230130 - USD/JPY - Price Action Angles and Market Breadth
Introduction
In my post Last week, full of confidence I called a significant down-move on USD/JPY. It hasn't happened yet, while USD/JPY price action in the past week has been frustrating, insomuch that it is stuck.
But then; the longer the market congestion, the more violent the breakout.
In times like this when Price Action traders like to quote Munehisa Homma, "There are three market phases; buying, selling, and resting.", I would rather say that the resting period is the busiest time, because that’s when there is time to delve deeper into Price Action;
Recap:
USD-index #DXY is short long term.
JPY is long term.
USD/JPY is short long term.
Therefore:
Price Action Angle
This means:
Market Breadth;
It's a phrase I borrowed from the stock market. ‘Market Breadth’ is an indicator that measures the ratio between the number of advancing stocks, and number of declining stocks.
In FX Price Action analysis, you can measure the range of the rise and decline in each subsequent wave, and the time it takes to cover the range.
If the range is getting larger, the intensity of buying/selling is increasing, and visa versa if the range is getting smaller.
In the illustration, the market breadth is getting smaller. --- I didn’t even put it on the chart to avoid overloading the illustration. In ranging markets this may be an indication of immanent breakout, if the volume rises.
When we apply this to USD/JPY:
Firstly; This is a bad example because USD/JPY is currently a mixed bag of everything. It has no structure at all. Still, Price Action Angles can be deduced:
After the knock-back of 24 January, that down-waves are getting steeper - ever so slightly, and the up-waves are getting shallower - ever so slightly.
Last week I called an open at 130 and a stop at 131.00. This is still valid, and I’m still in the trade. Although now I would call an open at 131.00.
Other JPY-crosses proof more promising. EUR/JPY and CHF/JPY support the idea that the JPY is long (meaning USD/JPY should short, depending on USD) CHF/JPY is even close to breaking its congestion channel.
It’s just USD/JPY that’s holding on.
In my post Last week, full of confidence I called a significant down-move on USD/JPY. It hasn't happened yet, while USD/JPY price action in the past week has been frustrating, insomuch that it is stuck.
But then; the longer the market congestion, the more violent the breakout.
In times like this when Price Action traders like to quote Munehisa Homma, "There are three market phases; buying, selling, and resting.", I would rather say that the resting period is the busiest time, because that’s when there is time to delve deeper into Price Action;
Recap:
USD-index #DXY is short long term.
JPY is long term.
USD/JPY is short long term.
Therefore:
- The breakout will be in the direction of precious impulsive moves down.
- Because USD is short and JPY is long, I was expecting this JPY-pair to produce the biggest move on all JPY-crosses.
Price Action Angle
- Is an analysis method in which the speed of buying or selling in a wave is measured.
For an up-move, we draw a straight line from a swingpoint-low, where a wave starts, to the swingpoint-high, where it ends, and visa versa for a down-move.
We measure this angle with the x-axis
- In up-waves these angle may get steeper as time progresses, which means increased buying-pressure. And visa versa in down waves
- Or if the angles are getting shallower, the buying/selling pressure is waning.
This means:
- In congested zones: that a breakout becomes immanent in the direction of the steeper angles.
- In trends: that the trend is intensifying, and blow outs become more likely.
Market Breadth;
It's a phrase I borrowed from the stock market. ‘Market Breadth’ is an indicator that measures the ratio between the number of advancing stocks, and number of declining stocks.
In FX Price Action analysis, you can measure the range of the rise and decline in each subsequent wave, and the time it takes to cover the range.
If the range is getting larger, the intensity of buying/selling is increasing, and visa versa if the range is getting smaller.
In the illustration, the market breadth is getting smaller. --- I didn’t even put it on the chart to avoid overloading the illustration. In ranging markets this may be an indication of immanent breakout, if the volume rises.
When we apply this to USD/JPY:
Firstly; This is a bad example because USD/JPY is currently a mixed bag of everything. It has no structure at all. Still, Price Action Angles can be deduced:
After the knock-back of 24 January, that down-waves are getting steeper - ever so slightly, and the up-waves are getting shallower - ever so slightly.
Last week I called an open at 130 and a stop at 131.00. This is still valid, and I’m still in the trade. Although now I would call an open at 131.00.
Other JPY-crosses proof more promising. EUR/JPY and CHF/JPY support the idea that the JPY is long (meaning USD/JPY should short, depending on USD) CHF/JPY is even close to breaking its congestion channel.
It’s just USD/JPY that’s holding on.