The dollar-yen is bouncing around within a wide range as the Continuation Ascending Triangle has not yet reached the “narrows” of the pattern.

The “narrows” of a pattern occur when you have a self-limiting pattern like a triangle or wedge where the pattern’s range steadily decreases until there’s no room left for prices to move and the pattern is broken.

The range has three major psychological levels within it.  The 92.00, 91.00, and the 90.00.  Finding where prices may bounce while within the triangle pattern can offer some insight into where and which way the pattern may eventually break - or - whether it may break at all.

The “C” level sits at 91.05 while the “A” is at 91.62.  Notice that USD/JPY has made a full 100% retracement back to “C”.

If prices are sent down lower from the 1.000 level, the eventual downside target which would complete the AB=CD pattern would be at 88.65.  This low would also trigger the triangle breakdown through the uptrend line support currently near 89.20.  With an ABCD pattern where “A” and “C” are the high points, the entry would be to buy “D” when prices reach that low.  This would also make “D” a potential downside profit target for the triangle breakdown.

Both charts were created using Autochartist Chart and Fibonacci Pattern recognition software.

With the daily chart of the EUR/USD now transitioned to a sideways market cycle, the uptrend has shown it wants to take a breather.  But NEVER assume that a trend stall = a trend reversal.  With the channel pattern’s uptrend line support, this trend looks like it’s ready to CONTINUE.

The trendline I have been watching closely isn’t just the daily chart’s support - it’s the 240 minute’s resistance.  The 240 minute chart transitioned into a downtrend with the dramatic sell-off on October 26th.  Today the downtrend line resistance of the falling wedge formation has been broken and while I am also watching the 34ema high to CONFIRM the downtrend reversal on this time frame, the first step — the pattern break — has occurred.

Both charts were created with MT4 and the Autochartist Chart Pattern plug-in.

The intraday AUD/USD is in a possible distribution cycle.  The ABCD pattern on the 30 minute chart below will short the set up off the 78.6 level as well as Wave resistance.

Here’s some background on the ABCD Fibonacci pattern.The distance from A to B should ideally be equal to the distance from C to D. The move from B to C here was very strong as it retraced to the 78.6%.  If there was a stronger trend in this market and on this time frame, it’s more likely the retracement would have been more shallow closer to 38.2%.  Since that’s not the case here it’s more likely the trend is weaker on the 30 minute chart.

This pattern originally alerted a buy signal at D so this time frame is in trade management as prices are rallying.  The selling pressure I’m watching for comes as this Fibonacci pattern is running into resistance and possibly a 100% retracement of C to D.

Here’s a possible scenario for the short off the resistance of the ABCD pattern above and the potential 3 Drive pattern’s downside target where a long set up could trigger.

Charts courtesy of Autochartist Fibonacci Pattern Search

I’ve been watching the USD/JPY closely as the Dow and U.S. Dollar do battle because by watching which market the dolalr-yen is moving with allows me to seek which is driving the market.

For those of you who are wondering: It’s still largely the psychology of the Dow that’s the driver which means the Dow is pushing the U.S. Dollar Index around.  This is important to know because of the way economic data and event will be processed by traders and investors.

The swing set up is setting up as prices are once again nearing the resistance of the 34ema Wave low.

The support that prices are currently bouncing from was the Forecast from the “Last complete pattern” which was a Head and Shoulders.  If prices can reach the 34ema low and trigger the swing short, keep an eye on the Forecast support once again which is at the major psychological level of 89.50.

Both charts were created with MT4 and the Autochartist Chart Pattern plug-in.

I’m not an active GBP/JPY trader mainly because it’s, well, you know, CRAZY!  But I’ve been getting to know this pair and studies like the PowerStats have helped.

This is a one month sample so I am looking at the most current volatility characteristics for the pair I hear they call the “twisted sister”.  This is a 24 hour clock on Eastern Standard Time and you’ll see that the highest average movement is between 2:00am and 11:00am which is the heart of the Frankfurt/London?New York overlap.  So I have a good idea of what to expect in term of pip movement and I know when I will see it.  I can also add to this by making sure I keep track of the economic data releases that will push prices towards the upper ranges of probability.

Having said all that, I still need the set up.  Here’s a look at the 60 minute GBP/JPY.

There is a channel down pattern which would set up a short off the downtrend line resistance just above 148.80.  This short is a trend follow as this time frame is in mark down.  The top line of the channel is also lining up with the 34ema low.

“Price movment range” courtesy of PowerStats. Price chart was created with MT4 and the Autochartist Chart Pattern plug-in.

When economic releases approach it’s important to consider the volatility that could accompany the data.  Tonight’s 7:00pm EST CB Leading Index release will likely dictate which of the swing entries I will consider.  If prices are very close to the triggering the swing short on teh 15 minute chart (top) then there is more risk as prices could be more volatile right near the entry price and stop my trend follow out as prices settle down.  However if prices shoot lower from the 0.8993 area the 30 minute chart (bottom) may not trigger at all.  So here’s the question you must ask yourself:

Since you don’t know the future the main issue is your own risk tolerance.  If prices are near the 15 minute trigger you could wait for the more conservative swing short IF you have a low risk tolerance.  If your risk tolerance is HIGH then take the 15 minute entry…it’s the bird in the hand.

Both charts were created with MT4 and the Autochartist Chart Pattern plug-in.

Here’s an ABCD Fibo on the intraday fiber.  The ABCD suggests the possibility of prices to

1) Reach the projected resistance (R) at 1.4940 which is the 1.000 Fibo Extension from the ABC move and…

2) If/when the extension is reached which would be the projected high, the subsequent retracement is plotted on the chart to show the support as prices move lower from the the high (R).

This type of two step (automated) Fibonacci  analysis is considers both the upside extension resistance and essentially offers a more classic Fibonacci retracement series from the “C” support to R providing the support levels after the high is reached.

For more information on automated chart patterns and Fibonacci levels visit Autochartist.com

The support of the channel up pattern on the 240 minute cable has allowed for buying support and a subsequent rally to the 1.6400 level.

The uptrend line support came in at the 1.6300 level as the uptrend began to stall as indicated by the Initial Trend.  In fact, the uptrend on th2 240 has transitioned to a sideways market cycle despite prices finding support and heading higher.  The market cycle flattened as prices sold off on October 23rd.  Since the pair has rallied over 100 pips since the uptrend line bounce, the 15 and 30 minute chart are in a mark up cycle so look for pullbacks to buy into on those two short term time frames.

The uptrend line still strong enough support corrections as the EUR/USD has pulled back to just below the 1.5000 level.  While is break of the psychological level does show that there is selling pressure to the “000″, this is hardly a break that has broken the back up the uptrend.

Look for for a corrective entry off the uptrend line support of the wedge and keep in mind that there is 34ema Wave support extending down to the 1.4940 level.

Setting up BUYS in a major downtrend is usually left to bottom pickers and traders that aren’t already short.

That being said, there’s a certain logic to “too far, too fast” bu the trick is to make sure there is a valid trade behind the entry rather than the illogical thinking of “the market’s sold off too much”.  There NO SUCH THING as too much…not until you see zero anyways.

Th best approach is either very neat term or very long term which means a 15 minute chart or a daily when trying to set up a sell-off buy.

The 15 minute chart here has a channel down pattern that could set up a buy if prices can rally up through the downtrend line resistance and the 1.6350 major psychological level.  Since the time frame is short, your stop loss should be kept tight around the 1.6320 level since if prices can’t maintain support above the “50″ pip you probably don’t want to argue with the landslide!