For the past 12 months, USDJPY was in a fast downside trend, losing approximately 20%. But once it has reached the very strong psychological level of 100Y for 1$, we have noticed a change in the dynamic. After three bounces at this price (now Major ), the downside trend made a reversal, confirmed by two facts :
- first (PINK 1 on the chart), both the 80 days Moving average and the upper descending have been passed when they were previously containing buyers during the whole wave. This was one indication that the trend was about to reverse.
- secondly (PINK 2 on the chart), the previous top at 104.155Y has been passed too. This is definitely showing that the downside trend is over, by definition.
Now, the USDJPY pair should continue its ascension toward the first and second resistances that correspond to the two next tops.
The short term level to look at closely is 102.80Y because this is the first invalidation level of the reversal. If it is broken, this will show some signs of weakness of the reversal. Obviously, if 100Y had to be broken too, this would definitely mean that the downside trend is back.
For the ones who want to initiate a long position based on that idea, the short term stop should be placed just below 102.80Y (invalidation of the reversal scenario).
Feel free to comment your idea and suggestions !
The reversal we can notice now is only short term in my opinion (for now) ; it would be really confirmed if USDJPY passes 106.80 (Major resistance, plus 200 days moving average as you put it on your chart).
I did not know the Disparity index ; do you think it is reliable as an indicator for trading or it just shows an information about the trend's pace ?