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I’m going to begin the day today on the US Dollar versus the Japanese Yen [USDJPY]. Starting on the Daily Chart, over the past three or four weeks, we have been studying this box or this range that has developed on the Daily Chart. You go all the way back here to January 24th, the left-hand side of the red box, and we saw the market dive into this zone, find support down here into this blue-shaded area, which is into the low-101s. 101.20 down to 100.95 or so is that blue-shaded area at the bottom of the box. We find support there, and then we begin a rise that took it all the way back up here into the mid to upper-102s. Another dive back down to the blue zone. A challenge of the pink-shaded area at the top, which previously we had seen some resistance.
Just after breaking into the box we could see the resistance on the left-hand side, back in January. We found resistance into the pink-shaded area again. Then we took a dive back down to the 101s, back down to the blue-shaded area at the bottom of the range or the box that we see here. And now we’ve seen, once again, a rise back into the pink-shaded area.
For those of us in the Trade Room that have been buying since testing down here into the bottom of the box and the low-101s, this is our profit target. If you’ve been buying, you should be closing profit as it challenges now into your profit target. It doesn’t mean you have to close the entire trade, but just protecting some profit as it reaches into the top of this box, because history has shown a great deal of resistance here. We could see resistance here, resistance here, and the potential for at least a little bit of a pullback as it challenges here into resistance. So, it’s my expectation today: as long as we stay underneath and I’ll call it 103.30. Underneath 103.30, the top of that red box and the top of the range, then we could be looking for some pullback. Some fall back down into support before eventually breaking out of the box.
Otherwise, a break above 103.30, a simple push above that level, we start working our way back into the upper-103s, towards the 104-level. Let’s go ahead and drag this purple-shaded area over a little bit further because that becomes our next resistance zone. You follow that purple-shaded area that goes between 103.87 – 103.14. I don’t think you should get too hung up on those exact prices, but definitely that’s the zone to watch right inside that purple-shaded area.
Follow it back in time. You could see that was the break zone over here. You could see support on the far left-hand side. You can even see some resistance. A spiked resistance. Far left-hand side of that purple zone. Support. Support. We could see an attempt to breakout here. Got right back up inside or above that purple zone. Then support again. Finally broke underneath it and that’s when we went into our little box or range.
Again, getting above 103.30, that becomes our likely next resistance. And get above there, we go all the way back up to the orange-shaded area, which is into the upper-104s, towards the 105s for the USDJPY. Our main area that we want to focus in or concentrate on over the next day or so is here into the pink-shaded area at the top of the box, between 103.30 and 103.00. That’s basically the zone that we want to take a look at.
Of course the Forex Black Book trend bar at the very bottom of the chart is green. Because we’ve been going up for the past two or three weeks, we see it turning green. Bright green because the short-term and longer-term trends are coming into agreement, and we saw that last week and the continuation as it pressed higher. Since it’s green, the best opportunities to trade with the Forex Black Book actually will be on dips into support. So, it wouldn’t be out of the question for this to come back, maybe to the green-shaded area as support, before making that next rally back higher.
It doesn’t have to do that, but that would definitely give us our lowest risk, highest reward opportunity to buy on a dip into support. If it just simply breaks above the 103.30-level without dipping lower, I’m not sure we’ll get a new green arrow because that’s the way that indicator is designed to work. It shows us a trend with the trend bar – the green trend bar – and then we look for the 4-hour to turn back in the direction of that trend. Well, if it doesn’t pull back at all, then we don’t have the chance for it to return back into the direction of the trend.
So, it would probably need to take a dip down to the green zone before we see an opportunity with the Forex Black Book. Otherwise, a simple breakout above 103.30 could be our next clue. Let’s go ahead and take all of this information down to the 4-Hour Chart, and really that’s what we’re doing. We’re looking for clues or evidence of reversal or a continuation. A reversal or breakout. A bounce or break of this area highlighted in pink and the top of the box.
Take a journey back in time. I’m actually going to move this line just a hair higher right at the 103.0-level. The black line at the top of the pink-shaded area. Follow it back in time and you go back here, left-hand side of the chart, and you could see the difficulty above 103 – 103.30 – that it had. A difficulty breaking above it. So, if we simply get a break above 103.30, above the box, above the pink-shaded area, then of course we likely look for the continuation higher.
What’s a break? Is it simply a spike above there? I don’t think so. If you just look over to the left-hand side, it spiked above there. It couldn’t sustain that hold and turn back around. So, a spike above it isn’t going to be interesting for me. What I will be looking for would be an open and close. A clear candle body open and close above 103.30. That would be our clue to a breakout and continuation, again, back to the purple-shaded area and the 103.80s towards 104.00 for the USDJPY. If it doesn’t do that and it leaves a longer wick on the top of a candle body or an engulfing candle, or some other clue to reversal, we could be looking for that dip that we would expect to see.
So, I’ll be watching for, of course, potential clues to reversal for it to go back down. Challenge into support, which could be down here to the green-shaded area as our next support, or a breakout above 103.30. I don’t think we have evidence to either direction right now. Yes, we are holding as support. That’s clear evidence of resistance, but there’s no evidence of reversal yet. So, if you’re looking for a short-term intraday trade with fairly minimal risk, I suppose you could be looking for a sell here into 103.30, as close as you can get there. Stop would likely go around 103.50 or so. Maybe a little bit higher. That way, if it does begin to target back down to the green zone, you could begin to take advantage of the fall back down here.
Then, once it reaches into the green zone or possibly even the yellow zone down here, we could be looking for support and reversal back in the direction of the trend as the trend bar is implying the green bar at the bottom of the chart. One last thing. Let’s put a trend line like this. It’s not very helpful or useful in today’s market, but if it takes a dive back down to that blue trend line, that could become support once again. That, of course, is back down towards the 102-level. Clearly this is our decision zone today. Selling as close as possible to 103 is a clear possibility of short-term intraday trade, targeting back down to the green zone or possibly the yellow zone as it reverses from the top of our range or box.
An open and close above 103.30 invalidates those sells and likely looking for the turn back to 103.85 today for the USDJPY.
