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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 today on the Weekly Chart. Give us a wider-term perspective for this currency pair. I know that sometimes as an intraday trader, you can forget to look at these larger compressions, but I think even on an intraday basis, it’s important to take a look at the larger timeframes to get an idea of what the overall market is doing. Then we can base our intraday trades based on the overall market direction or conditions for the currency pair.
Well, over the past several years, we go all the way back down here to the bottom of the chart. We’re down here into the 76s or 77s at the bottom of the chart, back in 2012. Then we began a pretty aggressive uptrend as the market started moving higher. Moving back, the first longest leg we saw moving all the way up here into the 103-level. A dip back down. A second leg pushing all the way up here into the 105s. And since then, over the past couple of months, we’ve just seen the market kind of drift back down and go into a period of congestion.
Let’s go ahead and zoom it in a little bit here on the Weekly Chart. Take a look at that period of congestion. at the top right-hand side of the chart. And I’m going to put a little rectangle here so we can really get a good perspective of where I’m talking about. It’s that orange rectangle at the very top of the chart. Let’s see if I can bring it down just a little bit here, and bring it down just a little bit. And you could see, over the past several weeks, inside that orange box, the market has just been bouncing around. Top to bottom. Top to bottom for multiple weeks.
Again, this is the Weekly Chart, so each one of those candlesticks is a weekly time period. So let’s take that same information and go down to the Daily Chart. And as we get down here to the Daily Chart, we could see that same information. We could see where the current market has been over the past several weeks. I’m going to get these lines back in order since I moved them around a little bit. We could see where the current market has been over the past several weeks. So, we can bring this in a little bit tighter like this. This orange box. And we could see that it’s been bouncing around in that orange box.
Every time it reaches down towards the bottom, the blue-shaded area, the bottom, it’s found support. And over the past several days, we’ve talked about buying down into the 101.20-level. And if you did that Monday or Tuesday, it’s been quite profitable, as it now pushes back into the mid-102s. As we approach the top of this box, we’re approaching the top of our congestion zone. That orange box that we see there. The green-shaded area has been showing resistance throughout the life of this congestion. You could see resistance back here. But even still, going all the way back up into the pink zone and the top of the box, the low 103s, we have found resistance there.
So, the higher it gets towards the green-shaded area, towards the pink-shaded area, it becomes riskier to buy this currency pair, because we’re potentially running into resistance and could turn around and go back down, as it has been doing for the past several months. Really since the beginning of the year. The beginning of 2014. So, your preference, if you’re going to buy this currency pair, you want it to go down. You want it to dip to the yellow zone, potentially even the blue zone at the very bottom. If you’re going to sell it and look for it to stay within this period of congestion, the higher it gets towards the green zone, towards the pink zone becomes probably resistance.
Now, at some point in time – when it’d be nice to know, but we can’t know that for sure. At some point in time, we will see the breakout of this congestion. It will break either to the top side – 103 – or to the bottom side – 101. We’ll see the breakout of this congestion. But as long as it stays in there, there are potential opportunities on an intraday basis to sell towards the top or buy towards the bottom.
So let’s go ahead and take that same information. Well, actually, let’s go ahead. Stay here on the Daily Chart. Let’s just put a couple of arrows. So, up here towards the top, we know that there’s resistance. A breakout above that resistance, we likely look for it to go higher. Same thing at the bottom. At the bottom, there is support. A breakout below it goes lower. Staying above it goes higher. So that’s the orange box that we see there. And again, like I said, there’s some intermediate support and resistance. The green and the yellow-shaded area, and that’ll be more important for the intraday.
Let’s go ahead and take it down to the 4-Hour Chart now. And this green and yellow-shaded area will be important. As we could see, there’s the box there. The orange box. There’s the blue zone at the very bottom of the chart. We can drag it over a little bit further. Bring our arrows down here like this. And these arrows up here, right around that high there. And we could see where that wider support and resistance are. And then we bring it in a little bit tighter. We know that the green zone has potential to hold resistance. We’ve already seen it. There’s no mystery there. And above that green zone, of course we know that there is a possibility of going back toward 103 or into the 103.30s.
Back down here into the yellow-shaded area, we know there’s support. And if it gets underneath there, we’re going back down into the blue zone, into the 101-level. So, these – the green, the yellow, the pink, the blue – become your opportunities to trade when you’re right in the middle, like where we are right now. Right around the 102.25-level, there’s risk that it goes in either direction. It could go up or down right now.
I think there’s a little bit more tendency for it to go up with the pressure we’ve seen since Wednesday and FOMC, but definitely the closer you get to that green zone becomes riskier that it finds resistance and bounces down. So, if you’re going to buy this currency pair today or even going into next week, you’d prefer to do it as close as possible to the yellow or the blue-shaded area. It minimizes your risk. If you’re going to look for a new selling opportunity, close to the green zone, but I think even further in towards the 103s and the top of the box becomes your best opportunities.
And at some point in time, like I said, we will see the breakout of this congestion. We will see it push out and start moving in a trending direction again. Let’s do one last thing here on the 4-Hour Chart. Take Fibonacci from the high down to the low of just the leg of the downtrend. We could see the 50% at the bottom of the green zone. Right now we’re currently finding resistance at 102.47. That’s the 50% retracement level. The .618 is at 102.75 or 102.77. Top of the green zone. And .786 and .886 sit all the way up here at 103.20, 103.46. So, clearly, the best opportunities will be rallies into resistance to sell this currency pair. Dips into support to buy it. Potential buy on the breakout above the green zone could give you a buy targeting the pink or orange zone, but these are the opportunities that I would see today and even going into next week for the USDJPY.
