USDJPY & GBPUSD Forex Analysis

Hello Forex Traders!

The most eye catching price development yesterday happened with the JPY pairs. Whereas today the AUD bullishness has been dominating the scenes, after the interest announcement confirmed the same rates for another quarter.

Before we dive into the JPY currency and its crosses, please take this as a friendly reminder that this week will see further interest rate decisions on the CAD on Wednesday and EUR & GBP on Thursday, and the NFP (!) and unemployment rate on the USD on Friday. The first week of the fall trading could start with rough waves for us Forex seaman.

If you are interested in viewing a general analysis of the monthly charts, where candle sticks and chart patterns are the primary focus, please take a look at the article „Long Term Forex View“.

USDJPY

The massive USDJPY triangle is breaking as we speak. The chart pattern is in a majority of the cases a continuation pattern of the previous uptrend. A break of the triangle to the upside should be very appealing to trade for all break-out trend following Forex traders.

3- 9- uj d

Here are some clues the triangle is being broken:

1)      Daily candle above trend line

2)      Daily candle has a good size and close right at high

3)      Daily resistance at 99.05

4)      Last week’s high

5)      Yesterday’s high

Obviously there is a lot of momentum pushing this currency pair higher. Let us take a look at a lower time frame, such as the 1 hour chart, to see more information on the current move.

a)      Currently 3 waves have been completed without divergence

b)      Wave 1 is 170 pips and wave 3 is 180 pips, therefore making wave 3 by definition not the shortest (which is in line with EW rules for wave 3’s)

c)       Therefore, the chances of one more push to create divergence between wave 3 and 5 is high

d)      Currently the 3rd wave hit the -618 Fib target of the 1st wave (618 retracement) à both phi numbers

e)      If this is a 4th wave and a wave 5 is coming, then the usual spot for wave 4 to send is the 236 / 382 / 500 Fib retracement of wave 3 with a target at the -0.272 and -1.000 confluence at 100.20.
3- 9- 2013 uj 1 hr

f)       Once that happens, a 5 wave sequence has been finished and an ABC correction can take place

g)      The ABC correction should bring the currency back to a Fib of the first 5 waves up for more upside

h)      Any of the Fibs could be the bouncing spot for more upside

  1. a.      If this a wave 1 – 2 structure usually speaking a deeper correction happens à 618 / 786
  2. b.       If this is a zigzag correction any of the 3 Fibs 382-500-618 can be it

Be aware especially of last month’s high and the round psychological number of 100 and the weekly top at 101.50, which can easily act as resistance levels heavy and strong enough to stop the momentum for a bit of a retrace before maybe continuing.

3- 9- 2013 uj 1 hr 2

GBPUSD

The USD strength against the Yen seems to be setting up, just as the USD index was showing in our analysis last week. 

The GBPUSD has been quite interesting this year:

1)      It broke the major weekly wedge

2)      It broke with a impulsive down trend and moved 1,500 pips from 1.63 to 1.48

3)      It then stalled and has gone sideways for 6 months

Will the USD strength be strong enough to push the Cable back in a long-term down trend?

Will we see this currency pair move down to the lower 1,40 and maybe 1.30 price territory?

Good questions!

If this indeed were to happen, then I want to see a break of the following first:

1)      A break of the up trend channel on 4 hour and daily charts

2)      A break of the daily support level at 1.5420

That would be the first clue that a major fall could be setting up.

Considering the fact that the GU is still in a uptrend channel, longs might be of interest to some of you. Be careful with longs when approaching the 1.56 and 1.5650 resistance areas. Just like the 1.57 top. Personally I rather search for longs when the major top of 1.5750 is broken and the currency pullbacks and uses the broken top as a support.

3- 9- 2013 gu d

Thanks for reading and sharing!

Please read more on poragmming yourself and here on defining entries.

Hope you all had a great trading month in August and wish you an even better on in September!

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Chris is the head of the mentoring program and trading room at Winner's Edge Trading. He has a passion for technical analysis and helping Forex traders achieve their goals in trading. Chris has been trading for almost 10 years and is most fond of the Double Trend Trap (as a strategy), moving averages (as an indicator) and Fibonacci (as a tool).

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