USD/JPY 4H Chart 12/5/2012 7:45AM EST
Breakout, failure: Last Friday (11/30), the USD/JPY broke above a flag pattern as seen in the 4H chart. Bullish momentum was preserved as the RSI held above 40 and pushed to 70. However, despite these signs of a bullish market, it failed to extend above the 82.83 November high. This failure is followed by a bearish swing so far and the USD/JPY is trading around the 82.00 handle to start the 12/5 US session. The RSI is at 40 again, a break below which would reflect loss of bullish momentum.
Double top? The failure reflects a market that is due for a bit of consolidation or correction. A push below 81.65 should complete a double top, and reflect more of a bearish correction rather than sideways consolidation, or coiling (triangle). In the double top scenario, a breakout projection targets the 80.50 area. Also note the 38.2% retracement (of the Sept-Nov rally) at 80.65, which is reinforced by a previous resistance pivot to be tested as support.
Bullish context: Failure to hold below 82.00, and a push back above 82.40 reflects a sideways, coiling type of consolidation. Whatever the structure ends up to be, the higher degree outlook remains bullish with the 2012-high 84.19 in sight. Only a break below 80.00 should suggest the bearish outlook.
Fan Yang CMT is the Chief Technical Strategist, trader, educator and a of the main contributors to FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.