During the last week and a half, the resistance of 1.4058 was crossed upward. However, the pair crossed it back downward during the last trading session trough a very strong red candle. When, in an unclear situation such as this one, where the power game is strong with no apparent winner (between bears and bull), it could be better to wait until a clearer issue will appear.
The RSI indicator, whose the goal is to show the intensity of the prices, shows the apparition of two low points, suggesting a downtrend in the prices’ evolution. Such an interpretation suggests a weakness of the bulls relative to the bears.
According to this analysis, the probability for the pair to keep decreasing for a few sessions , to reach and test the support of 1.3732 is high. Once the support reached, there are three potential behaviors of the pair:
1. The pair reaches the support, tests it and since the breach will be vain, will start a new uptrend; creating the opportunity to go “Long”.
2. The pair reaches the support, but is not crossing it. It could be better waiting for a “Parking” of about a session and a half, and then entering a “Long” order.
3. The support is sharply broken downward. In this case, we suggest waiting for a small technical correction and only after start looking for a decreasing configuration on One Hour graph.
During last week, the resistance of 1.6109 has been clearly crossed. This breach confirmed the current uptrend. On the last session, a correction candle occurred but his intensity was quite low relative to the breaching candle occurred earlier.
Actually, it seems that bullish power is stronger. The best attitude to adopt is to wait until the end of the current correction and only after, go “Long” with the trend by the identification of an increasing configuration on One-Hour graph.
Going “Short”, which is opposed to the trend, is not recommended at all.
The last 3 weeks corrected the previous downtrend until an important resistance zone around 0.9933. After the resistance was reached exactly at 0.9933, the pair stopped for a while and started to decrease.
Currently, the pair is making its way to the following support at 0.9947. The pair is very likely to stop at this support and start to increase back. However, in order to catch the opportunity to go “Long” which is created, we suggest waiting for one of the two following templates:
- Vain breach of the support.
- A session and a half of “parking” on the support
USD/JPY Daily graph: http://www.real-forex.com/charts-daily/November2010/JPY_DAILY_081110.JPG
We can easily identify the navigation occurring for already 3 weeks between 80.42 (support) and 81.96 (resistance).
Currently, the pair is 60 pips below the upper level of the navigation. Once that level will be reached, there are two possible outcomes from it, each one with special behavior to adopt in function:
- A vain breach above the resistance, and creation of a downtrend whose the first destination will be the lower level of the navigation. There is an opportunity to go “Short”.
- A real breach of the resistance followed by a closing above the resistance, confirming a new uptrend, starting on the new support: 81.96. The opportunity to go “Long” could be created. The most profitable behavior to adopt could be waiting for a small technical correction and going “Long” after the identification of an increasing configuration on On-Hour graph.
Have a profitable week!