(Price on 1st pane, Slow Stochastics on 2nd pane; uptrend line in green; downtrend lines in red; horizontal support/resistance lines in yellow; 50-period simple moving average in light blue.)

8/12/2008 – USD/JPY – With recent dollar-strengthening, price on the USD/JPY daily chart, as shown, has reached up to approach resistance at the uptrend line (in green) that has defined price action since mid-March. This line originally served as support before being broken down in June, and has since acted as resistance.

Oscillators like the displayed Stochastics have been in a prolonged state of overbought and are pointing down once again, possibly hinting at a tentative exhaustion of recent upward momentum. In the event of a turn back down, major support resides at or near the significant 108.50 level that price broke just last week. Resistance, on the other hand, should continue to reside around the green uptrend line.

James Chen

Chief Technical Analyst, FX Solutions

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