USD/JPY Find Resistance At 61.8 Fib

After a steep drop below the 90 price level, the USD/JPY has begun to find its feet and has recovered a large portion of the previous decline. Despite the positive gains, the current recovery is being hinder by resistance at the 90.26 price level.

This area of resistance falls on the 61.8 Fibonacci retracement level, which is one of the more potent retracement levels and often provides significant support or resistance during a retracement. There are two potential ways a forex trader could trade off this resistance level, one going short and the other going long.

For a short position a trader would look to enter around the 61.8 Fib level and would target one of the earlier retracement levels, such as the 38.2 level, and would use a stop loss that would be slightly above the 61.8 level. Potentially a trader could target as far as the 0.0 level, which is representative of the start of the retracement; however there is much smaller probability that price will eventually reach this level, so traders should adjust their expectations accordingly.

On the long side, a trader would enter a position if the price makes a strong breach above the 61.8 fib level with the initial target being the 100.0 fib level. For this type of trade it is critical that price makes a true break above the 61.8 level and does make a false breakout. In order to assure that a true break has occurred, it is highly suggested that additional forms of confirmation be used

Matthew Cherry
TradersChoiceFX - Forex Broker