Forex Video Briefing (10/8) – USD/JPY: Breakout vs. Clear-out

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[videojs mp4=”http://s3.amazonaws.com/fxcom-amazon-s3/2014/09/ClassicBreakoutversus1.mp4″]
Forex Video Briefing (10/8) – USD/JPY: Breakout vs. Clear-out

First of all, looking at the 4H chart, we can see that price is already below the 100-, and 50-period simple moving averages. The RSI tagged 30 and has held below 60 showing development of bearish momentum. These point to the breakout scenario, which suggests further consolidation, bearish correction.

However, let’s consider the clear-out scenario first. Price did not clear 108 yet as it is in a mini-consolidation around it, roughly between 107.75 and 108.55. Also, the RSI did not tag 30, showing a lack of bearish momentum in this breakout attempt.

Looking at the 1H chart, we can see that if price breaks above 108.55, it will clear above a near-term price bottom. This would increase the likelihood of the clear-out scenario. However, USD/JPY would still be at the crossroads, and a hold below 109.00 still puts pressure on the downside. A break above 109.20 might revive the uptrend and put pressure back on the 110 area.

If price falls below 107.75, the breakout is on, and the 107.00 handle would be in sight. The 4H chart shows that this is where the 200-period SMA resides, and was a previous consolidation area in mid-September. Below 107.00, the previous 2014-high at 105.44 comes in play as a possible support, as you can see in the daily chart. Perhaps the FOMC meeting minutes during the 10/8 US session will give the USD/JPY a little nudge for a short-term swing which will help us assess whether the current price action is a breakout, or a clear-out.