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I’m going to get started today on the US Dollar versus the Japanese Yen [USDJPY]. Starting here on the Daily Chart, over the past several weeks, we have been discussing the support that we have found within the range, highlighted in the red box at the top right-hand side of the chart. And if we look up here, we can see, going all the way back into the beginning of February, we’re looking back into February 3rd, February 4th, the first time we challenged this blue-shaded area at the bottom of the range or the red box.
Then it started bouncing up, came back down, challenged it again. Bounced up. Challenged it again. And we’ve seen multiple challenges of this support highlighted in the blue-shaded area over the past several weeks. We go all the way into the current timeframe, the past four or five days have been also challenging here into that blue-shaded area at the bottom of the red box.
The bottom of that blue-shaded area and the bottom of the red box sit right at 101.15, you know, give or take five or six pips at each one of these levels, but we could see 101.15 seems to be about the place where most of the price action has come to a stop or found support over the past couple of months, going back to February. And really, only if it gets out and breaks out underneath that 101.20, 101.15-level will we expect it to go down. As long as it holds within or above that blue-shaded area and that red box, there’s a potential for reversal to go back up, just as it has done since the beginning of February.
Now, over the life of this range, this red box, we’ve seen a few times where the trend bar with the Forex Black Book has gone from red to green, red to green to red to green, and now it’s red again. And that gives you a little bit of a bias to the bear side, but remember it’s been red before, and then it turned around and went back up. So, keep that in mind as you’re looking for new opportunities with the Forex Black Book. It’s not a guarantee just because it’s red that it’s going to breakout underneath this support.
If you’re looking for selling opportunities as associated with the Forex Black Book, the ideal scenario is that it actually goes up, finds resistance. That becomes your selling opportunity, into resistance with a new red arrow on the 4-Hour Chart, and then you sell it. Really selling it down here into the support and into the blue-shaded area is not the ideal scenario for the Forex Black Book. So, for those traders that trade the Forex Black Book, you want to wait for it to go back up, potentially even as high as the 102-level, and we’ll talk about that here a little bit more in a moment.
First off, talk about the breakout. What constitutes a breakout? Because I’m sure there’s a lot of folks, probably even some folks listening to this video today, that saw the candle yesterday be a large bear candle, red candle pushing all the way down here towards the 100.80s, and jumped into a sell. They said, “It’s breaking out and let’s go into a sell,” and then, next thing they go, the market turned around and went right back up and they’re scratching their heads and wondering what in the world is going on because a lot of folks probably sold as it pushed underneath the 101.20, 101.15-level.
But if you’ve been in my Trade Room, it’s likely you didn’t sell it underneath that blue-shaded area because you weren’t fooled into the false breakout. Let’s go back to the left-hand side of the chart and look at the first time we attempted to get outside that blue-shaded area. That’s all the way back here. Again, back into February, we can see the first attempt to breakout underneath that 101.15, 101.20-level. There’s three daily candles and it turned right back around and went back up.
How do you look for a breakout? For me, it constitutes a full daily candle, open and close outside the range or outside the support. Until I see a full daily candle, single candle open and close outside that blue-shaded area and underneath that support, I’m not getting fooled into a false breakout, which has happened so far for the USDJPY. So, actually, if you’ve been following me in my Trade Room, then you know that I’ve been buying over the past few weeks and I’m still holding buys. We actually even entered a buy here on this demo platform that you can see here. The buy right down here into right about the 101.30-level, and now we’re already seeing some profit, as it’s not pressuring towards the 101.60-level, targeting back towards the yellow-shaded area.
So, again, I’ve been focused on the buys. The only reason I would change that attitude is if we saw a full candle body open and close underneath that blue-shaded area, which we did not see. And now we even see potential reversal at it’s breaking back above 101.50, 101.55. If it opens and closes again, opens and closes above 101.50, 101.55, that blue-shaded area, I think we’re easily looking to target back to the yellow-shaded area. Why am I so confident? Because that’s what history has shown us.
History has shown us that every time it bounces off this blue zone, this support, then it minimum goes back to the yellow zone, if not higher towards the green or the pink or maybe even the purple-shaded area at the very top of that red box and the top of our range. So, if you’ve bought it along within me yesterday into the low-101s, then you should be in profit protection mode, cheering on the buyers to stay above this blue-shaded area and target back to the yellow-shaded area.
Now, I am no way against selling this currency pair, but the best thing I can tell you is sell high. Remember: buy low, sell high. The old motto there. Well, if you’re going to sell it, where do you want to sell it? The higher it gets, the better. The lower the risk becomes, the higher it gets. So, I think selling it happens all the way up there into the yellow-shaded area. Closer to 102.10, 102.20 becomes a better opportunity to sell it.
So, for the sellers, if you’re selling, you’re selling all the way up here towards the yellow zone or the clear daily candle, open and close underneath 101.20. Until then, you’re very, very cautious about selling this currency pair. More likely it is that along with me you’re buying here into the blue zone, targeting back to the yellow zone. Remember my trade management practice is when I see 20 to 25 pips, I’m moving my stop to break even. So, if you bought it at 101.30 or lower, then you’re likely already moving your stops to break even and protecting that trade from going negative, because it definitely could turn around and go down. There’s no guarantee it can’t, but all the indications right now are pointing to support for the USDJPY right here into this blue-shaded area.
Let’s go ahead and take it down to the 4-Hour Chart real quick, before we wrap up this portion of the video for the day today. And Fibonacci, high down to low of the last longer-term downtrend, we see the .382 sitting right at 101.65. So, if we’re going to see it continue to pressure higher, it needs to break through that .382 Fibonacci at 101.65. Then we’re likely looking for it back in towards the 101.90s and 102.00-level, back towards the yellow-shaded area. Back underneath the blue zone, again, looking for it to go lower.
One last fib. Let’s see what this looks like. Let’s go from this high right here, down to the current low, and very interesting now we are breaking above the 50% of that shorter range. The .618 of that shorter range sits right here at 101.75. That’s where our current candles have capped out. So, getting above here, 101.65 to 101.75, we’re likely looking for it back towards the 101.90s, 102.00 for the USDJPY today.
