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I’m going to begin the day today on the US Dollar versus the Japanese Yen [USDJPY]. Starting here on the Daily Chart, the most important part about this chart is I want to point out the patterns that have been taking place over the past couple of years. Starting from the far left-hand side of the chart, the end of 2012, we began an uptrend that continued to rise from down here into the 79.00-level all the way up here towards the 103-level at the top of the chart into May of this year.
Now, after capping out into that high, we saw a change in the price pattern, where, on the left-hand side, we saw higher highs and higher lows, on the right-hand side we could see higher lows persisting along the blue trend line, but we see a change in the pattern of the highs, where, instead of higher highs, we see lower highs along the red trend line. So we see lower highs, higher lows, consolidating into a symmetrical triangle. And over the past several months, we’ve continued to get tighter and tighter within that triangle pattern.
Zooming in here a little bit on the Daily Chart, getting a closer view of this; and as long as that pattern persists, we could see that consolidation persists, as it gets tighter and tighter inside that triangle. But I expect, over time, we’ll see a catalyst that’s able to drive this out of this pattern. We’ll see either new higher highs made and a breakout to the topside or new lower lows made and a breakout to the bottom side of that symmetrical triangle.
Now, the two lines – the red line and the blue line – aren’t really the most important parts of this pattern. The most important part is the fact that we see those rising lows and lower highs. So, don’t get too caught up on the levels that those trend lines are at, but more importantly, the fact that we see the lower highs and the higher lows. And if that pattern changes, we’ll likely look for a breakout and a continuation in the direction of the trend. On the topside, I would look for, around the 99.00-level, the purple-shaded area that sits up there next to that red trend line. If we see a breakout of that 99.00/99.20-level, we’ll likely look for the continuation higher in the direction of an uptrend for this currency pair.
If it breaks down to the bottom side, we could see down here, closer towards the 97.00-level, 97.00, or into the 96.90s – the purple-shaded area that sits down here next to the blue trend line. We follow that back and we see that’s our last historical low that we see here. So, again, we see rising lows. If it breaks through there, we’ll expect it to go lower. If it breaks through the topside, we’ll expect it to continue the bullish trend for the USDJPY.
Let’s even zoom that down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, I want to zoom out a little bit so we could see that full scope of that triangle pattern here. Right now we’re sitting right in the middle of the triangle. We could see how high the red trend line is and how low the blue trend line is in association with the current market price, which sits right here into the low-98s, right around 98.30 at the current moment.
If, today, we see non-foreign payrolls, which is very late in the month; as unusual as that is, if we see non-foreign payrolls be the catalyst that drives it out of this pattern, if we start to see it move it higher, we’ll look for the challenge of the high point of the triangle, which is up there into the 99.0-level and the red trend line. And of course, a break above that, we’ll look for a continuation lower. However, if that catalyst of that news drives it lower, again, we’ll look for it to continue to pressure back down towards the blue trend line.
Right now, sitting into the 98.30-level. A little bit higher than that, we do see some resistance here in towards the 98.60-level – the blue-shaded area. And of course, beyond that 98.60, the blue-shaded area, we’ll look for it to push back towards the 99.00-level and the red trend line at the top of the chart. On the bottom side, of course, this yellow-shaded area has been an area of congestion over the past few days. We could see the historical supports over here, acting as some resistance, keeping the market from pushing higher through that yellow-shaded area with some strength over the past few days.
If it pushes underneath that yellow zone, I would expect, if it pushes underneath – and I’m going to move this arrow down. Underneath the 98.00-level; if it pushes under there, we’ll likely look for it down here into the 97.65-level, which is the bottom of this green-shaded area. And of course, beyond that, we’ll challenge back down towards the 97.00-level and the blue trend line at the bottom of the triangle. And all of those are within the triangle. Of course our main breakout will be above the red line or below the blue line for the USDJPY today.
