USDJPY overbought but buyers still in control

Trending markets can get overbought and stay overbought. That is the case with the USDJPY.

It has been up 6 of the last 7 days (and up strongly in June), and the RSI on the daily is overbought (see video). However, trending markets can get overbought and overbought and more overbought. The overbought oscillators can feed that trend as traders who try to sell get stopped out when overbought conditions continue to run higher (and higher and higher). Traders can use the RSI as a secondary tool, but defining risk at a hard technical level allows traders to define and limit risk against a level (or area).

Having said that, the pair has a topside channel trend line on the hourly chart near 145.07 (see hourly chart below). Also, the low of a swing area on the daily chart comes in at 144.98 (see daily chart above). Those two technical target levels along with the natural resistance at 145.00 may give traders looking for a level to put on a counter trend trade, a level to define and limit risk (i.e. lean against). If the price goes above 145.07 with momentum, GET OUT.

Until those levels are reached, however, the buyers and the trend remain intact.

This article was written by Greg Michalowski at Source