Identifying Next Move on USDJPY

Identifying Next Move on USDJPY

Where will the USDJPY go next?

Identifying Next Move on USDJPY Forex Pair
Identifying Next Move on USDJPY Forex Pair Getty Images

The 240-minute chart of the USDJPY shows that after moving up to the first congestion dot (Point A), price then moves back down to Point B.  This move was created because after price breaks through a resistance level (red ATR on chart), it must return to test for support.  In this case, although the ATR was flipped from blue to red (Point B), hidden divergence forms on the low, indicating that price would go back up -- in search of resistance to push price down. 

Again, a congestion dot forms (yellow arrow) and, again, price must now test for support.  The anticipated test for support should be around the blue ATR, blue arrow.  This is also confirmed with the Stochastics being overbought and starting to turn.

Identifying the Next Move on the USDJPY​Here's the problem.  Typically, when the 240-minute chart is about to turn and test for support, the lower timeframe (60-minute chart) should confirm what the higher timeframe is identifying.  In this case, the lower timeframe is the 60-minute chart.  Instead, the lower timeframe is showing another potential move to the upside because hidden divergence has formed on the lows.  Additionally, although you would expect the Stochastics to be overbought (in harmony with the 240-minute chart), it isn't.

USDJPY 60 Minute ChartAdditionally, when comparing the highs to highs in both price and Stochastics, both are making new highs.  This pattern indicates a new high could be made on the 60-minute chart, which is opposite of what the 240-minute chart is showing.  Although most higher timeframes will dominant, the lower timeframes normally will confirm the move on the higher timeframe.  In this example, the move is not being confirmed and is the first clue that the higher timeframe may not dominate, at this moment.  Instead, you should wait for the 60-minute to either align with the 240-minute.  Price could retest the congestion dot or even break though the congestion dot before going back to test for support (especially since this is a previous area of resistance).

 

 

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