USD/JPY Trade Idea: Buying on a Dip Toward 97.00 (4/29)

by Admin

Awards 2013

USD/JPY 4H chart 4/29/2013 7:40AM EDT


JPY rebound after BoJ: The Japanese yen clawed back some gains after the BoJ meeting showed that its members has peaked in their aggressive stance on QE. The existing policy will still put pressure on the yen, but it is not surprising for the USD/JPY to show some short-term bearish correction under the 100 hurdle.

Oversold + Support: If we believe the USD/JPY is due for a major correction, then it is probably going to complete a double top by falling below 95.77, which could open up the 92.55 pivot. However if we continue to ride the existing uptrend that has been intact since Oct/Nov. 2012, then we might consider looking for a combination of oversold momentum and price near support factors. As we enter the 4/29 US session, USD/JPY is inching lower toward the 97.00 handle. Around here, we have an area of support/resistance pivot, the 200-4H-SMA, and the 38.2% retracement at 97.11. The RSI is tagging 30. Another couple of tags and it might be done with a bearish correction cycle.

Around 97.00, we might expect some support. Even if it does not result in a bullish continuation, we can still anticipate some push back to 98.00 or higher, or until the 4H RSI gets dragged back to around 60. After that, it will just be a matter of trade management and some luck. The last couple of times the RSI was at or near 30, USD/JPY rallied. I would be prepared for a similar reaction because I think the BoJ policy in place should still run its course in putting pressure on the JPY.