Fundamentally there are several forces at work on this pair. There is a safe-haven demand for the Yen after China’s downgrade of its growth outlook creating some selling pressure while the policy divergence between the FED and the BoJ creates buying pressure. On the daily timeframe it has been trading inside a triangle consolidation pattern since December last year. The next critical data point to be released impacting this pair will be US employment data, which may provide fresh impulses. Meanwhile, on the hourly timeframe, we can see the contours of a bearish Bat pattern developing. Price has comfortably passed the B point and travelled 70% on the way from C to the potential reversal zone (PRZ). With this, the set up qualifies as a trade candidate and it goes on my watch list.
When defining the potential reversal zone (PRZ) for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: a BC expansion (in this case 2000 BC). This defines an extremely tight zone, just 5 pips wide, represented by the orange lines in the chart. There is structure inside this zone (a 4H resistance level), which increases the edge of a reversal. Should price action test the PRZ and reverse convincingly, I would enter short. SL goes 10 pips behind X. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD.
There are 50 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.5!
UPDATE: Price action tested the potential reversal zone without reversing convincingly as it formed two spinning tops in the zone before a spike exceeded X. This invalidated the pattern so I did not enter the trade. Nothing was risked and nothing was lost. On to the next trade!
UPDATE: Price action tested the potential reversal zone without reversing convincingly as it formed two spinning tops in the zone before a spike exceeded X. This invalidated the pattern so I did not enter the trade. Nothing was risked and nothing was lost. On to the next trade!
riskmode
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what kind of signal in the PRZ are you looking for to actually take the trade?
JazzForex
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A reversal candle (towards bearish) like shooting star, tweezer tops, bearish engulfing, etc.
riskmode
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what time frame would this candle have to be on to be relevant? I'm assuming a bearish engulfing candle on the 1 minute chart wouldn't mean much.
JazzForex
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I am looking for a reversal candle on the timeframe where I am looking to potentially enter the trade. In this case the hourly timeframe.
riskmode
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what happened?
UnknownUnicorn168204
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Is exactly what I'm seeing at the moment. Waiting anxiously for this move to play out. Great post Jasper :)
JazzForex
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Thanks for responding. Yes it was an obvious pattern to consider!
HexVex
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You don't need sunglasses on your mugshot to proove what a cowboy you are.
JazzForex
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If you were able to give normal, constructive feedback I might respond to the essence of what you are saying. You are however unable to engage in a normal conversation, nor are you trying to be helpful in any way. Have a good day.