A relatively well-formed triangle consolidation pattern on the EUR/JPY daily chart, as shown, appears on the verge of being broken to the downside as of Thursday morning in New York. A true breakdown and close below the bottom border of this triangle should help identify this formation as a potential downtrend continuation pattern. This potential downtrend continuation, however, would not truly be confirmed unless price broke down below the 113.60 region, which is the bottommost point of the triangle and a multi-year low in the pair.

UPDATE: As of Thursday afternoon in New York, price on this pair has retreated back up, failing to make a bonafide break below the bottom border of the triangle. This setup will continue to be monitored for any subsequent pattern breaks.

As of Thursday morning in New York, price on the USD/CAD daily chart, as shown, continues to strengthen significantly and adhere to the steep uptrend support line that has been in place since late September. The continued strength of this pair hints at a possible targeting of the double-tested 1.3000 level, the recent 4-year high in the pair. Before that level is potentially reached again, however, a significant correction should occur. If this correction happens to break the aforementioned uptrend support line, price could subsequently target the 1.2100 region to the downside, a significant prior support/resistance level.

As of early Wednesday morning in New York, despite a somewhat strengthening dollar in other major currency pairs, the USD/JPY (a daily chart of which is shown) has exhibited continued bearishness in line with its steep general downtrend. Technical signs are pointing to further bearishness in this pair, potentially targeting the 91.00 support region to the downside.

UPDATE: Bullishness off the uptrend support line has continued as of Tuesday afternoon. Still, however, we are watching for any possible subsequent breakdown of dynamic uptrend support.

UPDATE 2: As of Wednesday morning in New York, the bullish bounce off the abovementioned uptrend line has accelerated. No breakdown has occurred as of yet, obviously, but any subsequent breakdown could still be a key trigger for impending bearishness in this pair.

As you may know, I have been working closely with Steve Nison, the trader who originally introduced candlestick analysis to the West from its origins in Japan many years ago. There are numerous subtle nuances within candle charts, and when combined with Western technical analysis (i.e., support/resistance, trends, patterns, indicators, etc.), the combination can potentially be extremely powerful. Learn in this free webinar how to identify these combinations to find high-probability forex trading opportunities.

The webinar will be held on Thu, Dec 11 2008, 14:00 GMT (9:00 AM U.S. Eastern Time). For more details and to pre-register, please click on the following link: http://www.fxstreet.com/live/sessions/session.aspx?id=af1b7dba-7a7a-43b7-b7f0-e9cf5f49bf62 . Thank you, and I hope to see everyone there!

James Chen

As of early Tuesday morning in New York, the bulls on the EUR/USD daily chart, as shown, have been resisting the bears, as might be expected from a support/resistance perspective. Noted on Monday’s Chart of the Day (please click here to view), price has been approaching a confluence of support. These support factors are notated by the three converging lines on the accompanying chart. Barring a fundamentally-driven breakdown below this strong support, there is a technical bias towards an eventual move back up to target the 1.3050-1.3100 region once again, which represents the approximate top of the current consolidation.

As noted on last Wednesday’s Chart of the Day (click here to view), the USD/JPY was technically bearish, and was poised to continue its entrenched downtrend after just a minor upside retracement. As of early Monday morning in New York, this outlook appears to be coming to fruition as price has clearly respected the downtrend resistance line, plummeting two big figures all the way down to strong support in the process. Monday’s price action thus far has hit but not yet broken this support at 93.50. As noted on Wednesday’s Chart of the Day, if this support is broken convincingly, the next major target to the downside could potentially be in the 91.00 region.

UPDATE: As of early afternoon in New York, price has broken tentatively below the key 93.50 support region.

- James Chen