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USDJPY Bump-and-Run Reversal
Written by: PaxForex analytics dept - Friday, 02 March 2012 0 comments
The USDJPY has entered a steep bump-and-run reversal pattern as visible in this H4 chart. The chart pattern also resembles a rising wedge formation which was induced by the Bank of Japan and their market shock of last Thursday as the vowed to double the size of its balance sheet. This currency pair currently trades close to its support level and is pending a breakdown which could cause the USDJPY to correct all the way down to its 200 DMA.
MACD has confirmed the pattern and surged alongside with prices. Momentum has topped out and now retreated back below its moving average from where we call it lower in order to confirm the sell-off. RSI has reached extreme overbought territory and remained there for an extended period of time. RSI currently flirts with a breakdown from current
levels which should ignite a larger sell-off amid profit taking. We recommend a short position at 99.25 with a potential second entry level at 100.00. We also advise traders to place a stop buy order at 99.75 in order to hedge their position.
Traders who wish to exit this trade at a loss are advised to place their stop loss order at 100.00. We will not use a stop loss order and execute this trade as recommended. Place your take profit level at 97.25. Here is why we call the USDJPY currency pair lower
USDJPY has entered a bump-and-run reversal pattern
Forex pair close to breakdown of formation
MACD indicates momentum dropped below moving average
RSI trades in extreme overbought territory and is pending a breakdown