October 28, 2008 – USD/JPY Daily Chart
(Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; downtrend lines in red; horizontal support/resistance levels in yellow; Fibonacci retracement levels in grey; 50-period simple moving average in light blue.)
10/28/2008 – USD/JPY – After a remarkable plunge last week in the USD/JPY, a daily chart of which is shown, price action has finally made a major rebound during overnight trading as of Tuesday morning in New York.
Due to widely reported possibilities for Japanese yen intervention as well as a substantial rebound in the Nikkei Index, which contributed to a lowering of risk aversion, this significant rebound could possibly represent the beginnings of a bottom reversal in this key pair. Or it could just be an important correction within the context of a continuing overall downtrend.
At this point it is too early to tell, but traders can look towards significant support/resistance levels for guidance on potential direction. Today’s rebound reached and retreated from a 38.2% Fibonacci retracement level, which coincides approximately with a significant prior swing low (in mid-March). If price continues its retreat, clear support to the downside resides around 90.90, the level of the recent historical low. Any continuation of the current upward correction with a strong break above the 38.2% level, on the other hand, should target the 98.50 prior support region, which coincides with the 61.8% Fibonacci retracement level.
Chief Technical Analyst, FX Solutions
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