A Japanese volcano from the air

USDJPY Through the Eye of RSI

It is fascinating how accurately the RSI momentum readings confirmed the Elliott context and signaled the return of the larger degree bull trend on the USDJPY chart. It armed us with enough confidence to change our previous assessment. Let’s see how.

Notice on the weekly USDJPY (below) that the two corrections’ starting points were above 67 on the RSI.  And, when the Japanese yen pulled back, the 50 area on the RSI provided support throughout both triangles. Usually the 38-50 area is where the bears run out of fuel during larger degree complex corrections.

The RSI confirming the corrective nature of the decline on the weekly USDJPY chart
USDJPY weekly: both corrections begun in the sustainable bull phase fund support in the middle of the RSI pane.

But, the weekly was only the background confirming the existence of the larger degree bullish volcano. One timeframe down the daily showed a clear ranging market. The RSI failed to ever get below 34, or above 67, until the July 30 push. At that point RSI had no trouble piercing above the 60+ level. 60-66 would have been expected to provide resistance if the correction was going to develop further. The RSI confirmed the end of the 7 month long narrowing range pattern by breaking the range boundaries and qualifying the following 5-day long setback as a breakout pullback long setup.

RSI showing the existance of the range and marking the end of the lull

Final note: we marked the three overall sideways moving legs down labelled as A, C and E. Check out how the consecutive selling attempts were getting weaker and weaker; finally the third was so flat that it hardly produced a scalpers profit at any daily setup throughout the bear grind. Now you understand our proprietary definition of the triangle from the Glossary section. Take advantage of this technical knowledge.

The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.

About Laszlo Nagyferenczi

Laszlo Nagyferenczi is a day trader, analyst and instructor as well as the creator of the proprietary Context-Momentum-Signal concept. He has authored over 200 blog articles about his unique approach to trading and the Elliott Wave Theory. His clients appreciate his ability to go from the theoretical to the practical i.e. all the way to the actual trade set ups. Originally hailing from Hungary, Laszlo is fluent in English and Hungarian with a long list of education credentials including BA in Economics, Certified Elliott Wave Analyst (CEWA), Certified Adult Educator for T-Groups, Professional Co-Active Coach (PCC) at CTI. The real education, though, has been the trial by fire in the markets, with real capital at risk.

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