USD JPY- 300 - PIP BREAKOUT ON ITS WAY
We have been in a Range setup on the Daily Chart for some time now and with it being above the Outer Uptrend Line, a major breakout could be on the horizon. If the breakout is Bullish, then the major Resistance at 105,43 that ended the 9 month trend would be the first major target. On the other hand, the Range setup is also part of a very long period of sideways movement for the USD JPY which has broken an Inner Uptrend Line in the process. Since major trend changes are normally preceded by sideways patterns and breaks of Inner Trend Lines, a bearish bias in favour of the Japanese Yen might be the better forecast for 2014.
The current Range pattern of the pair can be seen in terms of the large Uptrend that ended in December 2013. You can see the break of the Inner Trend Line and the gradual drift towards the Outer Trend Line that has now taken the form of the Range.
Between the Support and the Resistance boundaries, the pair has been moving by 168 Pips on average inside of this Range. Most of the trends have been volatile, however, with perhaps only one of them offering a stable setup for a trade.
From here, we could see a bullish breakout that carries us back to the Resistance that ended the Uptrend and then to the Breakout Equivalent of the Range. This could last between 7 and 15 days from the start of the breakout.
On the bearish side of the coin, a break of Support would start a new, major downtrend. Trend changes often take place after a long period of market indecision in the form of these Consolidation setups. Several past Support and Resistance price points would be hit along the way, but the main target would be the Breakout Equivalent at 97,85 (See Trade Manual).
So, what direction do we take in this situation? As always, we will wait on the market to make that decision for us. Never anticipate the breakout of a major barrier by using the Smaller Time Frames nor before a clear signal from the Daily Chart is given.
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