Business-Insider

by S. Wade Hansen

The USD/JPY looks like it may be heading to 100.00.

The forex market has been consolidating this week as traders await the Bank of England (BOE) and European Central Bank (ECB) interest rate decisions. However, while the forex market has been consolidating, the U.S. stock market has been hemorrhaging losses---causing traders to evaluate their risk outlooks. You can see on the chart of the VIX (the CBOE volatility index) that volatility continues to climb.

VIX (CBOE Volatility Index)


As volatility climbs higher and higher, more traders are going to continue unwinding carry trades and offsetting their short JPY positions. This should boost the value of the JPY.

You can see on the chart of the USD/JPY that the pair has been consolidating into a nice pennant.

USD/JPY Pennant


Pennant formations like this usually result in the currency pair resuming its previous trend. Should the USD/JPY break down below the uptrending support level that has formed during the past few weeks, it will most likely continue downward a distance equal to the distance the pair moved down before the price pattern formed. This would constitue a move down to the 100.00 level.

Watch for the reigns to come off tomorrow after the big interest-rate announcements in Europe.


To learn more about price patterns and how you can use them in your trading, check out the following three lessons:

- Price Patterns (http://www.pfxglobal.com/index.php?o...k=view&id=1956)

- Continuation Patterns (http://www.pfxglobal.com/index.php?o...k=view&id=2063)

- Reversal Patterns (http://www.pfxglobal.com/index.php?o...k=view&id=2065)

Each lesson has extensive explanations and in-depth videos.
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