USD-JPY Daily Chart with Bollinger Bands

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The market for USD-JPY is beginning to get slower and slower. The Bollinger lower and upper bands have become too close to each other on the daily chart. This is called the Bollinger Band Squeeze.

Why does the market become slow?

It is often the sign of indecision. When there are low selling and buying activities, the market becomes slow and begins to move sideways. The price will go up and down between a resistance and support level which are way too close to each other and get closer as time goes by.

The good thing about this is that when a liquid market such as USD-JPY slows down, a big change in movements is up ahead. A breakout will make the price move quite strongly. This is able to create a chance for the traders to to enter the market and make money.

The question of the day – why the USD-JPY is considered an indecision situation?

Knowing the answer may help you to have a better understanding about the bulls and bears. It can make you enter the market at the right time. Perhaps it doesn’t help you to locate the trade set-ups on time, but the more you know about the behaviors of the market participants, the better you will be able to trade, because it is basically all about the psychology of sellers and buyers. The tools that you use, such as candlesticks, are merely a reflection of the mentality of the market participants. Even the Bollinger Bands, which remind you of a technical indicator tool, simply reflect the mentality of the buyers and sellers.

The answer for the question is based on the monthly time frame. USD-JPY has been strongly trending for a while now. It has been about 5-6 months that it is able to reach a strong, but not too strong resistance level at 124.13. These levels and lines are nothing but the simple limits that the sellers and buyers have in their minds.

When the buyer stops buying, the price will stop going up, and will begin moving sideways or it will go down. This is where the resistance level begins. Later on, when the price begins to reach this level, the buyers stop buying again for the same reason as last time. Only when those reasons change, will they keep on buying and the price will go above the level or even higher than that.

This is what a resistance level means. They form based on the buyer’s decision. It is the same way with support levels; they are formed with the seller’s decisions.

Now during this 5-6 month period that USD-JPY has reached the 124.13 resistance level, you can tell that the price stopped just below this level, which means that buyers have stopped buying USD against JPY. The price hasn’t collapsed yet and bulls still have control. Bears haven’t been able to take control. You can say this from the long lower shadow of the 8-1-2015 candlestick.

The bulls will not give up so easily though, and it is very possible that they will be able to make the price break just above the 124.13 level. It doesn’t really make a difference for us as we will wait for a strong trade set-up to enter the market.

As of now, the Stochastic Oscillator is going down. In order to have a long trade set-up, based on the Stochastic Oscillator, USD-JPY will have to break the resistance level while the indicator is in the overbought area.

If the price manages stay below the 124.13 level for a long time, it will eventually collapse because the bulls will change their minds on holding their long positions. They will then sell to be able to collect their profit as they will come to the conclusion that the price won’t go any higher. Their greed will turn into fear of losing profit they have already made.

They begin to sell, starting a chain reaction. The price will go down and will hit the pending order that have been set on the lower price levels, and the price will collapse very suddenly. It is where it will be able to go short, if the price forms a strong sell signal before it goes down.

EUR-AUD

Is the monthly candlestick for 10-1-2015 formed around a strong short trade set-up that is around the 1.5380 level?

Will there be a strong 100 score set-up if this candlestick closers with a strong and long bearish body?

It would seem that there is a butterfly pattern that has shown up and works as a reversal pattern.

EUR-CAD

The EUR-CAD managed to turn around whenever it reached the 1.5584 resistance level for its weekly chart.

The true question is being whether EUR-CAD will go up to touch the 1.5584 level. This is what those who are still holding their positions ask.

It may, but it will take long time.

AUD-CAD

It would seem that AUD-CAD is forming a long trade set-up just right above the 0.9168 support level for the monthly time frame. Now it is just a waiting game for the candlestick.

The resistance line breakout can confirm that there is forming a monthly long trade set-up.

EUR-JPY

Are these lines considered valid?

Normally, no, due to the fact that when the market moves sideways for a long time and the price movements become longer than the actual consolidation, it means that the market no longer has liquidity, so the lines are then just seen on the charts and don’t affect the reality. Therefore, don’t trust those lines and their breakouts.

It’s the market’s big participants that are moving the prices. When they are out of the game, the lows and highs will be made by the small fishes. Then the big participants come back and begin to move the price the way they want.

NZD-CHF

The NZD-CHF is also forming a long trade set-up above the 0.5697 support level which is the ever support level for this particular currency pair that has been formed on the monthly chart.

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