USD/JPY Forecast May 11, 2012, Technical Analysis

The USD/JPY pair rose during the Thursday session as the 200 day exponential moving average acted in a supportive manner. The pair has been one that has been capturing much of the attention lately as it is a battle between two central banks that are looking to devalue at the same time. It is because of this that the pair has been a bit difficult to trade at moments.

However, at the start of the year we saw a nice breakout at the 80 handle to signal a possible trend change. In fact, this was even after a trend line break on the weekly timeframe that went all the way back to the start of the financial crisis. Slightly before that, we saw the 200, 100, and 50 exponential moving averages crossover as well, which is always a signal that will attract trend traders.

The area that the pair is in at the moment is also the region that hosts the 50% Fibonacci retracement level, and many Fibonacci traders will be paying attention to it because of this. The Bank of Japan has been very aggressive in trying to weaken their currency, so at this point we feel that selling simply isn’t wise as a break below the current area will attract far too much attention by the Bank of Japan.

The hammer form the Wednesday session is a hopeful signs for the bulls, and the Thursday session saw the pair break the top of that range. This is a classic buy signal, except the fact that the area also had a couple of shooting stars last week. This looks consolidative to us, and as a result we are wishing to play this pair in a more conservative manner.

The breaking above the 80.50 level signals to us that the consolidation has given way. The shooting star from the previous week will have relented, and the bulls would drive this pair much higher. The pair looks like the 81.50 level would be the next serious resistance, but we feel that a move higher would have greater potential to rise than just that area.


USD/JPY Forecast May 11, 2012, Technical Analysis

Written by FX Empire