Chart of the Day: Dollar-Yen Rebounds But Rising Flag Signals Selloff Ahead
Investing.com | Mar 25, 2019 10:57
Last week, the dollar since the dollar-yen pair hit the 112 level on March 5. In the following two weeks, the pair proceeded to develop a Head & Shoulders continuation pattern, whose completion accelerated its drop.
USD/JPY
Today, the dollar is on the rebound. However, we consider this a correction within the downtrend, as manifested in the very clear descending channel. The pattern in which the dollar’s freefall paused is a rising flag, bearish in the downturn, as short sellers repurchase contracts to return to their brokers.
The downside breakout would be the trigger for another selloff, as desperate supply lowers offers to find willing buyers. Note that the rising flag’s formation is consistent with an upward correction from the lower boundary of the descending channel. Also, the flag conforms to the chart, with the previous trough providing resistance to the flag’s continuous rise, turning it into a bottom.
h2 Trading Strategies/h2Conservative traders should wait for a decisive downside breakout, followed by a pullback to retest the pattern’s integrity, with at least one long, green candle engulfing a red or small candle of either color.
Moderate traders would wait for the breakout, and maybe even for the return move, for a better entry, but not necessarily to ascertain the trend’s consistency.
Aggressive traders may short at the upper boundary of the flag body, where the price reached 110.25.
Trade Sample
- Entry: 110.25
- Stop-Loss: 110.50
- Risk: 25 pips
- Target (NYSE:TGT): 109.50
- Reward: 75 pips
- Risk-Reward-Ratio: 1:3
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.