- Daily: The USD/JPY has been very choppy. You can retracements from the current intermediate downtrend have been strong, but have picked up the current short-term bullish action to be indicative of a larger scale bullish mode. (Refer to Daily Video Technical Update 2.12.2010-second pair; and Weekly Technical Update 2.12.2010).
- What are some clues that the current rally is it – that this is the rally to begin a new bullish mode? We don’t even have a lower higher bottom yet, though this would be a great confirmation.
- Other clues can be seen in both the strength of the bullish price action. Another is that it was rejected at 88.50 which is a 78.6% retracement (not shown here).
- The stochastic is also an important clue. Here I use a 25-period slow stochastic to capture the intermediate trend during longer-intermediate term ranging action (market has been in consolidation mode since Sept 2009). In the intermediate term, the market is still in consolidation, unless the stochastic dips after it goes overbought, but fails to reach below let’s say 50. That would be a bullish confirmation. For now, we have bullish signal in the short-intermediate term.
- 4H: The 4H time-frame also gives us confirmation for the short/intermediate-term bullish outlook.
- Here the stochastic period is 25, and we can see a very strong clue here. You can see that the stochastic has fluctuated widely between Jan 19 – Feb 4. This is indicative of ranging action. However, note that during the Feb 5th decline, the stochastic stayed above.
- This is the new bull’s clue indicative of a new bullish cycle in the short/intermediate-term.
- Daily: Looking back at the daily, we see some short-term targets within the consolidation mode. 92/92.50 is an important resistance area. If that is broken, the market still has to break the 94/94.50 area to signal a long-term bullish outlook outside of the current consolidation context.
- This would be a completion of a head and shoulders.
Fan Yang
Currency Analyst
Commodity Trading Advisor
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