Ever since the start of this year, USDJPY have been trading inside a horizontal channel. When you look at the slope of the channel, it is neither bearish nor bearish. Now that the year 2017 is coming to an end, here’s the million dollar question: Will we see a break out of this channel in 2018? That’s what we will try to find out in today’s analysis.
If you look at the recent move up (impulse wave which started on 5 september), it ended up as a rising wedge which broke to the downside. Then the spot (USDJPY) dropped near 111.00 which was the projected target for that rising wedge. Technically speaking, USDJPY have also retraced 61.80% of rally from 110.00 to 118.60. Both of these things show that we may be going up from here. For any serious bullish move, we need a strong daily close above 114.00. Then a retest of this parallel channel and new momentum breaking above the previous high. If we get all these things, USDJPY could move to a new range in 2018.
On the other hand, as you can see from chart below, we are in the process of forming “Head and Shoulder” formation. Left shoulder and head are already formed… Now if the right shoulder forms and we get a break of the neckline (red lines), USDJPY could move back down to the bottom of parallel channel (around 107.00).
As it is a daily chart, both bullish and bearish predictions will take some time (probably in the first 2 months of 2018). So be ready to join whichever side wins. If you are a bull, then it is best to wait for the breakout and retest of the channel. If you are a bear, then wait for the neckline break and retest of this H&S. Either way, some big moves are coming.
Happy trading in 2018.