Technical Analysis of the Financial Markets

USDJPY Technical Analysis – USDJPY Triple Confluence Short Trade Setup


USDJPY Technical Analysis

The Japanese Yen has reacted to yet another day of selling pressure and lost considerable ground against the US Dollar. We are nearing market close and the US Dollar is up almost 0.90% in daily trading.

In reference to my previous analysis here where we correctly predicted the rise from demand and have taken profit as we enter the next supply zone. We are now ready to look for shorting opportunities.

This entry into a strong supply zone has led to short trade set up forming. We have 3 areas of confluence to support this decision as listed below:-

  1. Entry into supply zone as highlighted on the chart.
  2. Hit of the upper descending trend line.
  3. Relative Strength Index approaching over bought conditions on the daily time frame.

These 3 confluences add up to a high probability short with excellent profit potential.

Those who trade USDJPY on a regular basis know that historically this pair consolidates before making a very strong move in either direction. The descending and ascending trend lines are causing a pennant candlestick pattern which generally points to a trend continuation. With the long term trend being bearish and the medium term trend showing bullish conditions we will need to monitor price action around these significant trend lines before making a more longer term prediction.

With the current short set up in mind, an entry at current price at the trend line is the prime entry. Stops above 114.50 should be sufficient to get us out of the trade should the set up fail. The obvious profit target is demand at 110.10 which also coincides with the ascending triangle.

The more conservative trader would benefit from a break of a trend line on the lower time frame to add further confirmation to the trade.

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