The big drop on USDJPY

The big drop on USDJPY

8 August 2019, 07:24
Dorin Petre Rosu
0
104

The price behaved just as expected on the US dollar versus the Japanese yen currency pair,  fulfilling the drop to 105.80 (the actual extension goes to 105.50)  via the false break of the triple resistance area - see article. Of course,  the question of the now is which is the next step?

USDJPY, D1

As the price finds itself in an impulsive wave that touched the lower line of the descending channel etched by joining the 112.40 and 109.32 highs,  it is natural to expect the start of a correction or at least of a consolidative phase.

The low of 105.50 can be considered as a crossover between the descending and the corrective waves, which translates into the fact that, actually, the retracement has already begun. This leads to assessing its possibilities.

The first scenario pleads for a consolidation limited by the support-turned-to-resistance psychological level of 107.00. This level is important because it marked two important moments in the existence of the current descending trend:

  • The low of 106.77 on June 25, 2019, which represents the end of the first bearish driven phase that constructs the trend (the one that began at 112.40) and at the same time the beginning of the angled rectangle, a pattern that roles as the first consolidative phase of the trend and which ended at 109.32, in the triple resistance area mentioned in my previous article - and that, for a clean chart, I redrew it as a double resistance, being consolidated by the 109.00 psychological level and the upper line of the descending channel.

  • The high of August 8, 2019 (not highlighted on the chart), which was a dismissal of the bullish attempt to bring the price back above 107.00 and render the piercing as false.

So, as long as the price oscillates beneath the 107.00 psychological level or falsely pierces it, the bears are in control.

But if the price went above the 107.00 level, it would still leave the bearish dominance intact, as the lower line of the broadening formation (the extension of the joined March 25, 2019, and May 13, 2019 lows) would act as a fail-safe and repel the bullish endeavor.

In fact, this is the second scenario:  the piercing of 107.00, met by a confirmation as resistance of the broadenings' support or the descending channels' upper line, followed by a retreat under the 107.00 level.

Both scenarios, for the time being,  aim to 103.50 The big drop is still to come.

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