USD/JPY (daily chart) as of Wednesday (10/26/2011) has hit yet a new all-time low below 76.00, reaching down to 75.70 in Wednesday’s trading. This bearish price action conforms to a bearish trend channel that extends back to the early April high around 85.50. The downtrend channel has prompted the pair to drop below successively lower support levels, including the key 80.00 and 78.00 levels. Japanese intervention notwithstanding, further downside momentum below the key 76.00 level within the current bearish trend could see price make its way down towards the 73.00 price level, a significant Fibonacci extension. Potentially more likely, however, price could soon see yet another substantial move to the upside, perhaps triggered by intervention activity, that breaks out above the noted bearish channel and targets the key 78.00 resistance level to the upside once again.
(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)
James Chen, CTA, CMT
Director of Technical Research and Education