The chart setup points to a bearish reversal soon

Selling the Retrace in USD/JPY

Posted Thursday, August 9, 2018 by
Skerdian Meta • 1 min read

USD/JPY made a bearish turnaround by mid-July losing around 250 pips in a few days. In the following two weeks this forex pair made a weak retrace higher but the downtrend resumed last week and it has been unfolding in a more old fashioned way, with smaller retraces higher and bigger moves down.

We have seen three retraces in the last week and today we are seeing the fourth retrace. Yesterday USD/JPY completed another bearish move as it lost around 70 pips from top to bottom.

Today, USD/JPY has retraced some of yesterday’s losses and now this pair is banging its head against the 100 SMA (red). We decided to open a sell forex signal since this moving average has been providing support previously and it is now expected to provide resistance.

The stochastic indicator is not overbought yet on the H4 timeframe chart, but it is well overbought on the H1 chart. Besides, the buyers are having a tough time here below the 100 SMA so I don’t think they will be able to push above it. In this case, the reverse down might come before stochastic becomes overbought on the H4 chart.

Besides that, you can see a descending trend line which has been formed by the lower highs in the last several days. Following this chart pattern, USD/JPY should reverse down from here since the trend line has caught up with the price. For these reasons we decided to go short on this pair, now let’s leave it to run its course.

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About the author

Skerdian Meta is our Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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