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Contributors Top Trade Idea For October 20th and 21st – USD/JPY

liquid marketsA US shutdown occurred and after 16 long days, the government was back on its’ feet. Consequently, the debt ceiling was raised with a green light from the President and simultaneously extensive talks of threat to default came about. Additionally, the intense drama has resulted in a temporary 2 to 3 months deal, so what’s next we may wonder but the real question is, what will happen after the short term deal comes to an end?

Only 48 hours after the US government reopened, President Obama gave a 3 minutes speech which was filled with words of hope whilst assuring the public of a balanced approach to a responsible budget. The president also emphasized the need of both growth and fiscal policy to be working in tandem in order to foresee a mutually desired outcome which he sounded confident as usual to be benefiting all.

Despite what seemed to have been presented as resolutions with the show of responsibility and concern by some relevant key individuals primarily in the political arena including the President himself, uncertainty and disappointment still persists amongst the general public with reference to several instilled plans by the government. For instance, the Affordable Care Act also known as ‘Obamacare’ hasn’t given a good first impression as much as it has been rosily promoted prior to its launch, since new registrants are still facing difficulties singing up for it due to technical glitches. Obamacare has also been viewed as a ‘shambles’ by some, including doctors and other experts in the healthcare sector mainly due to the lack of organization they say and rather pricy packages which more than 50% of the general public wouldn’t be able to afford it.

For us traders and based on the conundrums mentioned above, I would like to draw your attention to some possible trade opportunities for the dollar yen pair based on harmonic chart analysis as follows. Firstly, as shown below it would be wise to look at the USD/JPY across three timeframes and by applying the 50 EMA, 100 EMA & the 200 EMA to give us a rough idea on the direction or the overall trend for the dollar.


As you may have noticed above, the dollar is seen to be trading on the downside with ever stronger bearish sentiments particularly on the 1hr and the 4hr timeframes mainly due to the fact that prices reflected by the candles are trading under all three Exponential Moving Average (EMA) lines. For the longer term based on the daily chart, prices maybe consolidating or trading in a range but again the trend maybe favoring the downside as it has begun to be trading below the 50 EMA as well as the 100 EMA and maybe heading downwards towards the 200 EMA.

Once an approximate trend direction of the dollar has been established which I have concluded to be ‘Bearish’, I proceeded to seek for formations of chart patterns and in this case, an ABCD as shown below seemed obvious at the time.


The analysis above is based on the 4hr chart and the probable target downwards with the first TP forecasted to be at the 95.60 area. The 95.60 area as the 1st TP was concluded by having the length of AB to be similar in length to the expected C to D point. Additionally, by pulling the Fibonacci extension tool from B to C, the 127.2% level landed within pips of the expected D point which was a fairly good sign in increasing the probability of the analysis in addition to applying other methods based on significant support and resistance levels. In summary, a sell entry could ideally be between the 97.90 to the 97.70 area with TP’s from 95.60 to any levels within the potential reversal zone area marked by the horizontal blue lines, between the 94.83 right down to the  91.50 area and with the SL preferably at the 98.92 level.

Happy Pipping !

About Kenny Simon

kennysimonKenny Simon is Head of FX Training at Liquid Markets. He is a contributor for the Technical Analysis section of LQD ‘s Blog. Being a fan of the wonders of nature, he  believes that trading in-harmony with the market’s natural ebb and flow could potentially increase one’s success in obtaining Low Risk, High Probability Trades. Besides the technical aspects of his analysis, Kenny emphasizes the importance of understanding and applying Fundamental Analysis, Money & Emotions Management into one’s approach to trading the markets.



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