That is the question I asked myself at the end of the past trading week and even during the last hours of the American trading session.
The reason for that are the first signals for a deeper correction at least, if not a trend reversal. And those signals are:
- On the W1 time frame the pair has reached a strong support zone around 108.80 – 108.70.
- On the H4 time frame the waves the pair formed to the downside came in threes with a relatively similar height and are very visible in the two trend channels (in red and blue).
- On the H1 time frame during the news on Friday and the volatility that followed the pair formed very typical sharp movements in both directions, which are often the first signal for a trend reversal.
And, in the end, a trading idea for next week:
The trend channel that formed on the H1 time frame has a height of 31 pips and there is a possibility for that to rise to 38 pips. In case of a breakout there could be a rally with the same height. After the pair reaches the limit of that rally I think the pair will retrace for a test of the breakout and it may or may not reach the trend line, according to the theory. That is when it will become clearer whether USD/JPY will start moving to the upside or not.