In recent times, one of the flight-to-safety trade in currency markets has been USD/JPY. When the market uncertainty goes up, JPY goes up against USD.

USD made an all time low of 75.57 on October 31, 2011. It again came down to within 50 PIPs of this low in early Feb ’12 before rising up to 84.178 on March 15, 2012.

Since then it has generally drifted lower making couple of imperfect ABCD patterns.

First ABCD move down

A1 (21-Mar-12) – B1 (03-Apr-12) – PIPs: 253.6
– B1 was in a support zone formed by the high of March 2nd.
B1-C1 (04-Apr-12) – PIPs: 137.8 – 54%% retracement of A1-B1 (within 50% Fibonacci level)
C1-D1 (16-Apr-12) – PIPs: 263.6 – 104% of A1-B1;
– D1 was also in a support zone formed by the low on March 6th.

Second ABCD move down

A2 (04-Apr-12) – B2 (16-Apr-12) – PIPs: 263.6
– A2 is same as C1 and B2 as D1
B2-C2 (20-Apr-12) – PIPs: 148 – 54%% retracement of A2-B2
C2-D2 (09-May-12) – PIPs: 234.8 – 89% of A2-B2 – not a perfect ABCD
– D2 was within 50% and 61.8% retracement of the move up from February 2nd to March 15th.

Since May 2nd then the pair has been slowly forming a short shallow saucer pattern. The break out will be when the pair goes above the March 2nd high of 80.12.

This is still an emerging pattern and seems to be on shaky ground. D1 level of last ABCD pattern – which acted as a support level before it broke – is now acting as a resistance level. The pair needs to close convincingly above it for the pattern to become viable. Yesterday, USD/JPY it briefly traded above this resistance but then closed in the lower half of the day’s range.

Today, it fell below that resistance level and breached the low of yesterday making yesterday a short term reversal candle. If USD/JPY does not go above today’s high then it may retest the lower bound of the saucer again.

Update: Price action of USD/JPY in the wake of the news from ECB, was bearish thus confirming the short-term reversal candle of yesterday and negating the emerging saucer pattern.