Want FULL ACCESS To
ROSS’ DAILY TRADE ROOM?
Simply Click The Get Started Button Right Now!
Transcript of Video
Click Here to receive an email alert when Ross posts a new daily video.
I’m going to get started today on the US Dollar versus the Japanese Yen [USDJPY]. I’m going to start all the way out here on the Monthly Chart. I know that may not seem like an important compression or timeframe to look at, especially if you’re a shorter-term trader, an intraday trader, or scalping trader. It seems kind of an inconsequential compression to look at if you’re the shorter-term trader, but I think it’s even going to be important no matter if you’re a position, a long-term or a shorter-term trader for the next couple of days.
First off on this Monthly Chart I want to point out the blue trend line. You take the blue trend line from this high into 2002. Connects here into 2007. So, you see the blue trend line connecting with those two highs. That’ll be very important as we zoom into the current market price, sitting here into the 109s, down here at the bottom right-hand side of the chart.
I have several different fibs drawn here on the chart. One from the highest high, the mid high, the lower high, down to the lowest low. Those will also be something that we’ll look at as we get down to the smaller compressions, but I just wanted you to see, mainly here on the Monthly, where that blue trend line comes from.
We take it down to the Weekly and you could just see that blue trend line peaking in its head at the top right-hand side of the chart. What’s important about this Weekly Chart is the red trend line. This currency pair has been in an uptrend for a long time. We’re going all the way back to 2011, 2012, and it’s just been moving higher ever since. The red trend line just connects with our last two lows that we see here within this period or within this uptrend. I could connect another trend line from here, up to this high, but I don’t really think it’s going to change the fact that we’re in an uptrend. But again, there’s that blue trend line peaking in at the very top.
While we’re here on the Weekly Chart, let me just go ahead and point out the Forex Black Book trend bar is green, which of course signals a bullish or uptrend bias here for the USDJPY. Let’s go ahead and take it down to the Daily Chart. Now we’re starting to see how that blue trend line is becoming very important for the current market price. You could see we’ve been in an uptrend for quite some time, but there’s the current market price all the way up here, upper-108s, lower-109s, as it’s challenging just underneath that blue trend line.
A couple of different trend lines here. I have a black trend line, a green trend line representing the most recent leg of the trend. 100-day moving average well below the current market price here on the Daily Chart. Let’s go ahead and zoom it in here on the Daily. Get a little bit more detail. You could see a little bit more detail about what’s been going on over the past few days. We’re looking at five days now kind of stuck up here in a period of congestion underneath the blue trend line and above the green trend line. So, a period of congestion.
What does that mean for us? Well, I want to get a couple of these boxes here. Let’s just draw out a couple of these boxes. What this means is we see historical periods of congestion within this uptrend, where it goes into hesitation and then breaks in the direction of the trend. Let’s put a couple more of those, where it goes into hesitation and then breaks in the direction of the trend. Let’s put another one down here, closer towards the bottom, where it goes into hesitation, congestion, and eventually breaks in the direction of the trend. I could continue even further down and look down here, but I think you get the idea. Congestion. Trend. Congestion. Trend run. Congestion. Trend run. And here we are now in congestion again.
The question is: has it been too long, has the trend been going up for so long that it will not break in the direction of the trend and it’ll turn back around and go back in the other direction, or are we going to see just another push in the direction of the trend? But I think to really answer that question we have to wait for the breakout of this congestion. Until then, we continue to focus our efforts in the direction of the trend, until we see evidence or clues of reversal.
Let’s go ahead now. Zoom it in one more time here, just so we get a closer view. There’s that area of congestion. You see the blue, the pink, and the yellow areas there. I can put another blue box there if I wanted to, but for right now the yellow-shaded area at the top and the blue trend line, by the way, from the Monthly Chart is our resistance. If it breaks above that, we look for it to go higher. If it breaks underneath this green trend line and the blue-shaded area, we look for it to go lower. As long as it doesn’t, if it stays under the yellow-shaded area and the blue trend line, we look for it to stay in congestion. If we stay above the blue-shaded area and green trend line, we look for staying in congestion. So, the green, blue. We’re kind of in that zone right now of indecision.
Are we going to go down or are we going to continue the uptrend for the USDJPY? Let’s take that information. Let me zoom out once and go down to the 4-Hour Chart, and you could see that period of congestion there. There’s the yellow zone. The blue trend line at the top from the Monthly Chart, by the way. There’s the blue-shaded area at the bottom. The blue-shaded area also down at the bottom of our congestion. I’ve also put two green trend lines, and over the past few days in the Trade Room we’ve been discussing the horizontal areas of support and resistance that I shade with the orange, the green, the blue, the pink, and the yellow.
I shade them with those horizontal area of support, resistance and congestion, but we can also interpret it as a diagonal area of support and congestion, and that’s why I put two trend lines. If you could think about, and it doesn’t allow me to shade between them like I can with the horizontal levels, but if you think about this, if you were to shade between these two green trend lines here, we’re into a zone of support. Just think about maybe a green-shaded area coming up from the bottom like this. And we’re in that zone of support, and as long as it stays within or above it, we expect it to continue to go up in the direction of the trend no less. If it breaks underneath it, we look for a continuation down.
So, right now, in the direction of the trend, I think the best opportunity is right now into the blue zone, looking for buys, targeting the yellow zone, which is the top of the congestion zone. A breakout of the yellow zone goes in the direction of the trend. The risk in that scenario, and there’s risk in every scenario. The risk is, if you buy it now, it breaks the blue-shaded area. I don’t think that this is a good opportunity to sell it, as long as it holds above this congestion. I think the only reason I would sell this currency pair is if it broke underneath and I’ll call it 108.50, 108.55, the bottom of that blue zone. If we break, open and close, we can see the past couple of attempts have not opened and closed underneath it. If we see an open and close under that blue zone, the two green trend lines, then we look for it to begin pressuring down, potentially all the way down to the green zone and the black trend line in the middle of the chart, all the way back down here into the low-107s.
But for right now I’m going to continue to focus the direction of the trend, buying towards the top of the congestion, looking for the breakout in the direction of the trend. The risk is minimal down here at the bottom because if it breaks underneath that blue zone, we don’t want to stay in the buys any longer for the USDJPY this week.
