For today’s technical analysis we have another one of my favourite pairs, the almighty yen!
I've been trading the downtrend on this pair for several weeks now with great success as it has become very predictable, following the same pattern time and time again.
First thing is the channel it has been in since the start of june which it has failed to break several times.
You may have also noticed the pair has been respecting support levels turned resistance very strongly as you can see in the below chart with the 85.10 as it did previously with the 86.20 price level.
There are no apparent signals showing an end to this strong bear market, fundamentally the yen has gone from strength to strength providing plenty more down room for the pair, it continues to make new lows and potentially reaching price levels we haven't seen since April 1995!
So now for the entry!
We have a Fibonacci retracement drawn up from the highs of 20/08/10 to the lows of the 24/08/10
We are now looking to enter on the pullback between the 50% and 61.8% Fibonacci retracement level, price has moved past the 50% fibo level and failed to reach the 61.8% level so we will be entering at the retest of the 50% price level at 84.69.
As for our stop we want to place it a reasonable distance above the most recent major resistance at 85.10 so i am going to place my stop 50 pips away from our entry and 10 pips above the major resistance at 85.20.
As for our take profit we have plenty of room for a further downward move, i will be placing my initial take profit at 83.00 but will again be looking to re-enter on another pullback!
This trade gives us an approximate reward to risk ratio of 3.4 : 1
Hope you've enjoyed reading and if you have any comments please feel free to leave them below
Happy trading, Lee J Brown
http://www.profxblog.com/
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