Trading opportunities for currency pair: the USD/JPY has edged towards the 121.68 resistance. A break in this resistance is expected before the FOMC convenes (28th October). The target zone is 123.48 – 124.51. This idea will become invalid if the daily candle closes below 120.20.
The last USD/JPY idea I made came out on 19th October, 2015. The USD back then was trading at 119.47 against the yen. The USD/JPY had broken away from the 118.40 support. According to the pinbar that was forming and activated, I expected the dollar to strengthen to 120.60 and to 121.60. The current price is 121.46. We can say that the two targets were reached.
After the ECB convened, the bullish setup on the dollar started to dominate. On Thursday and Friday the candle closed with a large shade. Gearing up for the consequences of the FOMC meeting has already begun.
What’s interesting at the moment?
The USD/JPY has neared the 121.68 resistance. I expect to see the resistance passed before the FOMC meeting. To calculate the targets, we need to make a channel. I’ve put a line through 116.13 and 118.05 and then a parallel line at the 121.56 maximum. According to the channel, the target is 124.51. A projection of the line with 125.85 and 125.27 peaks heads through this level.
We now need to deduct 116.13 from the 121.56 maximum. We get 5.43 and by adding this to the 118.05 minimum we have a single target of 123.48.
I’ve put a cut-out of a Brent daily graph below. Why? Because the patterns are similar. Have a look at how when Brent was up to 54.03, a U-turn took place and oil started to fall due to the dollar strengthening. If the dollar unexpectedly starts correcting, we’ll see exactly the same pattern on the USDJPY. As such, the growth scenario will become invalid with a close of the daily candle below 120.20.
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