USDJPY: Prices need to break below 110.36
Add BT as a preferred sourceUPON reaching a high of 118.71 in December 2016, USDJPY has been caught within a 600 pips range, fluctuating between the lower 107.95 level and the unrelenting ceiling of the 114.55 level. At the end of September 2018, USDJPY once again approached the well-respected resistance level, and is now experiencing a mean reversion towards the downside.
The range appeared to be broken on the 2nd week of February 2018 after being sustained for a whole year, and bottomed out at 104.55. Shortly after, the bulls regained control with a sharp reversal, whipping prices back to the historical ceiling at the 114.55 level. Hence, we believe the breaking of the range was not indicative of a change in trend, but rather, it is undergoing what is known as a range expansion.
In this case, the Weekly Stochastics Oscillator seems to work extremely well in spotting a mean reversion to the low when the oscillator rises above 80. Stochastics Oscillator is a directional indicator as well as a measure of momentum. A reading above 80 signifies an overbought condition while a reading below 20 represents an oversold condition. Do note that it is not meant to be used in isolation but in tandem with other factors to attain confluence, thereby, adding confirmation to a forecast.
