USD:JPY – Reversal target in sight

Dollar: Yen looks as though it might become an example of the cluster zone strategy I outlined in yesterday’s Fibonacci projection video

USD: JPY CFD - Daily. Source: CMC Tracker

USD: JPY CFD – Daily. Source: CMC Tracker

This set up has the following features:

  • The Fibonacci analysis has been applied to the sort of strong, high momentum trend that tends to produce the best results for this type of strategy
  • So far, this up trend looks to have an easy to read swing pattern or wave count.  This is also a favourable situation for this kind of analysis
  • Under this scenario we may now be in the 5th and final swing of an impulsive advance. These 5 swings are outlined by the blue numbers on the chart. This whole 5 swing advance looks very like it could be the 3rd swing of a bigger move which is outlined by the black numbers.
  • If things continue to behave according to the text book, the end of the next blue swing would see a correction of the whole advance from black “2”. A correction of this size provides decent risk: reward possibilities for a strategy that can identify and entry point for short positions close to the end of the current swing
  • The Fibonacci cluster zone shown on the chart consists of:
  • 161.8% external retracement of 3 to 4
  • 38.2% projection of the advance from “black 2″ to ” blue3″ beginning from 4

The Fib. cluster zone does not predict that the market will stop at this level. The strategy involves selling if price does happen to make a trend peak at or close to the cluster zone.

If there is a setup, a typical stop loss strategy would be to place the initial stop just above the trend peak that triggers the set up.

About Ric Spooner

Over 30 years market experience - professional trader, broker, director
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2 Responses to USD:JPY – Reversal target in sight

  1. Jaafar says:

    Hi Ric

    Thanks for the post
    Would the same strategy/outlook apply for gbp:jpy


    • Ric Spooner says:

      Hi Jaafar,

      GBP: JPY certainly has the same look about it. I can’t make the same sort of swing count as for USD:JPY though. With GBP: JPY, the corrections have overlapped below previous peaks which makes things a bit different. My thinking on that basis was that USD:JPY looks a more straight forward example.


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