USD/JPY Capped By 100.50

USD/JPY (daily chart as of September 11, 2013) broke above its medium-term downtrend line (bold blue line on the chart) on September 2 with a relatively small bullish candlestick, which was considered a weak breakout. Normally we prefer a much stronger breakout with a long bullish candlestick and follow-through price action to confirm the break.

Price has been capped by 100.00/50 for seven trading sessions after the weak breakout. The candlestick of September 6 had a long bearish body that wiped out all the gains of the previous three small candlesticks. This did not fit the characteristics of follow-through action. In addition, Japanese yen’s recent depreciation has not been confirmed by the general direction of the EUR, GBP, AUD, and NZD, which have been rising.

However, the MACD is making a bullish crossover above zero, and the RSI is rising well above 50. Once again, there are conflicting biases indicated by price action (potentially bearish) and the momentum indicators (potentially bullish). More confirmations should be required for any trading action.