USD/JPY - Daily Candle Chart 5th March 2009

USD/JPY - Daily Candle Chart 5th March 2009

Well, we are inching closer to the target at $100, but very slowly, and what is causing me some concern is the body of each candle is starting to decrease which is not a good sign. Tuesday’s candle was a nice wide spread up bar, Wednesday’s body has narrowed, and today ( although it is too early to say) looks as though it may be doing the same – premature I know, but a worrying sign. The reason it is important is that in a typical rally, whether up or down, we are always looking for wider spreads in the move, which signify momentum or effort if you like, and is one of the key signals we use with volume in volume spread analysis to indicate whether a move is running out of steam, or is likely to continue for some time. With narrowing spreads in an up move, this suggests that the bulls are losing control and the bears are starting to slow the rally down down, and if the selling volume is significant, then it could stop or reverse the rally. Given this is the case I would suggest you close your stop losses up tight for current positions, and for new positions I would wait for the above target to be met and exceeded before opening any new positions. Alternatively if there is a decent correction, then I would look for buying opportunities on any temporary fall, provided these do not penetrate the moving averages which are all pointing higher at the moment.

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