Forex Technical Update
USD/JPY1H Chart 5/21/2012 10:57 AM EDT
USD/JPY still has downside risk but is in a correction attempt. The 1H chart shows a market that has completed a 5-wave decline from 80.53 to 78.96. This does not always lead to a corrective rally, but if there is a correction, we can say it is a correction of the 80.53 to 78.96 swing. For a correction, 79.40- is the first barrier. It was support earlier on May 9, but has been acting as resistance since it was broken on May 17.
The 1H chart shows price action continuing to attack this resistance. Also, the RSI is just below 60 so the bearish momentum is still maintained. However, a break above 79.40/50 area while the RSI pushes above 60 should reflect the correction at hand. The first resistance area to consider is just under 80.00, near the 200-hour SMA and the 50% retracement at 79.75.
A market that pushes above 80.20, which is also 78.6% retracement and a declining trendline (seen in the 4H chart), will be a sign of weakness for the JPY. This would make sense, and further upside can be anticipated if the BoJ announces plans for more stimulus on the 5/23 Asian session (5/22 evening in the US).
If the market remains below 80.00 after the BoJ meeting and the market is not convinced of more stimulus, the USD/JPY has downside risk toward the 78.30-78.50 area before the market should consider buying again. Also remember that on the US side, there are going to be Fed members speaking this week. This week, it will be the relative tone of the two central bank officials that will likely give USD/JPY direction.
USD/JPY 4H Chart 5/21/2012 10:59AM EDT
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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