By: Mike Kulej
On Tuesday, the Japanese Yen experienced a strong rally. All of JPY pairs broke through important supports and moved anywhere from 100 to 300 pips. During the New York session, this move ended and new supports were formed.
As is typical after a one sided price swing, the Yen crosses are currently rebounding, on both the short and the intermediate term charts. Since daily charts remain in a strong downtrend, current up moves should be treated as a corrective move, with probabilities in favor of resumption of the downtrend. The question is - at what price level?
Using the CAD/JPY, we can apply the Fibonacci retracement levels on the last down swing, between the high of 83.50 and the low 78.40. In most instances, corrections reach one of the three main retracement levels – 38%, 50% or 62%. In addition, the previous support is likely to become a new resistance, which is at 81.00 on this chart.
Considering that this corresponds with the 50% retracement level, the 81.00 area might be difficult for the CAD/JPY to get above it. In reality, though, emergence of a candlestick bearish reversal pattern at any one of the Fib numbers might be a selling opportunity. Something to keep an eye on.
