The USDJPY has been in a steady downtrend since May 2010. With that comes the expectation that a reversal or retracment is possible. However I would caution against thinking it couldn’t go lower….there are no boundaries to what the market can do. As traders it is our job to look for indicators that may be pointing to a potential outcome.
In studying the daily chart we can see that there has been previous support at 86.30 during July 2010 and has now made a new low at the 85.32 area. The pair has now moved back to the 86.30 support area.
Here is where the potential trade setup is shaping up. If we get a break above 86.30 and a retest back down to it, the reverse head and shoulders reversal pattern has potential to bounce the pair back up and could indicate a reversal in the trend. This is just potential….it could just bounce down from here and test the multi-year lows below 85.00. I have attached two images to illustrate the setup, one from the current USDJPY and one from the EURUSD that recently experienced a reversal just as we are anticipating on the JPY. You can see our posts and explaination of the EURUSD here
This potential setup could take a few weeks to develop.
expactations of japan USD is going to be down because at this time Japan goveronment is in the good position….