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Getting started today on the US Dollar versus the Japanese Yen [USDJPY]. Over the past several months, we’ve seen this currency pair in a range. We go all the way to the left-hand side of the chart, where the vertical red line is, back in January, and we could see, for the most part, we’ve been holding between the zone here highlighted in blue, down around the 101.0-level, and the top of this red box, close to the green-shaded area into the 103-level.
We did have a little bit of a push all the way back up here towards 104, but that was a very short-lived push and back into the range we went. And again, holding there since January of this year. Once again, we could see the market challenging, in current time, back to the blue-shaded area. Multiple times we’ve challenged this area as support without a breakout underneath it and it returned back higher and stayed within the range.
Well, here we are again, challenging the bottom of the range. The question of course is: are we going to see another bounce off of the bottom of the range and a continuation back higher, or are we going to finally see the market break out of this range, push underneath the 101-level, and continue to pressure lower. We don’t know that. So, what we’re looking for is opportunities to trade this with low risk and high reward. Well, at the current moment, it wouldn’t be advisable to sell this currency pair because history has shown us that there’s quite a bit of support here. It’s a very difficult place for the market to continue to pressure lower, so it wouldn’t be advisable to sell it at the current moment.
Now, it doesn’t mean it can’t go down or it won’t go down eventually. It just means at the current moment it isn’t a low risk, high reward opportunity to sell it. Well, if it’s not a good opportunity to sell it, then maybe on the other side of that is a potential opportunity to buy it once again into the blue-shaded area and into the bottom of this support zone or range. So, as we look at that, we’ll be looking for clues to support. You know, market holding price action that dictates support. We’ll be looking for clues to reversal that give us opportunities to buy this once again from the bottom of the range, clearly knowing that our risk is that it breaks out underneath it and continues to pressure lower.
Let’s go ahead and zoom it in here a little bit on the Daily Chart and get a closer view of this support. And you could see the blue-shaded area, again, following it back in time, multiple times finding support here. We could see yesterday’s candle spiking well within that blue-shaded area, all the way down towards the 101-level. The low of that candle actually 101.06, so very close to 101. Repelled back higher again and we’re now sitting back into the 101.30-level.
Again, we’re looking for clues to support and clues to reversal here, so I think yesterday’s candle really shows us that the buyers are not yet ready to give up on this support zone for the USDJPY. What we’re looking for now is a clear entry signal. Are we going to just randomly enter it, or are we just going to wait for a clear signal to buy this currency pair once again? Let’s put a couple of arrows here. The black arrows that I’ll put on the chart are just showing us what our expectations are. Within or above that blue-shaded area, we look for this to bounce higher again. Underneath the blue-shaded area, easily see that we would look for it to continue to pressure lower.
If it goes up, what do we expect out of this? Well, clearly back in time, we can go back in time along this same blue-shaded area and we could see a lot of resistance into this pink-shaded area. So, we would look for that to be our first target. So, if you decide to buy it here into the low-101s, towards 101, then you look for this area right around 101.65, 101.75, maybe even as high as 102 to become your potential target for resistance. Let’s go ahead and put an arrow there.
So, again, on the other side of that, if you’re not considering a buy into the support and you’re thinking, “I want to sell this currency pair,” that’s fine, but you need to wait for the right time to sell it. I think there’s really only two reasons that you would even consider a sell opportunity here for the USDJPY. That would be, number one, the breakdown underneath the support and underneath the blue-shaded area, which it has not done, or a rally back into resistance, which, at this time, would be back into the pink-shaded area. So, the sellers are having to be patient. A break to the blue zone, return back to the pink zone. Right now the buyers are the ones that are looking for opportunities for the USDJPY today.
The Forex Black Book trend bar is red, and that’s something that we’ve seen throughout the life of this range. Every time it’s hit the bottom of the blue range, every time it’s hit down here into the bottom of this blue-shaded area, it’s been red. Take a look at that. You go back here. It was red. You go back here. It was red. You go back here. It was red. So, every time it’s hit the bottom of this range, it has been red down there. So that’s not really a clear indicator that it will break out. It’s just showing you what the previous price action was. It was going down. It was red. It was going down. It was red. It was going down. It was red. So, it’s just showing you what it’s been doing.
Is there a probability that could continue to happen? Yes, but we need a breakout under the blue zone. So, just because it’s red down here in the Forex Black Book trend bar doesn’t mean there’s not an opportunity to look for a buy signal here for the USDJPY.
Now let’s go ahead and take all of that information down to the 4-Hour Chart, as we begin to devise a plan here for this currency pair, and take a look at the support that we’ve seen here for the USDJPY over the past several hours. We can see the congestion here, right around the 101.30-level. And take a look at that. I have a line right here exactly at 101.32, but that doesn’t mean it can’t be a little bit higher. 101.35. A little bit lower. 101.30. In that zone is where we’re finding congestion.
What I would suspect that you’re looking for today is a breakout of this little area of congestion. Five candles right here. This period of congestion. If it breaks above there. So, let’s go ahead and put some shorter – well, let’s just do this. Let me put a box there. That might be the better way to do it. Let’s put this, and let me make this red, and we’ll draw it as a box a little bit thicker so we can see it. Let’s draw it as a box, and I’m just going to put it just like that. Right here.
So, here’s what we need to see today. If we’re going to trade the USDJPY, we would like to see a breakout above this box, which would be right around – let me see what that price exactly is at the top of the box – 101.37. A breakout above 101.37 or a breakout underneath the box, which the price again is 101.22. A breakout above or below that little period of congestion right there is really what you’re going to look for, for a clear trading decision. Of course we have a bias to the upside because we’re into the blue-shaded area, so I have a bias to buying because we’re in the blue-shaded area. Even if it broke underneath that box, I would be very cautious about selling. So, mainly what I’m looking for is the push above the period of congestion, above the 101.35 or so level, and then we look to target back to the pink-shaded area today for the USDJPY.
