If we run the Fib off the last swing move, we are between the 38.2% (91.30) and the 50% (90.56) of the move up. We not only have Fibonacci support, Daily Pivot Support, but we also have Monthly Pivot Support at the overnight low. So, watch for a bottoming pattern to form and a reversal bounce off the bottom for a move back up to at least correct the move down so far. (See the hourly for Fibo levels)
Come join us in the morning FOREX trading room from 8am to 11am as we continue to follow this pair and many others. Feel free to email me with your feedback on these Weekly Forex Plays.