USD/JPY Completing an ABC Correction

0
98
USD/JPY Completing an ABC Correction

Yesterday (8/5) we saw strong US data help boost the USD. The USD/JPY rallied to 102.90 but failed to challenge the highs around 103. The pair retreated, and as we get started with the 8/6 US session, the usd-yen pair is about to complete an ABC correction, with C=A projection. The projection would be toward 102.18.

USD/JPY 4H Chart 8/6
usdjpy 4h chart 8/6

(click to enlarge)

101.80-102 Support Factors:

Note that as USD/JPY  approaches 102, it will be approaching a very key support cluster. On the 4H chart, you can see that the 102 area has a rising trendline from mid-July. The 50% retracement level is at 102.08.

When you look at the daily chart, you can see that price is currently testing the 200-day SMA as support at the 102.25 area. The moving average cluster in the daily chart is around 102.

In the 4H chart, you can see that the 61.8% retracement level is at 101.85, and the 200-period SMA is at 101.80. On the daily chart, the 50-day SMA is around 101.90.

Finally you can see that price is currently also testing the broken triangle resistance as support.

A break below 101.80 would clear all these support factors, and would be a strong signal that price is back to focusing on the lows around 101.10, then the 100.75 2014-low.

USD/JYP Daily Chart 8/6
usdjpy 8/6 daily chart

(click to enlarge)

Reward to Risk Assessment:

We have established that a stop that stays clear of all the key support factors should be below 101.80, let’s say 101.70. To the upside, the first target for USD/JPY should be 103, with a slightly more aggressive one toward the 103.75-104 area.

This means, for a conservative target (103), the entry will have to be 102.10 to yield a 2:1 reward to risk ratio. (reward: 103-102.10 = 90; risk: 102.05-101.70 = 45). A target of 103.75 would yield 165:45, or 3.6:1 reward to risk. So you can see that if the entry is a little higher around 102.20, the conservative target at 103 yields a 80:55 or 1.45:1, while the 103.75 target yields 155:55 or 2.8:1 R:R.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
Previous Post: Gold (XAU/USD) Awaiting Falling Wedge Breakout (8/6)

SHARE
Previous articleCryptocurrency Trading News: Bitcoin Stays Calm; Litecoin Continues to Slide; Darkcoin Rises
Next articleGBP/USD Falls Back after Soft Manufacturing Data
Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.