Chris Capre's  Instablog

USDJPY - Looking Set to Extend Gains

For the first time since Jan. of this year, the USDJPY has formed 3 bear candles in a row. Although this may seem intimidating for bulls, I am expecting price to go higher, minimally retesting the current yearly highs at 84.18, probably during the london session.

Why?

Rarely ever do tops create a forex price action appearance like we are seeing on the daily chart, with a strong bull candle, then three doji-like pullbacks. With the high of the first doji printing at 84.18, and the low of the last bull candle at 82.85, in essence we have our short term range and thus our lines in the sand. If price breaks below the lows of the last bull candle at 82.85, then we will expect price to test support at 82.50/60. If this goes, then we would be quite surprised if the bears can push price past 82.00 where we will expect strong buying.

In essence, I'm not sold this trend is done, and am expecting higher highs and an eventual challenge of the 2011 highs at 85.50 so will take any pullbacks to the daily 20ema and 82.00 as a buying opportunity. Only a break and close below 82.00 will change my view on this one.

EURJPY - Breaks Yearly Highs

Truckin along now for 5 bull candles in a row, the EURJPY has just broken the yearly highs taking out a key resistance level at 109.94 and the key big figure at 110. The daily candle closed at 110.32 so we are expecting price to continue higher targeting the next major swing high at 111.51 from Nov. 2011.

We would like to note from a price action perspective every one of the last 5 bull candles pulled back into the range of the prior candle without fail. We suspect price will either pullback to the 110.14 intraday resistance level or the 109.94 levels before new buyers come in. The prior pullbacks could have been caution on the bulls part approaching the yearly high, but now that they have cleared it, we are looking for a breakout retest setup of the aforementioned levels to get long so watch these levels for price action triggers.

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