Is the Top In ?? Time For the Monthly Reversal ?This is a follow-up to the idea I presented last month regarding this pair being severely overbought on longer timeframes. The existing price action strongly suggests that a downward cycle is imminent. Here's my rationale.
In the past three weeks, each weekly candlestick has initially surged to new highs before experiencing a significant selloff in the second half of the week. The 166 level is proving to be a key High Time Frame (HTF) resistance level, with sellers ardently defending this level. See the chart below for the visual
When we look at the daily charts, reversal indicators become even more prominent. It appears we have now entered a distribution cycle , a sideways movement often seen following a long rally in price.
This cycle is more easily identifiable on shorter timeframes, but its appearance on a daily chart strongly points to an impending downward move.
The daily charts show the distribution trading range between 164.5 and 166.3. A decisive break and close beneath 164.5 would serve as a conservative entry point for traders.
Additionally, my TRFX indicator has just signaled its first daily sell alert in quite a while. This is a high-probability indicator for me and prompts my re-entry into the market.
There's a possibility for a minor rally up to the 165.5 level, but I anticipate a substantial sell-off to occur, targeting the 158.7 level which marked July's low.
This trade is expected to unfold in the weeks leading up to the next Bank of Japan (BOJ) meeting. The potential drop could provide an entry point for buyers eyeing another upward push.
However, given the extreme overbought conditions evident on the monthly charts and now we are approaching the last Quarter of the year, we might see a deeper correction down to the 150 level, a prior monthly high, which could spark profit taking over the coming months. This becomes more likely if the 158.7 level gives way.
I will hold this trade as the profit potential is huge and given the reasons above anyone buying at these highs should be very cautious as the higher timeframes looking to be pointing to large players positioning for a downward move.
Let's see how it unfolds.
