[Euan Jonker]

David / Simon,

Please consider the following chart:


The resistance line have been tested 3 times and so too the support line at the top.
That makes is an upward trend you can bank on... well, at least it's been.
The interesting thing is, that another resistance line has formed, which have been tested three times as well.

Does this mean the upward trend is coming to an end?
Is this a Rising Wedge planning to throw the trend?
What would the key pointers be to look out for here before considering a trade?
Would one be looking for a breakthrough of either line, or merely watch out for reversal patterns?

What are your thoughts on this one?

Euan.

[David Waring]

Hi Euan,

Glad to hear from you again.

First, I think its important to point out here that technical analysis is meant to give you an indication of things, but is not a black and white science where are chart pattern definitely means one thing or another.

That's why it is important that traders always protect themselves with stops, as even the best traders are wrong a lot of the time.

With that out of the way, I think that what you have identified here is indicative of a trend that is weakening somewhat as you have stated. The reason that I say this, as your chart points out, is that the pattern of higher highs which is indicative of an uptrend has started to falter on the hourly.

What is also worth noting here however, is how strongly the market has rallied up to this point, and perhaps more importantly than this, where it is in relation to its major support and resistance levels. If you look at this chart from our USD/JPY Analysis and Discussion Thread, you can see that not only is the market trading above major support, but it is also right at a major resistance level represented by the 108.40 area, which may explain why the market is stalling a bit here.

As far as the key pointers to look for before considering a trade I would point you back to this post on keeping the bigger picture in mind.

Hope that helps. If there is any other questions or analysis relating to the USD/JPY, feel free to post it in the the USD/JPY Analysis and Discussion Thread.

Best Regards,
Dave