Updated: Oct 24, 2019
The US Dollar has been gaining against the Japanese Yen since early this month. Figure 1 shows a 4 hourly candlestick chart. The uptrend maintained momentum and was relatively uninterrupted until a double top was put in place with highs on the 15th and 17th of this month, shown under the green arrows. A double top is an intrinsically bearish pattern and since its formation, the market has been in a consolidatory retracement phase.
Notice the pitchfork drawn in figure 1. It is constructed using the low at point x, the high at y and the low at z. The market has respected the resulting trendlines frequently, especially the half channel lines which are the inner pair of red trendlines surrounding the median line. The first high of the double top occurred on the higher half channel line, and the most recent low reversed from the lower half channel line. This pitchfork has been, and will likely continue to be, significant in the development of price action.
The horizontal yellow lines are Fibonacci divisions of the uptrend ranging from the low at z to the high of the double top. Previous articles discussing the ubiquity of the Fibonacci universal constant and Fibonacci retracements and extensions may be of use for readers unfamiliar with Fibonacci analysis. Observe where the 0.382 level of the Fibonacci divisions coincides with the cyan trendline of the pitchfork. The point of intersection is encircled by a green ring.
Now consider the time elapsed between the initiation and termination of the prior uptrend. From the low at z to the second high, the highest high, of the double top, the duration was 60 candlesticks. In this case, each candlestick represents 4 hours of price action, but candlesticks are an appropriate unit of time for now. 60 is already significant because of its proximity to 61 and 62, which are derivatives of the Fibonacci constant, phi, 0.618. Much more interesting, however, is the result of multiplying and projecting a 0.618 measurement of 60 candlesticks. In order for the duration of the progression and retracement to be connected by a 1:0.618 relationship, the retracement should last for 37 candlesticks, that is, 60 x 0.618 = 37. This point in time is shown by the rightmost vertical dotted white line. Notice that it coincides remarkably with the intercection of the 0.382 level and pitchfork trendline in the green ring.
A continuation of an appreciating dollar over the next few days could see the market rise into the prior resistance of the double top around 108.940. In that case, watch how the market behaves at that level. There could be particularly strong resistance if the market tests resistance at the time when it coincides with the median pitchfork line, shown in the pink ring.
It is a possibility, albeit not an obligation, that the market enters the green ring or an area in very close proximity to it on Friday. If it does, there would be a strong bullish case for a reversal to the upside. Be aware that there is a cluster of price and time barriers there.