September 27, 2013 – USD/JPY (daily chart) has been mired in a sideways consolidation for at least three months now, unable as of yet to extend the bullish trend that was previously in place from September 2012 to June of this year. Since the multi-year high of 103.72 was established in late May, the currency pair plummeted by almost 10% before recovering partially and embarking on a series of consolidation patterns.
From late June to late August was a slightly downward-sloping parallel channel that brought the pair down to its 200-day moving average, which was respected as support on at least two occasions. After price broke the channel to the upside in the beginning of September, it made a failed attempt to rise above the key 100.00 level, only to fall into the current triangle pattern.
As this triangle has developed for the past several weeks, price volatility has progressively contracted, and the pair should be poised for a potential impending breakout. On an upside breakout, the key level to watch continues to be 100.00, a breakout above which should target the 103.00 resistance level. A downside breakout should meet strong support around the noted 200-day average, followed by the 97.00 support region.
James Chen, CMT
Chief Technical Strategist
City Index Group
Forex trading involves a substantial risk of loss and is not suitable for all investors. This information is being provided only for general market commentary and does not constitute investment trading advice. These materials are not intended as an offer or solicitation with respect to the purchase or sale of any financial instrument and should not be used as the basis for any investment decision.
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