USD/JPY Daily Chart 7:50AM 10/8/2012
Failed breakout: The USD/JPY fell back from 78.85 after the initial bullish reaction to a positive NFP. This shows an inability to break above a key declining trendline going back to April as seen in the daily chart. This failure holds the USD/JPY between the declining trendline and a rising trendline going back to Oct/Nov 2011 when the USD/JPY was at a record low of 75.56. The daily RSI has not been able to escape the 40-60 range, which reflects consolidation momentum.
Trendlines converging: As the market nears the apex where the 2 trendlines converge, we should probably look for a range to be broken for direction instead of the trendlines. To the upside, a break above 79.20 pivot would be an initial sign of bulls building from a bottom. However, a break below the 77.00 handle is probably a sign that the USD/JPY has a chance to gravitate back to the historical low, although that would bring out BoJ intervention speculation.
Congestion, momentum: Even the 4H chart shows a bit of congestion as the market made a higher low and a lower high. The momentum is not clear, as the RSI tags 30, 70, 30, and 70 again. The status quo right now for USD/JPY is a choppy market with deep retracement swings. Therefore, if it can hold the 4H RSI reading above 40 this time and push it back above 60, it is likely shifting to bullish bias.
USD/JPY 4H Chart 7:53AM 10/8/2012
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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