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USD/JPY Correction Set Up

Posted by Raghee Horner in February 5th 2010  

I have to be frank…I really was not expecting the degree of movement we got today the day before NFP.  Sure you roll with it, but after a while there is usually a rhythm to the market and today definitely had a beat all its own.

The USD/JPY sold off hard with the equities disintegration as the yen rallied against the dollar as is the typical movement.  The USD/JPY and Dow have excellent directional correlation.

With the mark down cycle firmly in place on the 30 minute chart, the 34ema low is an ideal place to take advantage of a bounce and short into upward momentum.

Add in the Fibonacci Retracement levels - as I often will do for secondary confirmation - and the resistance area widens a bit.

Notice that the 38.2% comes in before the 34ema low and the 50% is just below the 34ema high.  This opens up two swing set ups.  First would be the shallower retracement to the 38.2% and the second would be a higher bounce nearing the 50%.  I do like the 38.2% as it also takes advantage of the 89.50 major psychological level.

One thing that can be done here is analyze the price movement range for potential volatility.  This suggests that on the 30 minute time frame the 89.53 level will be resistance.  This works well for the 38.2% swing short entry.

Both charts have the MT4 chart pattern plug-in from Autochartist and the graph is courtesy of PowerStats.

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Filed under: Chartology