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Traders Watching for USD/JPY Bottom
04/27/2011 5:00 am EST
Technical patterns are suggesting that the yen is forming a bottom against the US dollar, and as such, it seems that buying at current levels would be dangerous and ill-advised.
The USD/JPY has entered a former congestion zone that should now serve as support. The zone, 8070-8200, is defined by the sideways trade that took place following the rally off of the panic low in mid-March.
We expect that this drop will result in formation of a wave ii low ahead of 7637 before a much larger advance in a third, or C, wave. Recent doji candle patterns on the daily chart suggest that a bottom is imminent.
Looking toward “the clouds” so long as it holds above the daily Ichimoku cloud, it will confirm our thoughts on a yen bottom:
Daily studies do, however, still show room for additional setbacks before the cloud can support, and as such, buying at current levels is not recommended until we see a bounce off of support on the first chart.
Use the cloud as a reference point and look to buy dips to the cloud top or on a break back above the 200-day simple moving average (SMA) by 83.30.
Ultimately, only a sustained break back below the cloud would negate our constructive outlook.By the Staff at DailyFX.com
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