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USDJPY, the trend is up but it is not the right time to buy

USDJPY Tech analysis by Simon Kazinsky on 20:56 November 25, 2014 EST



USDJPY has made aggressive advancements over the course of the second half of this year. From July the Japanese yen has devalued 18% against its American counterpart in the midst of the huge monetary expansion experiment currently underway in the Asian country also known as Abenomics.

From a technical perspective USDJPY is due for a pause or a correction now as it is overstretched on the daily chart as seen above. A price of 122 in the following days would put the pair at its maximum divergence from its supporting moving average on this chart.

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As we can see on the 2h chart the pair has not even broken its short term supporting moving average, so entering short would now be picking a top which, as we know, is usually a bad strategy. A break below the given moving average would be the first signal of weakness.

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On the 8h chart we can see that, at present, there is another support at around 110 but that mark should go up rapidly as the supporting moving average finds its way to catch up with current prices.

Retail traders are now long the pair by a 56/44 ratio which feeds well with the thought that the bet is single sided and a correction could be imminent.

In all, the trend is undoubtedly up and should not be fought but with USDJPY overstretched on the weekly chart it is probably a good idea to pick profit on some of the long positions and wait for a significant dip to hit a supporting moving average to resume adding to longs.




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