USDJPY Technical Analysis: Cup and Handle Formation


- Weekly price chart suggests USDJPY currency pair is in a bullish trend

- Cup and Handle formation build in progress on Daily price chart

How does the Japanese Yen look against the American Dollar on a wider picture?

To get a sense of a bigger picture and understand the trend for USDJPY FOREX pair, let us first explore the weekly price chart for the currency pair. Since early September of 2019, the pair has risen from the multi-year lows at 104.64. This low point seen recently during the week starting 26th August, was earlier reached in mid-March 2018 and before that during early November 2016, thus creating a strong supply zone or else Support area/level (horizontal line at 104.64). Bubbles indicate historic reversal points. Weekly chart suggests a following up-trend in play at the moment. The USD is outweighing the Japanese Yen at the moment. Whether present fundamentals are strong enough to create a similar steep bull-run as seen during 2016 (first green upward arrow in the chart) is only to be seen in next few weeks to come.


Is daily trading outlook for USDJPY also bullish?

In the daily price chart we can focus on last two months of 2019, we see a big ‘U’or else a Cup formation completed. So 109 highs reached on 1st August was hardly sustainable and Yen started getting stronger against the USD. USDJPY plummeted to multi-year lows of 104.50 reached on 26th August (seen in weekly trading analysis above too). With strong support coming from previous levels, USD soon soared back to 108.4 levels this week. Last two days (19th and 20th Sept) saw red candles forming, confirming completion of recent bull trend on Daily chart and a possible Handle formation in play for next few trading days. Next couple of weeks we can expect USDJPY to complete the handle formation, so few more bearish daily candles followed by some bullish candles ( as indicated by the purple arrows ).

What’s in for the intra-day traders?

FOREX offers enormous intra-day trading opportunities to institutional as well as retail traders. To study these intra-day opportunities, one needs to further bottle down into shorter time-frame charts like 4H, 2H, 30 minutes and possibly even 15 minutes price charts. Force-fitting trading patterns or else indicators, is not the objective, however financial markets follow certain similar patterns on a regular basis. These patterns and indicators can be applied to these shorter time-frame candle movements too, and future moves predicted to set Stop Losses and Targets.

In this article, I wanted to take an opportunity to explore the ‘Cup and Handle Formation’ in detail. Many a times, these patterns appear to work in hind-sight, so we can look at historic charts and apply the formations. Will we see the Handle complete for USDJPY on Daily? Will the ‘Cup and Handle Formation’ complete for this price chart? At Contrawiz let us monitor the currency pair for coming few days / weeks and assess together.

For similar interesting analysis please review our other posts

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