USD/JPY: Buyers Should Enter Conservatively, Above 103.50 Level

The first formal task as chair of the Federal Reserve commences on Tuesday, as Dr. Yellen takes on the challenge with her first debut speech on the same day. Five years went by, with easy flow of stimulus under Bernanke’s ruling, but now a drastic change of policies is underway. So, the question remians, will this new turn of play be as radical for the US economy as some are expecting? A,nd not only for the week ahead, but for the whole of 2014?

USD/JPY Hourly Chart" title="USD/JPY Hourly Chart" width="464" height="277">

As most concerns about the cutting back on stimulus and bond purchases be aired and dealt with on Tuesday, the next day will see to another announcement by UK’s central bank, the BOE. This said, news and updates from both Yellen of the Feds and Carney of the BOE needs to be given much importance by traders and investors as these are events that may move markets this week.

Let us take a look at the USD/JPY Hour Chart. As clearly illustrated above, a ‘W’ pattern seems to be forming with prices possibly progressing upwards form C to D and a fall in prices is expected once the pattern has completed within the Price reversal Zone (PRZ) marked by the blue box as probable D point. The dollar seemed to have been trading above all three Moving Averages ( 50, 100, 200). Additionally, due to a strong positive correlation of the dollar to both the EUR/JPY and the GBP/JPY and with bullish sentiments dominating the two pairs, the USD/JPY is expected to follow suite. The USD/JPY closed at 102.31 as of Friday and ideal entry for buyers would be preferred to be a conservative one at above the 103.50 level ideally at either 103.55 or 103.60 with profit taking levels being anywhere within the blue box which marks the PRZ zone at D point.

Once the W pattern is said to have completed within the PRZ area, sellers may dominate by driving prices lower from the ideal sell entry prices at 103.10 towards the horizontal purple lines between 102.55 to 102.13 as your possible take profit (TP) area.