ANALYSIS OF FOREX

USD/JPY: Indecision in the market

USD JPY price movement
The USD/JPY was overbought on the 14th of July, and it accounted for the steady decline in the currency pair. The USD/JPY has been fluctuating in the confluence of 134.62 and 136.62 support and resistance zones respectively since June 20, until there was a breakout of the resistance at 136.62 on 14th July to reach a new ATH (all-time high) of 139.14. Looking at the chart, it seems new resistance and support zones were created following the market sentiment. The new support zone is 137.54, but this zone has not been tested multiple times, so we cannot rely on it.

52.55 RSI (relative Strength Index) has also been tested multiple times, and it has been a major point of reversal. Using, the RSI, there is indecision in the market presently. There are possibilities that the JPY continue in the uptrend because the US dollar index is currently at 106.80. Using the candlestick pattern, on the H4 timeframe, the bears were in control in the last 4 hours, but the bulls are gradually taking control of the market which may be in response to the fall in home sales in the United States by 5.4% year-over-year. This typically means that the Federal Reserve may decide to raise the interest rate to strengthen the dollar. This is actually reflected in the US dollar index. Moreover, there was a bullish engulfing spotted, and it is a clear indication of upward movement of the USD/JPY pair. Immediately after the bullish engulfing pattern, the USD/JPY pair reacted by moving in the upward direction, but the trend was halted by an inverted hammer which will definitely create a downtrend.

Using the SMA (simple moving averages) the 20-period SMA is currently making a reversal on the downside to cross the 50-period SMA, which indicated a downward trend.

Market prediction: There is clear indecision, and it will be advisable not to take any trading position until the trend hit the 137.54 support line.

The USD/JPY made a move of about 1.80% on the uptrend as usual

Graph showing USD JPY price movements
Using the 50-period and the 20-period Moving Averages, in conjunction with the Relative Strength Indicator (RSI), a trend reversal is spotted. The 50-period Moving Average crossed the 21-period Moving Average and it was a clear indication of a downtrend. This means that the USD/JPY pair will decline, thereby indicating a sell order. This was supported by the RSI making a divergence relative to the price action, indicating a retracement. This is the time to initiate a sell order of the USD/JPY currency pair.

There was a decline in the USD/JPY YTD (year-to-date) high from the 139.38 zone to a range of 138.00 to 139.00, which is about a 0.33% decline because it is currently trading at 138.48.

Using the H4 timeframe, the new support level is 139.20 because it has not been tested multiple times. The resistance level is 134.75, and it has been tested multiple times. The 20-period Moving Average crosses over the 50-period Moving Average at 135.77 and price action responded accordingly-  in the upward direction.

The RSI showed that the USD/JPY is overbought at 76.52, which indicates a downtrend against the prediction spotted on the Moving Averages. But the H1 timeframe indicated a possible downtrend, supporting the RSI with a support zone of 136.67.

Our simple prediction: Place a sell order on the USD/JPY pair and set your TP (take profit) at 136.67.