Hello, dear traders. Today we are going to talk about the US dollar against the Japanese Yen trading pattern. As we can see at the chart the currency pair is consistently rising since the beginning of September and has reached the resistance at 109.43. There is a steep rising trend line indicating the strong bullish mood in the forex couple, which drove prices to 6-year fresh peak. All the Simple moving Averages are below prices and that further supports the upside continuation scenario, however the bulls prevail for almost a month now and the upward structure seems overextended. The question here is, bullish bias is going to continue?
Furthermore, at the below chart we can see the daily volumes of futures and options traded on the Chicago Mercantile Exchange. We can see that the volume of trading has been decreasing while prices have been rising to fresh highs that suggest bearish divergence as the volume does not follow prices. The bulls’ power is fading and eventually we will reach a point of reversal.
Looking at the Oscillators the OsMA was at previous peaks line but now is falling towards neutral line bearishly diverging rising prices. The Stochastic was in overbought territory but now is falling also providing a diverging sign. Finally, the RSI (14) is in the overbought zone suggesting that the prices are likely to stop the rising path in the medium term. Therefore, the oscillators suggest that the USDJPY is likely to reverse sometime soon. In our view, the currency pair rose substantially over reflecting investors’ fundamental expectations for both the major currencies, the technical indicators confirm that by being overbought of providing bearish divergence signals. We would expect a corrective move initiation either at the resistance at 109.43 or could even go to 110.70 before a retreat comes. Going long at the moment it is highly risky while we would prefer to see a reversal pattern at the sohrter term before we go short.
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